Maryland Business

By: Robbie Whelan

According to a new report from Reis Inc. (no, not a TPS report), the national vacancy rate for office buildings is 15.9 percent, a four-year high.

“It’s bad,” Reis director of research Victor Calanog said. “It’s decaying and getting worse. Given the depth and magnitude of the recession, you can argue that we are facing a storm of epic proportions and we’re only at the beginning.”

Check out The Daily Record’s focus section on commercial real estate this Friday. In it you’ll find an analysis of the reportage on office vacancy rates in the region, which range from around 12 percent (probably low) to 15.05 percent at the highest. Most business boosters in the region will tell you that this is because of Maryland’s “soft landing” in times of recession — a popular theory that proposes that because of the state’s proximity to the federal government’s nourishing economic development teat, certain industries (defense contracting, federal employment, etc) will keep the state’s economy afloat and office buildings full.

But most of the brokers and market observers that I spoke to seemed to suggest that the local office market is actually not even doing as bad as nearly a  whole percentage point under the national average. You see,  Baltimore’s vacant space, particularly in downtown, is concentrated into a few large chunks: 100 Light Street (being vacated by Legg Mason in favor of Harbor East), 2 Hopkins Plaza (vacated by the law firm Venable in favor of the Constellation HQ building), 225 N. Calvert Street (vacated by Bank of America for cost-saving reasons) and the state-owned World Trade Center (a patchwork of small, empty spaces throughout the building).

The recession hit this town in the middle, or perhaps near the end, of a boom in the construction of Class-A office space. The bulk of the vacant space, rosy-eyed observors would agree, is in the old spaces left behind by moves, rather than by the loss or closure of businesses, which are the really nefarious symptoms of a recession.

But space that is not re-filled once its tenants leave is comparable to those jobs that don’t get filled when employees move to bigger and better things. In a perfect world, both would be counted as negative growth. And it’ll take more than just rumors of imminent tenants to convince me otherwise.