The Baltimore area’s industrial property market continues to perform well overall, despite a glut of supply being delivered.
According to JLL’s report analyzing the market’s performance, despite a lot of product being delivered in the past year absorption rates and rents are generally on the rise. But some submarkets are outperforming others, primarily because of the available stock.
“Companies in this market migrate to good buildings, and the speculative deliveries over the next six-to-12 months will be top-of-the-line,” Ben Meisels, senior vice president in JLL’s Baltimore office, said in a news release announcing the report’s findings. “Some large tenants have been kicking the tires for as long as 12 months, and it’s not unusual to see real estate decisions pick up in the fall.”
The report found the Baltimore/Washington, D.C. corridor and the East Baltimore County submarkets performing the best. That’s particularly true of the Baltimore/D.C. corridor. That submarket reported a 11.2 percent vacancy rate for warehouse and distribution product, which represents a nine-year low.
Meanwhile, demand in East Baltimore County is being driven in large part by the demand of e-commerce companies and the submarket’s proximity to Interstate 95 and the Port of Baltimore. Because these areas have seen the focus of development and leasing, the asking rents continue to climb.
On the flip side, the report found the Baltimore West and Baltimore Southwest submarkets were struggling with decreasing rents. According to the report, the asking rent for properties in those submarkets fell by nearly 5 percent year-over-year.
That drop is largely driven by the fact the stock of warehouse and distribution spaces in those markets are older and consists largely of Class B and Class C space. Older spaces lack the ability to provide amenities, such as 40-foot-high ceilings and reinforced concrete floors to support conveyor belts, features that many e-commerce companies desire.
But overall the market, which has seen 1.1 million square feet in deliveries so far this year, has only experienced a slight uptick in vacancy rate. Through the second quarter of 2015 the vacancy rate stands at 9.4 percent, compared to 9.3 percent at the end of 2014.
New construction deliveries are also off last year’s pace, which saw 4.07 million square feet of deliveries last year. But there are some large projects, such as Sparrows Point and Chesapeake Real Estate Group LLC’s re-development of the former Sun Products building, that will add brand new space to the hot East Baltimore County and East Baltimore markets.