414 Light St. is starting its rise toward becoming one of the tallest buildings in Baltimore. Tradepoint Atlantic is transforming the former steel mill site at Sparrows Point into a massive multimodal hub. Stadium Square is primed to deliver needed creative space to Baltimore’s office market.
All signs point to a rosy outlook for commercial real estate for next year.
In 2016 the commercial real estate market continued its strong performance in the Baltimore metro area. Developments ranging from multifamily to industrial properties, in various submarkets, continued breaking ground as the area’s economy continued its solid performance.
The city continued to dominate the area’s multifamily market as developers invested in market-rate apartments in urban settings, particularly along the city’s waterfront
While there’s some question whether millennials really crave urban living — a recent report from the Urban Land Institute found 75 percent of 25- to 34-year-olds in the largest 50 metro area live in the suburbs — developers keep betting on young people wanting to make Charm City home.
Construction on projects such as the 44-story 414 Light St.; the 289-unit Harbor Point apartments; the $170 million Liberty Harbor East; and the Nelson Kohl apartments, Station North Arts & Entertainment District’s first new multifamily building, celebrated the start of construction in 2016.
There’s plenty more apartment and mixed-use developments looking to break ground next year. Keep an eye on the lease rates; with so much product coming on the market, that will be a strong indicator of future demand.
Baltimore’s office market hummed along as the metro area gained jobs. The business/professional services job sector led the way, adding 13,700 jobs in the 12-month period ending in July, according to a Delta Associate’s report on the Baltimore area office market performance in the third quarter.
The trend of “flight to quality” continued in Baltimore’s office market. Commercial real estate firm Newmark Grubb Knight Frank found that Class A vacancy rate fell by 200 basis points from the same time last year to 10.7 percent in the third quarter. The same report found developers in the area are responding to the demand and are building 1.7 million square feet of top-rated space. Even with all that construction Delta Associates predicts Class A vacancy will fall to 9.5 percent next September.
Christopher Abramson, managing executive director of NGKF Capital Market’s Baltimore office, has previously warned that the city needs creative space, particularly along the waterfront. There’s about 1.6 million square feet of creative space in that area, he said, and it’s about 99 percent leased. Meanwhile, developers, such as Arsh Mirmiran at Caves Valley Partners, argue developments like his $250 million Stadium Square, which includes 300,000 square feet of office space, is positioned to meet that need.
Maybe the biggest success story in commercial real estate in the Baltimore area is the industrial sector. The hot market continues to be driven in large part by demand from the e-commerce sector because it needs to be close to Interstate 95 and the Port of Baltimore.
A report from commercial real estate services firm JLL found that 3.5 million square feet in industrial building was anticipated to break ground in the final quarter of 2016, with nearly two thirds of it built-to-suit space.
But the biggest jolt to that market will come from Tradepoint Atlantic’s development of 3,100 acres at Sparrows Point into a multimodal hub. The development is expected to deliver 16 million square feet of space by 2025.
The project already has deals for a 1.3 million-square-foot distribution and warehouse facility for Under Armour and a 300,000-square-foot Fed Ex Corp. distribution facility.
There’s some lingering concern amongst economists, such as Sage Policy Group’s Anirban Basu, that the market is due for a correction in the next two years. But for the time, being cranes continue to dot skylines throughout the Baltimore region, and that’s not expected to stop in 2017.
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