The Baltimore office market continued its red hot pace in the second quarter, a pace that began a year ago and resulted in over 1.2 million square feet of positive absorption in the last twelve months.
The Baltimore market consists of Baltimore City and the surrounding counties of Anne Arundel, Baltimore, Carroll, Cecil, Harford, Howard, Kent and Queen Annes. Most of the activity is focused in Baltimore City, Anne Arundel County, Baltimore County and Howard County.
One of the biggest deals of the second quarter was for over 31,000 square feet of space within 308 Sentinel Drive in Annapolis junction, where the asking rent was $37.00 per square foot on a gross basis. This five store building containing 160,000 square feet was constructed in 2010.
Let’s have a look at some of the numbers….
The average asking rent has jumped to $22.67 per square foot gross, and is now over a dollar above the five year average of $21.59 per square foot.
As this graph indicates, the average asking rent is now just below the high of the last ten years after bottoming in 2014.
The vacancy rate stands at 10.1%, more than a full point below the five year average of 11.2%.
Given the pace of absorption over the last twelve months, it is no surprise that the vacancy rate is near ten year lows, even while a substantial amount of new space has been added to the market.
Net absorption in the second quarter was over 354,000 square feet, after a first quarter that posted positive absorption of nearly 550,000 square feet. There is over 140 million square feet of space in the market.
Twelve month construction starts were 916,042 square feet. There is just over one million square feet of space currently under construction, and two million square feet of space as delivered in the last twelve months.
The largest project currently underway is the 320,000 square foot McCormick & Co. headquarters under construction in Hunt Valley in Baltimore County. The building is expected to be completed in mid-2018.
The larges speculative project underway is Building E in the Annapolis Corporate Park, which will contain 129,800 square feet. The building is due to be completed in early 2018.
The average time on the market for vacant space is now 15 months, well below the five year average of 20 months.
It is interesting to note how well the Baltimore office market is performing compared to the Washington, DC office market, which continues to struggle with high vacancy rates in a number of areas.
While the current torrid pace will likely slow at some point, as long as the economy continues to perform, the office market should still enjoy positive absorption over the next few quarters.