The Baltimore area industrial market has been on a hot streak – driven by e-commerce, but also luring companies who like the traditional draws of the city’s port and I-95 access.
A third quarter report on the market from MacKenzie Commercial Real Estate Services found that 133,000 square feet of space was net absorbed in the Baltimore market, and total available flex space dropped by 60,000 square feet. At the same time, the average rental rate for flex ace increased from last year, reaching $11.59, and rental for warehouse was up $5.16.
“After a slowdown in industrial activity in Q1 2016, the Baltimore Metro market has picked up steam in Q3 as several large build-to-suits were announced, making a statement about the national economy, not to mention changing consumer dynamics as last mile e-commerce deals continue to impact the market,” Dan Hudak, senior vice president and principal at MacKenzie, said in the report.
Sage Policy Group CEO Anirban Basu prepared the report for MacKenzie. “While industrial market momentum could be upset at some point by the next economic downturn, the longer-term outlook for industrial space in the Baltimore area remains robust,” he wrote.
Developers and brokers in the area have remained confident about the market’s potential, which is being driven in large part by robust e-commerce demand.
Discussing the market’s performance following the third quarter, Matthew A. Laraway, a partner at Chesapeake Real Estate Group, was bullish this fall about the industrial sector’s prospects moving forward. He said that for the first time in many years there wasn’t a particular submarket underperforming.
“I feel like we got shot out of a cannon,” Laraway said.
Arguably the greatest sign of confidence in the industrial sector is the willingness of developers to continue to invest and build properties even with a tremendous amount of supply in the pipeline.
A report by commercial real estate services firm JLL on the industrial market’s performance in the Baltimore area during the third quarter found there’s nearly 3.5 million square feet of industrial development expected to break ground in the fourth quarter, with nearly two-thirds of that built-to-suit construction. Firms like Chesapeake Real Estate Group are confident enough in the market they they’re building large buildings on speculation, such as the 413,000-square-foot building at its Port 95 industrial park.
“Activity across the market has begun to shift north of the tunnel into Baltimore city east, Baltimore County east, and into the (Interstate) 95 north submarket as new highly functional product continues to come online and give tenants options. Inventory across these submarkets has grown by roughly 9.1 percent since 2010 and is expected to continue as a result of record high leasing velocity, coupled with limited availability and increased attention from developers,” according to JLL’s industrial insight report.
The Baltimore area is also home to one of the largest industrial redevelopment projects in the nation. Tradepoint Atlantic is currently in the process of transforming Sparrows Point from abandoned steel making site to a 3,100 acre multimodal industrial hub.
The project is expected to deliver 16 million square feet of space by 2025. Tradepoint Atlantic has already landed massive deals including a 1.3 million square foot distribution and warehouse facility for Under Armour and a 300,000 square foot distribution facility for FedEx Corp. That development is expected to have a $2.9 billion impact on the regional economy, according to Sage Policy Group reports.