Despite figures from the third quarter of 2010 that show a historically high vacancy rate of 18 percent in Baltimore’s downtown business district, some experts say the worst of the frozen real estate market is over.
David Baird, senior managing director of Cushman & Wakefield Inc.’s office in Baltimore, said data from the first nine months of the year point to a softening in the local business leasing market, frozen for years under the grip of the recession.
“I am cautiously optimistic,” Baird said. “We have seen a slow but steady improvement of market fundamentals, including stabilizing of vacancies and rents based on actions we’re seeing in the pipeline.”
Third-quarter figures released this month show the Baltimore market “relatively quiet” as the office vacancy rate in Baltimore was 13.8 percent, a slight increase over second-quarter data. The city’s overall vacancy rate was listed at 17.1 percent.
But announcements that the law firm Ober Kaler and Transamerica, the investment and insurance company, are moving into office space at 100 Light Street have boosted confidence in the beginnings of a downtown commercial and business real estate recovery, Baird said on Wednesday.
The move by Transamerica, which will occupy 140,526 square feet in the city’s landmark Inner Harbor tower in late 2011, had not been counted in the third-quarter data, Baird said. It is a benchmark toward what he deemed a budding recovery for city real estate.
“I think we are cautiously declaring the worst was over,” he said, citing bellwethers such as vacancy rates, leasing activity and absorption rates in building space that have sat vacant as points of measure. Maryland’s proximity to Washington has also helped spur development and leasing, he added.
“To date, there has been 258,604 square feet of leasing activity in Baltimore’s central business district this year,” Baird said.
The Cushman & Wakefield third-quarter report also showed that Baltimore County had a real estate vacancy rate of 11.6 percent — highest on the eastern side, where the rate was 16 percent.
Harford County, where the military’s Base Realignment and Closure activity is in full swing, recorded a 2 percent vacancy rate, the report showed. In Anne Arundel County, where BRAC is also expanding at Fort George G. Meade and the National Security Agency, the vacancy rate was listed at 10.3 percent.
BRAC activity includes the Fort Meade Cyber Command and the National Business Park, where a new development of 151,000 square feet located near the fort’s front gate opened fully leased in the third quarter. Another development in the park, 324 Sentinel Drive, broke ground in the third quarter and is expected to deliver 125,130 square feet of new office space by early 2011. It is also fully leased.
Rob Bavar, president of the Maryland branch of NAIOP, a national commercial real estate development association, said the suburban counties impacted by BRAC expansion are flourishing.
“You’re seeing strong demand in Harford, Howard and Anne Arundel Counties,” Bavar said. “The fact that we seem to have hit the worst of (the recession) tracks with what I’m reading and seeing at a national level.”
Bavar said the city’s Inner Harbor East held the city’s strongest pocket of real estate leasing. In the final quarter, he said, the counties surrounding the city are expected to continue to emerge from high vacancy rates due to BRAC.
Next year, Cushman & Wakefield projected, there will be more than 700,000 square feet of office and commercial space delivered as a result of BRAC and other government-related construction.
“We should see a lot more,” Bavar said. “It’s all heading upwards.”