Commentary: Baltimore real estate markets lack consistency in 3Q

Daily Record, The (Baltimore), Nov 29, 2004 by Shelly Schwartz

Yet, for all its positive data, Trammell Crow warns the market's performance lacks a sustainable velocity.

While signs of a possible up-tick are occurring, the company writes in a recent MarketScope report, New tenants in the marketplace are not showing any urgency to relocate; many companies are delaying expansion, and projected deals simply are not happening.

The fact that no new industrial buildings were added to the inventory during the quarter also helped temporarily stabilize the market and allow for increased absorption.

But that picture may change, according to Trammell Crow, as more than 1.7 million square feet are due to deliver in the fourth quarter, mainly in Howard and Baltimore counties. Another 700,000 square feet are set to deliver in the first quarter of 2005.

Biotech parks buoy flex market

Type of deal: Purchase

Square feet: 125,000

Address: 1350-1370 Blair Drive, Odenton

Tenant: Mullan Enterprises

Tenant representative: NAI KLNB

Two new biotechnology research parks under way in downtown Baltimore are fueling demand for flexible office space in the area.

Trammell Crow reports the East Baltimore Biotech Park on the city's east side, affiliated with The Johns Hopkins University and the University of Maryland, Baltimore's UMB BioPark on the west side - neither of which are yet complete - are giving prospective tenants good reason to consider flexible lease space nearby.

Like their parent research institutions, both parks are expected to generate significant jobs, attract significant research dollars and produce new business opportunities in the life sciences field.

We are seeing more office research and development tenants in the market right now, said John Roe, a Trammell Crow broker.

He notes, however, that the market in general is still pretty thin.

Baltimore market vacancy rates for flexible-use projects were unchanged during the third quarter at 13.7 percent, compared with 13.8 in the second, according to CoStar. Those rates stood at 14.5 percent in both the first quarter of 2004 and fourth quarter of 2003.

Net absorption was positive 200,100 square feet in third quarter, down from positive 320,000 in the second quarter of this year, and up from 81,000 square feet in the first.

With inventory outpacing demand, Trammell Crow noted landlords in the Baltimore area flex market are still forced to lure new tenants with lower rents and concessions.

We're still in a tenant's market, and we're seeing a fair number of deals with free rent included, as much as four or five months, Roe said. But we're in an upward trend, so hopefully sometime after the first of the year, demand will pick up.

The average quoted flex rate was $9.82 per square foot at the end of the third quarter, down from $9.96 per square foot in the three months prior, according to CoStar.

According to Trammell Crow, the largest leases for the quarter include CMSI, a provider of credit automation software and services, which claimed 28,000 square feet at 8671 Robert Fulton Drive in Columbia. Communications services provider Comcast Cable also leased 25,000 square feet at 8029 Corporate Drive near Baltimore.