Here’s the good news: The commercial real estate outlook for Baltimore City is improving. Here’s the better news: The momentum is likely to keep building.
New owners with a well-defined (and broker-friendly) process to add tenants, combined with the capital necessary to improve spaces, are driving occupancy higher in their buildings. Larger tenant leases have taken large blocks of Class A space out of the market, resulting in fewer quality options for those late to the game.
Things get tougher for Class B buildings as landlords slug it out for tenants one hard-fought deal at a time. At the same time, continued erosion in values of Class C buildings is resulting in owner-acknowledged obsolescence and a realization that their value may be only in the land they occupy. While redevelopment of these properties may be some time off, the table is being set.
New retail tenants to the market (Bubba Gump Shrimp Co. comes to mind) signal that national retailers are still on the hunt for locations that satisfy their criteria and that Baltimore fits the bill.
Other retailers are relocating or expanding into existing markets, which continue to solidify at their core (i.e. Harbor East, Fells Point, Canton). New projects are coming to fruition as once-rumored development turns into reality in Locust Point, Canton and Midtown. Still more mixed-use projects are in the formative stages, many with a retail element.
The maturation of the Gen X and Gen Y customer/worker base is partially the reason for this continued growth of this sector. (The availability of financing is the other).
The Fitzgerald, McHenry Row and the pipeline in Brewer’s Hill and Fell Point offer first-class alternatives to row home living favored by the Millennials. More projects are planned for south Baltimore and Midtown (student housing), and the sense of the market is that there is demand for more. Despite the relatively high monthly rent outlay, these tenants want to be and stay mobile in order to move where the jobs are and not see housing values drop 30 percent like their parents did.
What is 1,200 feet long, 160 feet wide and 50 feet deep? It’s “New Panamax” — the name for the class of ships that will be able to pass through the game-changing enlarged Panama Canal when the expansion is complete in less than 30 months. The Seagirt Terminal will accommodate the largest container ships in the world as container capacity of these ships doubles, enabling Baltimore to retain its competitiveness in global trade markets.
Our diverse economic drivers such as the University of Maryland on the west, Johns Hopkins to the east and the University of Baltimore and MICA to the north create centers of gravity for existing businesses to grow while attracting new projects at both their core and in their fringes. These organizations have tractor-beams that attract both capital and customers.
At the end of the day, Baltimore benefits from stabilized commercial real estate values, new environments designed as attractive components of urban living, strengthened infrastructure and increased redevelopment opportunities. These factors create momentum, which in turn, can feed on itself.
Owen Rouse, Jr. is senior vice president, director of capital markets at Manekin LLC. For more information, call 410-290-1400 or email [email protected]