Baltimore tech firms are raising more venture capital than a year ago and are looking to take advantage of low costs and industry opportunities in the area, according to a recently released report.
Commercial real estate firm JLL’s “Technology Office Outlook” paints a sunny picture for continued growth in the tech sector in the Baltimore metro area as in-demand submarkets begin favoring landlords.
Firms raised $119 million in venture capital in the past 12 months, according to JLL, and that represents a 73 percent increase year-over-year.
Tech employment in the metro area continued to increase, with a 1 percent bump in tech jobs year over year. Tech employment has expanded by 8.5 percent since 2001.
The Baltimore metro market may not draw the same level of interest from tech firms as places like New York, Silicon Valley or even Washington. But the metro area has been viewed as an emerging tech talent center, especially in cybersecurity, because of its location near the National Security Agency and U.S. Cyber Command at Fort Meade.
In July, commercial real estate firm CBRE listed Baltimore as a top 10 market for finding tech talent in that company’s “Scorching Tech Talent” report. That report also found the metro area’s relative affordability to be an asset in attracting talent and predicted an increase in office demand, particularly in submarkets where these jobs are clustered.
There are some challenges in the office market primarily around office supply. Rents in the metro area increased by 3.2 percent year over year, which, according to JLL, is the quickest pace of growth since 2007. There’s also a limited supply of adaptive reuse projects in the city that many tech firms favor, which could continue to drive up rent prices.
“Lack of speculative development, either new construction or adaptive reuse, in tech-heavy submarkets of Baltimore City had traditionally created challenging conditions for tenants in the market, but recent activity has begun to open up opportunities,” Patrick Latimer, JLL research manager, says in the report.
Much of that opportunity is expected to come, eventually, from Sagamore Development Co.’s $5.5 billion redevelopment of Port Covington. At full build-out, which is expected to take roughly 20 years, the development will provide 1.5 million square feet of office space.
The report says the Baltimore metro market still remains in a sweet spot with lower costs and greater opportunity.
Currently, there are 71 million square feet of total office space inventory and a vacancy rate of 12.8 percent. The average overall direct asking rent is $23.12-per-square-foot, which represents 3.2 percent rent growth during the past 12 months.