Q4 2014 | OFFICE USE

BALTIMORE METRO AREA

Office Market Report

Innovation & Politics: Key Factors in 2015

MARKET DEFINITION
The Baltimore Regional office market consists of Baltimore City and the surrounding counties of Anne
Arundel, Howard, Baltimore and Harford. The Colliers defined submarkets of Annapolis, BWI Area,
Howard County, Baltimore County West, Baltimore County North, Baltimore County East and Harford
County are all located within this Region. According to Costar, there are currently 375 existing Class
A buildings within the Baltimore Metro area with more than 45,700,000 square feet of space. In the
4th quarter of 2014 approximately 5,800,000 square feet of that space was vacant. The overall
regional vacancy rate ended at 12.7%, slightly better than the national vacancy rate of 13.5%.

MARKET OVERVIEW

Thousands

Net Absorption

Nationally, the office market improved in the

second half of 2014. Indicative of the
broadening economic recovery, the U.S.
office-use employment growth was stronger
than overall job growth at 2.8% year-over-year
in September. Most major markets added jobs
in the second half of 2014. Maryland added
more jobs this year than were added in D.C.
Metro, 2,800 in September alone. While FIRE
users (those focused on Finance, Insurance,
and Real Estate) have typically not fared well in
the recession, they have caught up to ICEE
businesses (Intellectual Capital, Energy and
Education) as it relates to traditional office
space demand. Additionally, as corporate profits
are out of the danger zone, confident
employers are reenergizing the office market in
certain areas.

2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2011

2012

2013

2014

Vacancy Rate
15.0%
14.0%
13.0%
12.0%
11.0%
10.0%
9.0%
Q4 2011

Q4 2012

Q4 2013

Q4 2014

MARKET INDICATORS
Q3 2014

Q4 2014

VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE

www.colliers.com/greaterbaltimore

In Maryland, questions surrounding taxes and

economic-oriented legislation swirled during
the 4th quarter, primarily in response to the
gubernatorial elections. With the Hogan victory,
the business community anxiously awaits the
effects of a Republican administration during
the next four year. Some economists theorize
that high corporate tax rates will likely be
reexamined, and while taxes as a whole will
probably go down, they will not hit bottom.
Creating a more competitive business
environment, while still maintaining and
investing in infrastructure, will be a balancing
act for the incoming Governor.
According to Moodys, although defense
spending cuts are on the horizon, cybersecurity

has been deemed a priority by the Pentagon. As

the Baltimore Metro Area is poised to be a hub
for growing cybersecurity companies, this
augurs well for the regions economy. Maryland
has consistently ranked as one of the most
educated states in the USA, ranking 4th
nationally in number of residents with
bachelors degrees and 3rd nationally in number
of advanced degrees. With a large amount of
STEM students in the pipeline, retaining those
newly graduated millennials has caused
increased apartment development in Baltimore
City, as well as new retail options.
As it relates to the cybersecurity industry, that
sector will only grow in the area. With tax
credits such as the Employer Security
Clearance Cost tax credit, aimed at helping
companies fund costs associated with getting
employees security clearance, help make
Maryland more hospitable for these growing
companies. In fact, the number one sector of
jobs lost in the D.C. metro was professional
services related to defense contractors
choosing to move to the suburbs of Maryland.
The quest to secure corporations and
businesses in Maryland, and specifically
downtown Baltimore, has also been challenging.
As a result, the Downtown Partnership of
Maryland has launched a grant program,
TechConnect, aimed at attracting technology
firms into Baltimore City offering cash
incentives for relocating. Additionally, the
Emerging Technology Center is looking for their
next class of entrepreneurs offering start-up

RESEARCH & FORECAST REPORT | Q4 2014 | OFFICE USE | BALTIMORE METRO AREA
absorption in the 2nd half of 2014 becoming
positive for the first time in over a year. In the
past, negative absorption was attributed to the
750,000 -1 million SF of Class B product is
subject to adaptive re-use conversions.

For 2015, it is anticipated that the Baltimore

Regions economy will continue to strengthen.
While federal hiring will decline or remain flat,
private sector hiring will accelerate, and wages
will likely rise as the labor pool tightens. Real
estate deals that died in the past several years
are suddenly reviving, showing an overall feeling
of optimism among companies looking to lease
or buy real estate.

funds of $25,000. As more companies, and their

younger employees, migrate into Baltimore,
concepts like Zipcar for transportation, and
Kinglet for small office requirements are
becoming popular options.
Overall, commercial real estate transactions
fared much better in 2014 than the previous
years, due to several large transactions in
downtown Baltimore (Pandora, MAIF, OneMain,
etc.). As a secondary market, the Baltimore
Metro offers corporations many advantages from
a headquarters perspective. First, Baltimore is
ideally situated with easy access to all major
highways sewing the Mid-Atlantic, rail and
airports, as well as proximity to major markets
such as D.C., Philadelphia and New York.
Second, cost of living and wages are lower in
Baltimore, giving employers the ability to reduce
payroll output while still enabling employees to
maintain a good quality of life.

VACANCY
Overall, vacancy rates in the Baltimore Regions
office market were relatively unchanged at 12%,
Class A office vacancy rose slightly at 12.7%,
while Class B & C space declined to 11.5%. With
little new office construction planned, vacancy is
expected to decline in the next 12 months.

NET ABSORPTION
During 2014, despite increases leasing activity in
Baltimore City, net absorption in the Class A
Baltimore Region office market was negative for
the first time in 12 months. This was due, in part,
to the reduction in sublet space. However, a
significant amount of BRAC-related space in
Harford County, and sequestration related
vacancy in Howard County is a key factor. Class
B & C space was a different story with positive

Single Story Asking Rental Rates

RENTAL RATES
Average full service rental rates hovered around
$21.25 PSF as it has for the past 3 years. Class A
office full service rental rates were also stagnant
at $23.50 PSF, as were Class B & C office rental
rates holding around $19.75 PSF.

Multistory Asking Rental Rates

$23.00

$21.00

$22.50
$22.00

$19.00

$21.50

$17.00

$21.00

$15.00
Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

$20.50
$20.00
$19.50
$19.00
Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q42014

SELECT LEASE SIGNINGS

TENANT

LEASED SF

PROPERTY ADDRESS

CITY

Kramon & Graham

25,853 sf

1 South Street

Baltimore

University of Maryland Faculty Physicians

34,500 sf

5900 Waterloo Crossing

Columbia

Maximus

33,600 sf

2555 Lord Baltimore Drive

Woodlawn

Stewart, Plant & Blumenthal

8,500 sf

7 St. Paul Street

Baltimore

Bon Secours

22,780 sf

6000 Metro Drive

Baltimore

Cigna Health Care

21,417 sf

111 S. Calvert Street

Baltimore

OneMain Financial

109,156 sf

100 International Drive

Baltimore

Itineris

12,600 sf

2050 Rockrose Avenue

Baltimore

Sourcefire

90,744 sf

8135 Maple Lawn Boulevard

Fulton

Development Design Group

27,433 sf

3700 ODonnell Street

Baltimore

SELECT SALES ACTIVITY

PROPERTY ADDRESS

BUYER

SALE PRICE

SF

PRICE/SF

300 W Lexington Street

AiNet Corporation

$18,500,000

202,838 sf

$91.21

11620 Red Run Boulevard

MHW Group, Inc.

$7,140,000

40,000 sf

$178.50

301 International Circle

Jai Medical Systems

$6,200,000

28,774 sf

$215

10420 Little Patuxent Parkway

The Howard Hughes Corporation

$130,000,000

103,323 sf

$185

7625 Maple Lawn Boulevard

Maple Lawn Professional, LLC

$4,600,00

11,910 sf

$385

www.colliers.com/marketname

RESEARCH & FORECAST REPORT | Q4 2014 | OFFICE USE | BALTIMORE METRO REPORT
UPDATE: MARKET COMPARISONS
Net Absorption

New Construction

TOTAL SF

ASKING RATES

VACANT SF

VACANCY %

CURRENT
QUARTER

Annapolis

5,611,799 sf

$22.80/FS

837,845 sf

14.9%

-63,226 sf

-120,796 sf

Baltimore County East

3,622,574 sf

$19.25/FS

477,376 sf

13.2%

41,847 sf

105,426 sf

Baltimore County West

13,056,637 sf

$19.95/FS

2,143,470 sf

16.4%

53,694 sf

150,073 sf

192,000 sf

Baltimore County North

15,137,817 sf

$19.90/FS

1,811,775 sf

12.0%

39,151 sf

213,474 sf

BWI

12,875,490 sf

$24.30/FS

1,447,011 sf

11.2%

42,891 sf

119,736 sf

119,880 sf

Downtown Baltimore

13,106,119 sf

$21.75/FS

2,106,076 sf

16.07%

-160,458

40,802 sf

Harford County

4,116,499 sf

$22.90/FS

917,065 sf

22.3%

27,233 sf

-2,229 sf

Howard County

18,439,247 sf

$23.40/FS

1,981,092 sf

10.7%

103,774 sf

405,829 sf

147,000 sf

SUBMARKET/COUNTY

YTD

CURRENT

COMPLETED

QUARTERLY COMPARISON AND TOTALS - BALTIMORE METRO CLASS A

QUARTER

TOTAL RBA

VACANT SF

VACANCY %

CURRENT Q
ABSORPTION

YTD
ABSORPTION

CURRENT
CONSTRUCTION

COMPLETED
DELIVERIES

AVERAGE
RENTAL RATES

Q4 2013

45,137,534 sf

6,327,797 sf

14%

286,525 sf

-607,319 sf

940,170 sf

138,9000 sf

$23.80/FS

Q1 2014

45,763,704 sf

5,863,724 sf

12.8%

1,090,243 sf

1,090,243 sf

464,000 sf

626,170 sf

$23.60/FS

Q2 2014

45,763,704 sf

5,586,093 sf

12.2%

277,631 sf

1,367,874 sf

464,000 sf

$23.35/FS

Q3 2014

45,763,704 sf

5,584,869 sf

12.2%

1,224 sf

1,369,098 sf

746,760 sf

$23.80/FS

Q4 2014

45,763,704 sf

5,796,430 sf

12.7%

-211,561 sf

1,157,537 sf

1,165,760 sf

$23.50/FS

Submarkets
ANNAPOLIS
The Annapolis submarket is located approximately 25 miles south of Baltimore City and 30 miles east of Washington D.C.. The local Class A & B office market
consists of 159 properties and approximately 5,600,000 square feet of space. In the 4th quarter of 2014 approximately 800,000 square feet of this space was
vacant or a 14.9% vacancy rate. Chase Brexton signed a 9,869 sf lease at 200 Hospital Drive in Glen Burnie. Plastic Surgery Specialists renewed their 7,347
sf lease at 2448 Holly Avenue. Additionally, Plan B leased 10,000 sf of space at 185 Admiral Cochrane Drive.
BALTIMORE COUNTY EAST
The Baltimore County East submarket includes Baltimore County suburban areas located east of Baltimore City, defined by the I-95 Corridor as well as I-695
and includes the local markets of White Marsh, Perry Hall, Dundalk and Essex. In the 4th quarter of 2014 the submarket included 110 Class A & B buildings
and more than 3,600,000 sf of space with approximately 480,000 square feet of that space vacant, or a 13.2% vacancy rate. Though typically not known as
an office market, proximity to major highways, and high density population, makes this submarket attractive for retail and industrial/flex users. Loomis
Armored recently signed a 50,000 sf lease at 4979 Mercantile Road in the White Marsh Business Community. Additionally, Katzen Eye Group signed a
10,000 sf lease at 7106 Ridge Road.
BALTIMORE COUNTY WEST
The Baltimore County West submarket is located in the suburban areas of Baltimore County bordering the western and northwestern portions of Baltimore
City. The submarket is defined by I-695 and Reisterstown Road corridors, and includes the local markets of Owings Mills, Pikesville, Woodlawn, Catonsville
and Arbutus. This submarket consists of 296 Class A & B buildings having approximately 13,000,000 square feet. In the 4th quarter of 2014 nearly 2,150,000
square feet of that space was vacant, representing a 16.5% vacancy rate. While there are no clear plans for redevelopment at Owings Mills Mall, other projects
nearby such as Metro Center and Foundry Row are moving along as planned. CSG Partners acquired Owings Mills Business Center and Owings Mills
Corporate Center for $13 million, while LifeBridge purchased 5400 Old Court Road and 8600 Liberty Road. Maximus Healthcare signed a 33,600 sf lease at
2555 Lord Baltimore Drive, and Novatech signed a 10,815 sf lease at 11425 Cronhill Drive.
BALTIMORE COUNTY NORTH
The Baltimore County North submarket incorporates major thoroughfares including the I-83 corridor as well as I-695. In addition to the traditional submarkets
of Towson and Timonium, the area also includes Hunt Valley, Cockeysville and Sparks. The overall Baltimore County North Class A & B office market contains

RESEARCH & FORECAST REPORT | Q4 2014 | OFFICE USE | BALTIMORE METRO AREA

Submarkets (contd)
275 properties and approximately 15,000,000 square feet of space. In the 4th quarter of 2014 approximately
1,800,000 square feet of that space was vacant representing a 11.9% vacancy rate. Of the Class A buildings
in the Hunt Valley/Sparks submarket, however, that vacancy rate is much lower standing at 4.6%. As for
lease activity, Katzen Eye Group signed two leases totaling 10,000 sf at 501 and 555 Fairmount Avenue.
KatzAbosch renewed their lease in Timonium for 23,000 sf at 9690 Deerco Road. Otherwise, rumors still
swirl about McCormicks possible exit of the market, and even the state, however, any decision to move will
likely be several years in the making.
BWI
The BWI Area submarket is located around the Baltimore/Washington Thurgood Marshall International
Airport and includes Fort George Meade, NSA headquarters, Linthicum, Hanover, Glen Burnie, Elkridge and
small portions of Howard County bordering BWI Airport to the west. This market consists of 198 properties
and more than 12,800,000 square feet of space. In the 4th quarter of 2014 less than 1,460,000 square feet of
this space was vacant or 11.4%. Although this market was relatively quiet in the last quarter, Hudson Cook
signed a 20,265 sf lease at 7037 Ridge Road, and an undisclosed tenant signed a 24,000 sf lease at 795
Cromwell Park Drive.
DOWNTOWN BALTIMORE
The Baltimore City office submarket comprises the traditional Central Business District (CBD) as well as the
adjacent areas of Harbor East & Fells Point, Canton, Stadium/West, and South Baltimore. Within this expanded
downtown area there is more than 13,100,000 sf of Class A office space. In the 4th quarter of 2014 more than
2,240,000 square feet of that space was vacant for lease or sublease, or a 17.06% vacancy rate. As has been
the case in the past, office buildings on the Pratt Street corridor fare better on average, ending the year at
11.77% vacant. However, the same cannot be said for properties North of Lombard Street which currently
hold a 28.83% vacancy rate. Among the larger deals was OneMain Financial which will be relocating to
109,000 sf at 100 International Drive. Cigna Health signed a 21,417sf lease at 111 S. Calvert Street, and
Stewart Plant Blumenthal renewed their 8,500 sf lease at 7 St. Paul Street. As for sales, 2 Hopkins Plaza
is back on the market after recently being purchased a year ago, and Metro West is going through the steps
to formally being put on the market for sale. The largest sale in the city was 300 W. Lexington Street which
sold for $18,500,000. Moving forward in 2015, expect to see cranes in and around downtown Baltimore as
construction begins and continues on projects such as Exelons new headquarters in Harbor East, and MAIFs
new headquarters in Locust Point.
HARFORD COUNTY
The Harford County submarket is defined by the I-95 and Route 1 Corridors. The area includes the local
markets of Bel Air, Aberdeen (including Aberdeen Proving Grounds) and Havre de Grace. This market
consists of 131 Class A & B properties and just over 4,100,000 square feet of existing space. In the 4th quarter
of 2014 about 900,000 square feet of that space was vacant or 22%. This market which has been plagued
by oversupply and vacancy may see more vacancy as recent reports suggest that the 2020 BRAC plan could
cut as many as 4,000 more jobs in Aberdeen. COPT recently developed incubator space at 210 Research
Drive in an attempt to lower vacancy. A confidential tenant recently signed a 6,000 sf lease at 1250 Brass
Mill Road, but otherwise leasing was relatively slow. As for sales activity, the Waters Edge campus is being
marketed for sale.
HOWARD COUNTY
The Howard County submarket is located between Baltimore, MD and Washington D.C. along the interstate
I-95 Corridor comprised of 385 Class A & B buildings and about 18,400,000 square feet of space. In the 4th
quarter of 2014 just less than 2,000,000 square feet of that space was vacant or 10.8%. As space around
Columbia Town Center becomes tighter, demand is radiating to the outer edges of the submarket. Several
notable transactions occurred this quarter, in particular Cisco which leased 100,000 sf of space in Maple Lawn,
securing Maple Lawns legitimacy as an office market. Snyder Kearney signed a 11,700 sf lease at 10320 Little
Patuxent Parkway, and Microsoft took 17,000 sf at 6518 Meadowridge Road to name a few more. University
of Maryland Faculty Physicians signed on for 34,500 sf at Waterloo Crossing, which is now fully leased. As
for sales, The Howard Hughes Corporation purchased 10420 Little Patuxent Parkway for $130 million.

485 offices in
63 countries on
6 continents
United States: 146
Canada: 44
Latin America: 25
Asia Pacific: 186
EMEA: 84
$2.1

billion in annual revenue

billion square feet under

management

1.46

15,800

professionals

RESEARCHER:
Nadia Kahler
Vice President, Research &
Transaction Management | Baltimore
100 North Charles Street
Suite 1710
Baltimore, MD 21201
TEL +1 443 543 1222
FAX +1 443 543 0191

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