2019-07-04_DTZ戴德梁行_Office_Q4_2018_Baltimore_4页_615kb

Baltimore Office Market Q4 2018 Summary

Core Content

The Baltimore office market in Q4 2018 showed a mixed performance, with vacancy rates increasing and net absorption remaining positive, despite a slowdown in investment sales. The market continues to benefit from economic growth, driven by Professional and Business Services, and is positioned to grow further in 2019 due to strategic capital investments and demand for high-quality office spaces.

Key Economic Indicators

• Baltimore employment increased slightly by 1.3% YOY in October 2018.
• Professional and Business Services was the main driver of job growth, up 6.0% YOY.
• Unemployment rates in Baltimore improved, while the U.S. unemployment rate declined.

Market Overview

• Vacancy rate rose by 68 bps to 13.4% in Q4 2018.
• Net absorption was 575,384 sf in Q4 2018, with 993,016 sf absorbed YTD.
• Class A space was in high demand, with 469,067 sf taken in the quarter.
• Leasing activity was stable, with 358,260 sf leased, of which 54% was Class A.

Notable Leases

• Johns Hopkins Health System renewed 65,328 sf at 1000 Lancaster and 37,827 sf at 901 S Bond.
• State of Maryland leased 64,234 sf at 211 Schilling Circle.
• Undisclosed tenant leased 59,600 sf at 7125 Columbia Gateway.

Investment Sales

• Transaction value reached 57 msf, with an average price of $139 psf.
• Greater Annapolis led sales, including:
  • 180 Admiral Cochrane Drive sold for $24.5M / $194 psf.
  • 116 Defense Highway sold for $12.6M / $153 psf.

New Supply

• Total new supply delivered in Q4 2018: 515,226 sf.
• 1500 W Nursey was a speculative project.
• 1265 E Fort Avenue delivered at 76% leased in the Southeast submarket.
• Pipeline for 2019–2020 includes 1,013,858 sf of new supply, with 20% already committed.

Rental Trends

• Overall gross asking rent increased by 1.00% to $23.45 psf.
• Class A rents averaged $26.63 psf, while Class B averaged $20.25 psf.
• BWI Anne Arundel submarket had the highest Class A rents at $30.74 psf.
• Columbia South and Town Center submarkets showed strong rent growth due to new developments.

Outlook

• Overall rents are expected to level off but Class A and B rents will continue to diverge.
• Vacancy rates may level off and decrease as construction slows.
• Landlord market could experience softening in the first half of 2019.
• Strategic capital investments are anticipated to support market growth.

Submarket Performance

Summary

The Baltimore office market in Q4 2018 maintained a positive net absorption trend, with 993,016 sf absorbed YTD and 575,384 sf in the quarter. While vacancy rates increased to 13.4%, the market is considered healthy due to the adjustment from new supply and strong fundamentals.

Class A space remained in high demand, with 469,067 sf absorbed in the quarter, and Class B rents showed marginal growth. Leasing activity was stable, with 358,260 sf leased, and 46% of the market’s absorption coming from Class A.

Investment sales were slower, but Greater Annapolis emerged as a key submarket, with notable transactions. New supply continued to be a focus, with 515,226 sf added in Q4 2018 and 1,013,858 sf expected between 2019 and 2020, of which 20% is already committed.

Looking ahead, rents are expected to level off, while the gap between Class A and B continues to widen. Vacancy rates may stabilize and decline as construction slows, and the landlord market could face softening in early 2019. Strategic capital investments are expected to drive continued growth in the market.