Baltimore’s ‘Skyline Market’ sizzles

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Demand for high-profile office space in Baltimore has reached a historic high, according to a recent report.

JLL’s Skyline report found vacancy rate has fallen to 8.7 percent in the city’s high-end office buildings and down to 5.5 percent in Class A buildings in the hot Pratt Street corridor. As a result, rents have reached an average of $25.26-per-square-foot in those buildings compared to $21.35-per-square-foot in the city’s overall office market.

“I think it’s all about people and clearly the environment that people want to work in,” Mark Levy, JLL’s Greater Baltimore market director, said.

The Skyline Market, as defined by the report, includes Class A and trophy office buildings that meet one of the following requirements: more than 200,000 square feet; constructed or undergone “significant renovations since 1985;” in a prominent location with “recognized-tenant profile;” or are “architecturally significant.”

JLL also found that Baltimore, with only three blocks of space more than 30,000 square feet on the skyline, combined with a lack of projects in the pipeline may result in a tighter market. But the development of Harbor Point is expected to provide the city with a great deal of capacity to absorb demand for the foreseeable future.

Part of the Skyline Market’s success can also be attributed by the ongoing conversion of older, less desirable office space into residential units. A big boost to the high-end office market is the conversion of more than 1.3 million square feet of antiquated office space into residential units.

Apartment conversions in downtown have flourished in part by demand for downtown living, but a 15-year tax credit for projects of at least 50 units that provides 100 percent credit on incremental property tax for the first two years, which is reduced to 20 percent by the final three years, hasn’t hurt.

Levy, and Patrick Latimer, JLL research director, said they expected a bifurcated market in the central business district to remain in Baltimore. Most of the interest in office space is expected to remain in the Pratt Street corridor and east of the Inner Harbor while west of Charles Street is expected to struggle until more residential development followed by retail takes hold.

“The atmosphere changes quite a bit block to block,” Levy said.

The market for high-profile buildings has been robust recently in Baltimore. In just more than a year 100 E. Pratt St., T. Rowe Price’s headquarters, sold for $187 million; 250 W. Pratt St., Pandora Jewelry’s regional headquarters, sold for $63.5 million; and the Transamerica Tower at 100 Light St., the city’s tallest building, sold for $121 million.