The overall vacancy rate for commercial office space in the suburban Maryland region – defined by Montgomery and Prince George’s counties – rose 1.7% to 14.1% at the end of first quarter 2022, according to the Suburban Maryland Commercial Office Q1 2022 Market Brief released by Edge.
Unlike the northern Virginia submarket, where vacancies have stabilized, the vacancy rate continues to creep upward, representing a continuation of the trend that started at the beginning of the health care crisis. Despite the persistent slowdown in leasing activity and increasing vacancies, the average market rent has increased to $28.86 per square foot, growing from $28.47 at the end of last year.
Edge, a full-service commercial real estate firm with offices in Washington, Virginia, Maryland and Pennsylvania, publishes quarterly data reporting on the area’s commercial office and industrial/flex real estate asset classes.
Among the largest leases completed in the first quarter was the expansion of Tetracore, which leased 99,202 square feet of space in 77 Upper Rock Circle in north Rockville. Additional significant transactions were Xometry’s 28,068 square foot lease at 6166 Executive Blvd. in north Bethesda, and the 26,177 square foot lease executed by American Kidney Fund at 11921 Rockville Pike in North Bethesda.
Although the pipeline for new construction space has diminished greatly since mid-2020, an increasing number of development companies are converting commercial office space into life sciences product. An example is 9900 Belward Campus in Rockville, where two suites have been converted into lab space.
Notable building sales included the purchase of Bethesda East Office Center, located at 4405 East-West Hwy. by Perseus TDC for $21.5 million, as well as MedCraft Healthcare’s acquisition of Westtech-Hartford at 12041 Bournefield Way in Silver Spring for $11.1 million.
Direct vacancy rates for submarkets in Montgomery Prince George’s and Montgomery Counties include Bethesda/Chevy Chase – 19.2%; Germantown/I-270 North – 16.6%; National Harbor/Oxon Hill – 15.7%; north Bethesda/Potomac – 16.7%; north Rockville – 14.1% and Silver Spring – 17.7%.