Baltimore Commercial Real Estate Sales Trends Second Quarter 2017

I cover most of the counties that make up the Baltimore region, as well as the city itself.

Through the use of the Costar service, I have conducted a survey of the commercial real estate markets in these counties involving recent sales transactions and longer term sales trends.  These counties include Anne Arundel, Baltimore, Carroll, Howard and Harford, in addition to Baltimore City.

Second Quarter 2017 Office Sales Trends

In the 2nd quarter, there were 78 sales involving just over 2.3 million square feet with an average price of $125.00 per square foot.  The average cap rate was 7.8% with a range from 4.3% to 10%.

The largest transaction involved the M&T Bank building on Charles Street in the downtown area.  The 359,000 square foot building sold for $24.5 million, or just over $68 per square foot.

In the first quarter, there wer 80 sales with an average price of $163 per square foot and an average cap rate of 8.6%.

In the year ago period there were 107 sales with an average price of $72 per square foot and an average cap rate of 8.5%.

The five year average sale price is $133 per square foot with an average cap rate of 8.0%.

Baltimore Office Market

From quarter to quarter, the average sale price is quite choppy from a high of nearly $220 per square foot in Q1 2016 to the Q2 2016 low of $72.

5yearaverageofficecaprate

Unlike the average sale price, the average cap rate has remained within a tight range for nearly three years.

2nd Quarter Baltimore Retail Sales Trends

In the retail sector, there were 86 sales with an average sale price of $155 per square foot and an average cap rate of 7.6%.  The range in cap rates was 6.0% to 9.7%.

The largest transaction was the Wal-Mart anchored Liberty Plaza shopping center in Randallstown which sold for $28.5 million, or $177.12 per square foot.

In the first quarter, there were 102 sales with an average price of $131 per square foot and an average cap rate of 7.6%.

In the year ago period there were 219 sales with an average price of $117 per square foot and an average cap rate of 7.6%

Over the last five years, the average sale price has been $167 per square foot with an average cap rate of 7.5%

5yearaverageretailsaleprice

The average sale price has held within a fairly tight range over the last three years, unlike the previous two years.

Baltimore Retail real estate market

Similar to the office sector, cap rates in the retail sector have held within a fairly tight range over the last three years.

Baltimore Industrial Market Second Quarter 2017

In the second quarter of this year, there were 33 sales involving just under 3 million square feet.  The average sale price was $70 per square foot.  The average cap rate was 7.6% with a range from 6% to 9%.

The most significant transaction was the C&S Wholesale Grocers property at 1000 Old Philadelphia Road in Aberdeen, which sold for $36 million.  This refrigerated cold storage facility contains just over 401,000 square feet.

In the first quarter, there were 34 sales with an average price of $40 per square foot and an average cap rate of 9.0%

In the year ago period, there were 39 sales with an average price of $71 per square foot and an average cap rate of 8.2%.

Over the last five years the average sale price is $59 per square foot with an average cap rate of 6.8%.

5yearaverageindsaleprice

As may be seen in this graph, the average sale price for industrial buildings has been quite volatilie for the last three years.  In the most recent period, the average price is clearly skewed by the large transaction involving C&S Wholesale Grocers as mentioned.

Baltimore Industrial Real Estate Market

Cap rates for industrial buildings have been a bit volatile during the last five years, as seen on the graph.

2nd Quarter Baltimore Multifamily Sales Trends

In the multifamily sector, there were 25 sales in the second quarter with an average price of $73,508 per unit.  The average cap rate was 7.7% and the the range was 5.9% to 10.8%.

The largest transaction involved Marble Hall Gardens in Baltimore near Morgan State University.  This property sold for $31 million and contains 393 units.  The indicated price per unit was $78,880.

In the first quarter there were 35 sales  with an average price of $133,495 per unit and an average cap rate of 6.4%.

In the year ago period there were 49 sales with an average price of $149,708 per unit and an average cap rate of 6.8%.

Over the last five years, the average sale price has been $126,426 per unit with an average cap rate of 7.3%

Baltimore Apartment Market

After peaking in the 3rd quarter of last year, the average price per unit for apartment properties has plunged drastically.  We’ll see what the next couple of quarters will bring.

Baltimore Apartment Market

Cap rates for apartment properties in the Baltimore region have held within a fairly tight range over the last 3.5 years.  The current trend appears to be higher, as the low price per unit suggests that lower quality properties have been changing hands more recently.

Final Thoughts

Similar to the Maryland suburbs around DC, which I wrote about here,  it appears that many buyers and investors have been on the sidelines this year, and particularly in the latest quarter.  One could speculate that this is due to having a new administration in DC, along with the issues facing this particular administration.  We’ll see if these trends continue to remain intact in the next couple of quarters.

 

Second Quarter 2017 Suburban Maryland Commercial Real Estate Sales Trends

I cover a number of the suburban Washington, DC counties in Maryland with my consulting services.  These counties include Anne Arundel, Frederick, Howard, Montgomery, Prince George’s and Washington, or from Annapolis to Hagerstown.

Through the use of the Costar service, I have conducted a survey of the commercial real estate markets in these counties involving recent sales transactions and longer term sales trends.

Suburban Washington DC Office Market (Maryland suburbs)

In the second quarter of 2017 there were 64 sales identified by Costar involving 1.76 millioon square feet.  The average sale price was $111 per square foot.  The average capitalization rate among the transactions where such data was available was 7.3% wth a range from 6.4% to 8.0%.

The largest transaction involved the Shady Grove Plaza in Montgomery County, which sold for $24.76 million in May, or nearly $137 per square foot.

This compares with a far more active first quarter where there were 121 sales involving just over three million square feet.  The average price was $113 per square foot and the average cap rate was 8.2%.

In the year ago period, there were 145 sales totaling almost 4 million square feet.  The average sale price was $163 per square foot and the average cap rate was 8.9%.

Over the last five years, the average sale price has been $159 per square foot with an average cap rate of 8.0%.

5yearaverageofficesaleprice

As can be seen by this graph, the average sale price each quarter over the last five years is actually quite random in the office market.  However, it does appear that the current trend is somewhat lower, as activity has slowed.  This is something worth keeping an eye on for the foreseeable future.

5yearaverageofficecaprate

This graph indicates overall cap rates for each quarter over the last five years.  Over the last two years, the range has been somewhat narrow between just under 7% to just under 9%.

 

Suburban Washington DC Retail Sales (Maryland suburbs)

In the second quarter of this year there were 78 sales totaling 1.11 million square feet.  The average sale price was $231 per square feet, and the average cap rate was 7.5% with a range from 6.1% to 8.5%.

The largest transaction involved Largo Towne Center in Upper Marlboro, Prince George’s County.  This property sold in June for nearly $56 million, or $227.53/SF for the 249,905 square foot shopping center.

In the first quarter there were 140 sales involving over 2.6 million square feet with an average price of $178 per square foot.  The average cap rate was 6.6%.

In the year ago period, there were 163 sales with an average price of $147 per square foot and an average cap rate of 7.0%.

Over the last five years, the average price has been $202 per square foot with an average cap rate of 7.0%.

5yearaverageretailsaleprice

Similar to the office market, there is no real trend in prices over the last three years, after a clear up trend in the prior two years.

5yearaverageretailcaprate

The overall trend in cap rates has been slightly higher since the five year low was set in early 2015.

 

Suburban DC Industrial Sales (Maryland Suburbs)

In the second quarter of 2017, there were 40 sales involving almost 1.9 million square feet with an average sale price of $86 per square foot.  The average cap rate was 7.6% with a range from 6% to 8.7%.

The largest transaction was the 475,000 square foot warehouse located at 9325 Snowden River Parkway in Columbia with sold for $29.2 million, or just over $61 per square foot.

In the first quarter there were 43 sales totaling just under 900,000 square feet.  The average price was $98 per square foot and the average cap rate was 8.5%.

In the year ago period there were 61 sales totaling over 2.2 million square feet with an average price of $83 per square foot and an average cap rate of 8.0%.

Over the last five years, the average sale price has been $73 per square foot with an average cap rate of 6.8%.

5yearaverageindsaleprice

Unlike the office and retail markets, there has been a clear up trend in the price of industrial properties over the last four years with the first quarter of this year seeing the highest average in the last five years.

5yearaverageindcaprate

While sale prices have climbed, cap rates have shown a choppy trend to the upside.

 

Washington DC Suburban Apartment Market (Maryland Suburbs)

In the second quarter of this year, there were 13 sales with an average price per unit of $123,303.  The average cap rate was 6.4% with a range from 5.6% to 7.6%.

The largest transaction was The Montgomery Apartments in Bethesda, which sold for $63,500,000 in June, or $165,284 per unit.

In the first quarter, there were 31 sales with an average price of $162,997 per unit and an average cap rate of 7.7%.

In the year ago period, there were 30 sales with an average price of $166,453 per unit and an average cap rate of 6.3%.

Over the last five years, the average sale price has been $142,909 per unit with an average cap rate of 6.6%.

It is noted that this market generally involves larger, institutional grade properties with at least 100 units.  This market does not have many smaller properties such as what may be found in Washington, DC and Baltimore City.  As such, there are fewer sales due to a smaller supply of potential buyers.

5yearaveragemfsaleprice

Over the last six quarters, the trend in price per unit has clearly been to the downside, reversing the trend of the prior two years.

5yearaveragemfcaprate

After hitting a multi-year peak in the first quarter, the average cap rate fell back into the middle of the range of the last five years.

 

Final Thoughts

In all four sectors, the pace of sales slowed.  The rate of slowing range from modest in the industrial sector to significant in the office and retail sectors.  For whatever reason, investors have clearly expressed some caution over the last three months.  Whether this becomes a new trend will become more evident as the year progresses.