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MARKETBEAT

Industrial Snapshot Q3 2015


Baltimore

BALTIMORE INDUSTRIAL

Economy

Economic Indicators
Q3 14

Q3 15

Baltimore Employment

1.35M

1.38M

Baltimore Unemployment

6.9%

5.5%

U.S. Unemployment

5.9%

5.1%

Q3 14

Q3 15

Overall Vacancy

8.3%

8.3%

Net Absorption

2.2M

1.3M

Under Construction

2.3M

995K

Overall Average Asking


Rent

$5.30

$5.40

12-Month
Forecast

Market Indicators
12-Month
Forecast

Net Absorption/Asking Rent


4Q TRAILING AVERAGE
1,000,000
800,000
600,000
400,000
200,000
0
-200,000
-400,000
2011

2012

2013

Net Absorption, SF

2014

$5.40
$5.30
$5.20
$5.10
$5.00
$4.90
$4.80
$4.70
$4.60
$4.50
Q3 2015

Asking Rent, $ PSF

The U.S unemployment rate abated 0.8 percentage points (pp)


year-over-year to 5.1%; a post-recession historical low,
according to Bureau of Labor Statistics (BLS). That momentum
trickled down to the Baltimore-Towson metropolitan area (MSA),
suppressing the MSAs unemployment rate by 1.4 pp year-overyear, to 5.5%. The Mining, Logging, and Construction sector
netted 700 jobs in Q3, according to BLS preliminary figures. The
Manufacturing sector continues to experience slow but steady
job growth, adding 400 jobs over the last three months.

The Third Quarter Industrial Slowdown


In Q3, 515,020 square feet (sf) of Baltimores industrial inventory
was absorbed, bringing the year-to-dates total to 1.2 million
square feet (msf) of positive net overall absorption. However, this
time last year, tenant demand resulted in twice as much space
being occupied. The ongoing delivery of new supply, some of
which remains unoccupied, continues to counter tenant
occupancies. As a result, the Baltimore industrial overall vacancy
rate has remained unchanged year-over-year, at 8.3%. Much like
many other market fundamentals, leasing activity declined yearover-year by 19.0% with only 5.6 msf in new deals executed
year-to-date. The third quarter slowdown is considered to be in
line with much of 2015 activity, which has experienced a lack of
new tenant demand for space in the Baltimore market and the
overall reduction in deal size. Fortunately, the 144,000-sf newly
constructed warehouse/distribution (W/D) building at 11503
Pocomoke Court completing this quarter delivered fully occupied
by American Tire Distributors. However, there is still nearly 1.0
msf of speculative development underway with only 12.3% preleased. Yet, the industrial direct average asking rent continues to
climb year-over-year by 2.7% at $5.37 psf.

Overall Vacancy

Outlook

12%
10%
8%

Historical Average = 9.1%

6%
4%
2%
0%
2011

2012

2013

2014

Q3
2015

The future delivery of class A W/D product is expected to elevate


the markets vacancy rate. However, the current vacancy rate is
still low enough to make new construction desirable. Newly
delivered product is expected to remain unoccupied longer than
expected, but asking rents will continue to increase over the next
12 months. In the investment market, institutional appetite is
expected to remain high for class A and B industrial product,
particularly in the Baltimore-Washington Corridor, although there
are a very limited number of available properties for sale. The
compression of cap rates and historically high price-per-squarefoot transactions are to be expected.
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MARKETBEAT

Industrial Snapshot Q3 2015


Baltimore

Vacancies in the Corridor Contract Y-O-Y


Overall Vacancy: Flex vs. Warehouse/Distribution

Midsize tenant occupancies in the 40,000 to 70,000-sf range


continue to chip away at the Baltimore-Washington Corridors

12.0%

overall vacancy rate, which was 0.7 pp lower from the same

10.0%

period last year, at 9.8%. The Corridor had the strongest quarter

8.0%

netting 339,582 sf of positive absorption. Maintenance Supply

6.0%

Headquarters and Hills Pet Nutrition occupied a combined


110,717 sf of space at 6745 Business Parkway. Overall net

4.0%

absorption in the Corridor year-to-date remains positive at

2.0%

601,664 sf. At 7.6%, the I-95 North Corridor has experienced the

0.0%
2011

2012

2013

2014

Q3 2015

largest uptick in overall vacancy (1.0 pp) year-over-year, despite


having the strongest influx of new tenants. New tenants entering

Flex

Warehouse/Distribution

the market resulted in positive absorption of 726,612 sf year-todate. Eddie Mercer moved from Frederick to 105,000 sf at 4501
Curtis Avenue and Canusa Hershman Recycling occupied
255,000 sf at 8203 Fischer Road. Yet, tenant downsizing such as

Direct Rental Rates

Ball Corporations return of 114,750 sf to 7001 Quad Avenue for


42,000 sf on Holabird Avenue and unoccupied speculative

$12.00

space, keeps the I-95 North Corridor vacancy rate elevated.

$10.00
$8.00

Slow-Moving Deals; Steadily Increasing Rents

$6.00
$4.00
$2.00
$0.00
Baltimore-Washington
Corridor

I-95 North Corridor

Flex

Beltway Submarket

Warehouse/Distribution

Leasing Activity vs. Sales Activity


12,000,000
10,000,000
8,000,000

Q3 marked the slowest quarter of new leasing activity year-todate. At 1.7 msf, activity was 22.2% lower than the previous
quarter. Nearly 75% of all Q3 transactions occurred in the
Baltimore-Washington Corridor due to larger than average
transactions. Woodgrain Millwork inked a 180,000-sf deal at
2000 Washington Boulevard and FedEx followed suit with a
120,000-sf short-term lease at the same location. AEXGroup,
Inc. also signed a 112,000-sf deal at 7951 Oceano Drive. At
$4.75 psf, the Baltimore industrial W/D sector direct average
asking rent increased 3.0% from Q3 2014; marking three years
of consecutive year-over-year growth. The Baltimore-Washington
Corridor W/D direct average asking rental rate experienced the
largest increase of 5.7% to end the quarter at $5.36 psf.

Investment Activity Ramps Up in Q3

6,000,000
4,000,000
2,000,000
0
2011

2012

2013

Leasing Activity

2014
Sales Activity

2015 YTD

In Q3, the Baltimore industrial market witnessed a slight uptick in


sales activity from the previous quarter with nearly $120 million
of industrial assets, totaling more than 2.2 msf, changing hands nearly half of which the BTR Capital portfolio. Boyd Watterson
picked up 7145 & 7175 Troy Hill Drive, two class A buildings in
Troy Hill Corporate Center, for $120 psf, while Merritt purchased
7195 Troy Hill Drive at $87 psf. The Ohio State Teachers
Retirement System also purchased a vacant 89,252-sf building
at 1710 Crossroads Drive for $89 psf.

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MARKETBEAT

Industrial Snapshot Q3 2015


Baltimore

SUBMARKET

Howard County

Anne Arundel County

Baltimore City/County Southwest

BALTIMORE-WASHINGTON
CORRIDOR

Harford County

Cecil County

INVENTORY

OVERALL
VACANCY
RATE

YTD LEASING
ACTIVITY

YTD USER
SALES
ACTIVITY

UNDER
CONSTRUCTION

YTD
CONSTRUCTION
COMPLETIONS

YTD DIRECT
NET
ABSORPTION

YTD OVERALL
NET
ABSORPTION

DIRECT
WEIGHTED
AVERAGE NET
RENTAL RATE

Flex

7,127,497

10.2%

305,226

22,770

(184,695)

(192,500)

$11.56

W/D

29,695,883

10.3%

1,111,735

184,491

652,741

652,741

$5.21

Flex

9,420,551

10.6%

281,510

(48,400)

(57,225)

$12.48

W/D

21,420,249

10.2%

357,967

150,012

138,178

46,787

46,787

$6.22

Flex

3,128,135

15.7%

141,635

76,729

62,585

69,185

$6.08

W/D

20,382,930

7.4%

832,100

285,000

82,676

82,676

$4.37

Flex

19,676,183

11.3%

728,371

99,499

(170,510)

(180,540)

$10.54

W/D

71,499,062

9.4%

2,301,802

334,503

423,178

782,204

782,204

$5.36

Total

91,175,245

9.8%

3,030,173

434,002

423,178

611,694

601,664

$5.91

Flex

2,204,780

13.6%

28,948

(61,914)

(42,914)

$8.09

W/D

19,887,622

5.1%

720,350

571,500

153,584

153,584

$4.57

PROPERTY
TYPE

Flex

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

W/D

9,759,156

2.7%

28,000

50,000

$3.04

Flex

4,925,691

10.3%

163,045

121,120

64,477

42,382

$10.76

W/D

44,536,853

9.2%

1,206,676

418,935

731,175

573,560

573,560

$3.72

Flex

7,130,471

11.3%

191,993

121,120

2,563

(532)

$9.88

W/D

74,183,631

7.3%

1,955,026

468,935

571,500

731,175

727,144

727,144

$3.86

Total

81,314,102

7.6%

2,147,019

468,935

571,500

852,295

729,707

726,612

$4.15

Flex

9,734,521

9.2%

277,762

30,064

(22,018)

(37,908)

$10.13

W/D

8,038,925

3.2%

42,837

(26,828)

(22,828)

$8.38

Flex

1,483,889

9.7%

(16,540)

(16,540)

$10.90

W/D

5,873,867

5.5%

7,900

(18,102)

(18,102)

$6.50

Flex**

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

W/D

7,203,249

3.3%

58,100

272,713

13,920

16,530

$5.20

Flex

11,218,410

9.3%

277,762

30,064

(38,558)

(54,448)

$10.34

W/D

21,116,041

3.9%

108,837

272,713

(31,010)

(24,400)

$6.68

Total

32,334,451

5.8%

386,599

302,777

(69,568)

(78,848)

$8.28

TOTAL FLEX

Flex

38,025,064

10.7%

1,198,126

129,563

121,120

(206,505)

(235,520)

$10.35

TOTAL W/D

W/D

166,798,734

7.8%

4,365,665

1,076,151

994,678

731,175

1,478,338

1,484,948

$4.75

TOTAL

204,823,798

8.3%

5,563,791

1,205,714

994,678

852,295

1,271,833

1,249,428

$5.37

Baltimore County East

I-95 NORTH CORRIDOR

Baltimore County North/West

Baltimore City

Carroll County

BELTWAY SUBMARKETS

BALTIMORE TOTAL

* RENTAL RATES REFLECT ASKING $PSF/YEAR **FLEX INVENTORY DOES NOT EXIST IN THIS MARKET

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MARKETBEAT

Industrial Snapshot Q3 2015


Baltimore

Key Lease Transactions Q3 2015


PROPERTY

SF

TENANT

PROPERTY TYPE

SUBMARKET

2000 Washington Boulevard

180,000

Woodgrain Millwork

Warehouse Distribution

Baltimore City/County - Southwest

2000 Washington Boulevard

120,000

FedEx

Warehouse Distribution

Baltimore City/County - Southwest

7951 Oceano Avenue

112,000

AEXGroup, Inc.

Warehouse Distribution

Howard County

4501 Curtis Avenue

105,133

Eddie Mercer

Warehouse Distribution

Baltimore County East

7077-7081 Oakland Mills Road

86,000

Shepard Exposition Services, Inc.

Warehouse Distribution

Howard County

7700 Rolling Mill Road

80,000

Pacorini Metals USA, LLC

Warehouse Distribution

Baltimore County East

1904 Park 100 Drive

60,128

Harmon Glass

Warehouse Distribution

Anne Arundel County

6745 Business Parkway

58,593

Hills Pet Nutrition, Inc.

Warehouse Distribution

Howard County

6745 Business Parkway

52,124

Maintenance Supply Headquarters

Warehouse Distribution

Howard County

PROPERTY

SF

SELLER/BUYER

4501 Curtis Avenue

520,300

BTR Capital Group/Alliance Partners HSP, LLC

$10,850,000

Baltimore County East

8203 Fischer Rd

318,620

BTR Capital Group/McConnell Johnson, LLC

$10,574,997

Baltimore County East

4505 North Point Blvd

230,835

Signode Eastern Operations/Eramus Properties, LLC

$4,700,000

Baltimore County East

3501 E Biddle St

195,089

BTR Capital Group/SK Realty Management

$19,050,000

Baltimore County East

1231 Tech Ct

151,125

Conowago Contractors, Inc/FR Conversions

$8,750,000

Carroll County

7145 & 7175 Troy Hill Drive

131,730

ASB Real Estate Investments/Boyd Watterson Asset Management

$30,400,000

Howard County

Rumsey Center

103,600

First Potomac Realty Trust/Finmarc Management, Inc.

$15,750,000

Howard County

1710 Crossroads Drive

89,252

The Suddath Companies/Ohio State Teachers Retirement System

$7,980,000

Anne Arundel County

8900-8906 Yellow Brick Road

60,000

TA Realty/Cabot Properties

$4,125,000

Baltimore County East

Key Sales Transactions Q3 2015


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Copyright 2015 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered
to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

SUBMARKET

Sarah Dreyer
Regional Director, Mid-Atlantic
500 East Pratt Street, Suite 500
Baltimore, MD 21202
Tel: +1 202 739 0371
Fax: +1 202 296 1050
Sarah.dreyer@cushwake.com

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