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Baltimore metro commercial outlook reflects cautious optimism about Trump

The Baltimore Gateway Class A office building is now 70 percent leased. (Courtesy St. John Properties Inc.)

The Baltimore metro area’s commercial real estate market continues to be buoyed by strong job numbers, two new reports conclude. (File photo)

The outlook for commercial real estate in the Baltimore metro area for 2017 remains optimistic, and firms are cautiously confident about the impact of President Donald Trump’s administration, according to two recent reports.

MacKenzie Commercial Real Estate Services and NAI KLNB recently released reports on the area’s fourth quarter performance and outlook for the coming year. Both reports expressed confidence in market performance buoyed by strong employment numbers.

NAI KLNB touts the state adding 35,000 jobs last year and the unemployment rate hovering slightly above 4 percent compared to the national figure of almost 5 percent. The firm’s report also highlights the 4.7 percent growth in Maryland’s nonseasonal industrial employment since January of 2015.

MacKenzie’s report, whose outlook was written by economist Anirban Basu, drills down into the Baltimore metro area. It found the metro region added 23,600 jobs between November 2015 and November 2016, which represents 75 percent of jobs added in Maryland in that time frame.

“Fueled by health care, cybersecurity, government contracting, and logistics, the Baltimore-Columbia-Towson metropolitan statistical area continues to be at the vanguard of Maryland’s economic growth,” according to the MacKenzie report.

Both reports predict continued success for Class A office product, particularly property in urban areas surrounded by amenities within walking distance. High-end industrial properties are also expected to continue to thrive because of the emergence of e-commerce and its need for space in the Interstate 95 corridor and near the Port of Baltimore.

The firms also the examined potential impact of a new administration on the Baltimore metro area’s commercial real estate market and expressed guarded optimism.

NAI KLNB anticipates less regulation and increases in defense spending under President Donald Trump, which could bolster sectors that have struggled recently, such as the suburban office market.

“Slight grins formed around the mouths of commercial real estate professionals with knowledge that a businessman that made his fortune by developing real estate was about to assume the presidency of the United States. Is that optimism well-founded? Maybe, but what nearly everyone agrees is that it is too soon to tell and it may be as long as two years before we have a more comfortable and confident answer,” according to the NAI KLNB report. “Nothing will happen quickly although many are looking forward to a period with less governmental oversight and regulation.”

In MacKenzie’s report, Senior Vice President Michael Spedden anticipates a “Trump Effect” that results in increased consumer confidence, a “fix” to the Dodd-Frank Wall Street Reform and Consumer Protection Act and reduced regulation resulting in positives for the Baltimore area commercial real estate market.

“Logically, this should only be good for our market,” Spedden writes.

But NAI KLNB also warns of a looming market correction for a national economy that continuously expanded since 2009.

“It is somewhere between difficult and impossible to ‘time the market’ and predict the end of the current expansion. That said, most agree that we are in the midst of a longer-than-typical expansion. When the contraction comes it will bring stagnant growth, higher unemployment and a correlating falloff in demand for space,” according to the report.

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