Mackenzie

4TH quarter
2016
BALTIMORE METROPOLITAN AREA market report

OFFICE | INDUSTRIAL | RETAIL | CAPITAL MARKETS | ECONOMY
www.MACKENZIECOMMERCIAL.com
baltimore
lutherville
annapolis
bel air
columbia
Table of Contents
Capital Markets ........................ 1
Economic Outlook ..................... 2
Office Market .......................... 3
Retail Market .......................... 8
Industrial Market ..................... 11
Investment sales & capital

CAPITAL OUTLOOK
FOURTH QUARTER | 2016
10-Year US Treasury Trailing 365 Days
By Brendan Harman, Assistant Vice President

The Capital Markets experienced a wild ride in
2016. On the debt side, a few banks are reaching
concentration limits on numerous asset classes
restricting capital that can be lent on certain asset
types. The 10-year US Treasury has increased
120 bps from July 5s lows to settle at 2.57%
(12/19/2016); this jump represents an 88%
increase. The 10-year US Treasury has increased
69 bps since the US Presidential election,
representing a 37% increase. Yet despite the rapid
increase of the 10 year, we are still at historic
lows. The trailing 10 years have averaged 2.84%.
Over the last 50 years the value is over 6%. The
market has priced in 3 Federal Funds rate hikes in
2017 and were expecting the Prime Rate to inch
up slightly throughout the coming year.
Source: Federal Reserve Board, 2016
Historical Baltimore Metro Sales Volume (all property types)*

Millions
Sales Volume
$ 3,000 M
While sales in the Baltimore Metro area are still hovering

around $1.5 billion in volume, which is just below the
five-year average of $1.6 billion, its drastically lower
than the past two years, which averaged $2.3 billion
comparatively. Overall, sales in 2016 were most
affected by office properties, which averaged $143/sf,
compared to $140/sf for retail buildings, and $62-$88/
sf for warehouse and flex buildings, respectively. The
market average price for sales is $115/sf. Cap rates
remain highest for office, flex and retail around 7.6%,
compared to 6.6% for warehouse sales.
$ 2,500 M
$ 2,000 M
$ 1,500 M
$ 1,000 M
$ 500 M
Source: CoStar Property Data
$0M
2011
2012
2013
7.5%
Cap Rates
2014
2015
2016
20.00%
$1.5 B
Sales
Vacancy
Volume
Rate
$115
Avg. Price PSF
www.mackenziecommercial.com
* All information furnished regarding property for sale, rent, exchange or financing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions,
or changes in conditions, prior sale, lease or withdrawal without notice. All information should be verified to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 12/31/2016.
Industry Growth and Employment
Regional Economy Filled with Promise in 17

Contributed by Economist Anirban Basu, Sage Policy Group, Inc.
Fueled by healthcare, cyber-security, government contracting, and
logistics, the Baltimore-Columbia-Towson metropolitan statistical
area continues to be at the vanguard of Marylands economic
growth. Between November 2015 and November 2016, the region
added 23,600 jobs, or roughly three-fourths of all the jobs added
in Maryland. That translated into 1.7% job growth, better than the
statewide (1.1%) and national (1.6%) averages.
While there is a presumption that the jobs of today are not nearly
as good as the ones of the past in terms of compensation, recent
data tells a more nuanced story. Professional and business services,
which encompasses a mix of jobs ranging from very high wage to
entry level, accounted for 46% of the metropolitan areas job growth
during the most recent twelve-month period for which data exist.
Education and health services, which also embodies a mix of high-,
medium-, and low-wage positions, chipped in another 35% of the
regions net new job creation.
Over the past year, the regional unemployment rate has dipped
from 5% to 4.2%, one of the lower rates of unemployment among
Baltimore Metro Area*

Millions
Employed
Unemployment Rate
10%
1.55
9%
1.50
8%
1.45
7%
1.40
6%
1.35
5%
1.30
1.20
2009
2010
2011
2012
2013
2014
2015
Business Services
Government
Leisure & Hospitality
Financial Services
Mining & Construction
3%
0%
2008
Transportation & Utilities
Other
1%
1.15
Education & Health Services
Manufacturing
2%
2007
The region can also point to a number of signature developments that

create the capacity to accommodate large-scale investment. These
include the redevelopment of downtown Columbia, major investments
in a number of Baltimore County submarkets including Towson and
Tradepoint Atlantic, as well as Port Covington and Harbor Point in
Baltimore City. Potential federal tax cuts and expected increases in
defense spending could also position the region for faster economic
growth during the months ahead.
4%
1.25
2006
The year ahead should be another year of progress. Realtors are

expecting a banner spring housing market as growing urgency to take
advantage of still low mortgage rates meets growing job security and
rising wages. Apartment leasing should also be brisk.
Industry Employment Rates*

Industry Employment Rates
Baltimore Metro Area
Labor Force
the nations 25 largest metropolitan areas. The decline in regional

unemployment has occurred despite the addition of 30,000 people to
the areas labor force. The Washington metropolitan area has added
jobs even more quickly and has a lower regional unemployment rate;
circumstances that support additional employment opportunities for
residents of the Baltimore area.
Information
0
50,000
100,000
150,000
200,000
250,000
300,00
Source: United States Labor of Labor Statistics
2016
Source: United States Bureau of Labor Statistics, 2016
Source: United States Bureau of Labor Statistics, 2016
HIGHEST PAYING INDUSTRIES

Healthcare, technology, and computer science are the highest paying jobs in Baltimore City, covering almost 30% of the citys job market.
BUSINESS VALUE
The highest value of sales and revenue falls to healthcare and social assistance, wholesale trade, professional, scientific and technical services, and retail trade.
EMPLOYMENT TRENDS
Baltimore represents 31% of the states educational services, health care and social assistance industry jobs.
Baltimore Office Market
THE NUMBERS
DIRECT VACANCY
ABSORPTION
ASKING RENTAL RATES*
2016 Q4
Quarter
Change
Annual
Change
Q4 Net
YTD
2016 Q4
Quarter
Change
Annual
Change
Baltimore City East
6.9%
-1.9%
-2.4%
3,920
24,100
$23.94
+$0.64
+$1.24
Baltimore City Midtown
8.9%
+0.5%
-0.9%
2,521
40,805
$17.55
-$1.90
-$1.78
Baltimore City North
10.9%
+1.3%
-0.6%
6,426
-4,615
$27.19
+$0.23
+$0.68
Baltimore City South
2.6%
-3.2%
-2.7%
34,101
46,942
$21.66
-$0.75
-$1.13
Baltimore City West
28.4%
+1.3%
+0.7%
-25,333
36,789
$23.75
-$4.85
+$8.25
Baltimore City
12.2%
+0.2%
-0.5%
21,635
144,021
$23.88
-$2.25
+$4.17
City Center A
28.4%
+1.0%
+2.0%
-28,425
-56,175
$23.85
+$0.30
+$0.56
City Center A+
6.4%
+1.6%
+2.0%
-121,831
-144,534
$29.66
+$0.38
+$1.82
City Center B
22.1%
+1.7%
-5.5%
10,012
-16,485
$18.63
-$0.06
+$1.73
City Center B+
20.8%
+7.1%
+9.5%
-227,810
-305,086
$22.90
+$1.13
+$1.73
City Center
16.8%
+2.6%
+1.3%
-368,054
-522,280
$23.12
+$0.34
+$1.67
Baltimore + CBD
15.0%
+1.7%
+0.6%
-346,419
-378,259
$23.34
-$0.38
+$2.37
Baltimore County East
12.1%
-0.5%
+0.5%
7,890
105,677
$21.99
-$0.39
+$0.07
Baltimore County West
13.5%
-0.3%
-3.1%
35,306
48,590
$20.45
+$0.17
-$0.64
Harford County
21.7%
-1.7%
-1.7%
63,542
51,140
$22.91
-$0.43
+$0.05
7.6%
-1.7%
-2.0%
77,360
128,218
$21.37
+$0.11
-$0.81
Reisterstown Rd Corridor
19.1%
+1.8%
+0.5%
64,797
130,334
$21.19
+$0.16
-$0.03
Towson
16.2%
-1.2%
-1.5%
49,387
67,569
$21.37
+$0.55
+$0.58
Northern Metro
14.4%
-0.6%
-1.0%
298,282
531,528
$21.59
+$0.05
-$0.11
Annapolis
14.1%
-1.6%
-2.4%
52,134
72,487
$26.94
+$0.84
-$0.67
BWI
15.2%
+1.1%
+3.3%
-167,106
-177,508
$25.26
+$0.78
+$1.18
SUBMARKET
I-83 Corridor
Columbia
9.0%
-0.1%
-0.5%
77,083
190,090
$25.28
-$0.16
+$0.15
Route 2 Corridor
13.5%
-1.0%
-1.4%
28,003
34,542
$22.67
-$0.06
+$1.78
Southern Metro
12.0%
+0.0%
+0.5%
-9,886
119,611
$25.37
+$0.39
+$0.41
Totals
13.7%
+0.3%
+0.0%
-58,023
272,880
$23.31
+$0.00
+$0.87
*Rental rates are weighted average.
13.7%
Vacancy Rate
20.00%
272,880
YTD
Vacancy
Absorption
Rate
$23.31
Avg. Rental Rate
SUBMARKET SNAPSHOTS
NORTHERN METRO
Baltimore County East | Henson Ford, Real Estate Advisor
Baltimore County East saw another major office building change hands
during the 4th Quarter 2016. COPT sold 4940 Campbell Boulevard
to a local owner, The Morris Weinman Company. The building is
well located nearby Johns Hopkins Pavilion and the newly developed
retail further east along Campbell Boulevard. This building adds to
the list of other properties in the submarket recently sold by COPT.
The largest lease transaction occurred when Corvel Enterprise moved
from 9920 Franklin Square Drive to COPTs 8140 Corporate Drive,
leasing 13,066 sf. While encouraging, this deal is a rob Peter to save
Paul situation. With newly developed office product being built at
Crossroads 95, the submarket will need to attract outside tenants to
backfill the remaining vacancies.
Baltimore County West | Meghan Roy, Vice President
DOWNTOWN
Baltimore City | Matt Curran, Real Estate Advisor
Baltimore City experienced significant leasing activity throughout

2016. We saw total vacancy dip from 13.44% to 12.21% resulting in
an increase in asking rents of nearly $4.00/sf. This is largely attributed
to a strong South Baltimore submarket. Planit Advertising moved into
26,000 sf at 1414 Key Highway, while McHenry Row was able to lease
remaining space achieving 100% occupancy. We expect this trend to
continue in 2017 as companies consider office buildings outside of
the traditional City Center due to the walkability to nearby restaurants,
shops, and free parking. The Stadium Square mixed-use development
in Federal Hill is set to deliver two new office buildings in 2017, while
McHenry Row plans to build another office building on the site.
City Center | Mark Deering, Senior Vice President/Principal
City Center ended the year on a positive note with the addition of
the Exelon Tower, a fully leased Class A+ building at Harbor Point.
Yet, City Center lost over 532,000 sf in 2016, partly due to the
Exelon relocation. All classifications of space experienced negative
absorption, leading to an increase in vacancy. The most notable trends
include the continued shift from lower class to higher class buildings
as tenants search for more efficient space with better parking, water
views, and better managed properties; and, the relocation from City
Center to surrounding neighborhoods. Locust Point, Fells Point and
Canton have all lowered their vacancy rates, and increased absorption,
as a result. We anticipate these trends to continue in 2017.
After experiencing a relatively active 3rd Quarter 2016 where vacancy

rates decreased by 2.39%, activity held steady during the 4th Quarter,
decreasing by a mere 0.3%. Although not a notable difference, this
quarters rate of 13.5% is down just over 3.0% from the same time
last year. We expect activity in this area to continue to be driven by
interest from government entities and related contractors. In terms
of rental rates, Baltimore County West does offer the lowest rate
among the Northern region submarkets, an average of $20.45/sf, a
characteristic that often draws attention from neighboring areas such
as Owings Mills, Ellicott City, and Columbia.
Harford County | Beetle Smith, Senior Vice President
The Harford County market continues to see most activity in the

Forest Hill, Bel Air, and Route 24 Corridor. This activity is starting
to fill current vacancies, and if it continues into next year, the better
spaces will be at a premium. The Aberdeen and Havre de Grace
markets lag behind with low deal velocity with a few prospects looking
in the Aberdeen area (hoping to receive government contracts). The
future, with the change in the White House, may be better as defense
spending increases and the business climate improves.
I-83 Corridor | Joe Bradley, Senior Vice President/Principal
The I-83 Corridor office market...steady as she goes! A slight drop

in the vacancy rate has the submarket hovering in the 9.0% range.
Ranked among the top three healthiest submarkets in the region, the
Hunt Valley portion of the I-83 Corridor offers what employers are
looking for - safe environment, free surface parking, and abundant
amenities. With new buildings under construction for JMT and
McCormick, Hunt Valleys stability and future growth are even further
solidified. Notable I-83 Corridor transactions this past quarter
included HMS purchasing 20 Wight Avenue (77,000 sf), Diversified
Insurance (14,000 sf), and BB&T (9,000 sf).
Reisterstown Road Corridor | Matt Mueller, Vice President
The song remains the same for the Reisterstown Road Corridor. Yes,
Foundry Rows opening has created a lot of buzz and is a selling point
to many of the local office parks and nearby businesses; however,
the office market has remained unchanged for the most part. Its
unrealistic to expect to see any immediate impact from Foundry Row,
improvement will be more of a long term transition. Class A product
continues to do well with rents ticking up and vacancy coming down.
2016 has been busy and has not slowed. We continue to see more
medical than ever in this market, an interest expected to remain for
2017. Overall, I think we will see Class A product flourish with supply
decreasing while demand remains high with both professional and
medical uses fighting for the same space. Class B & C will continue
to lag behind, but dont be surprised to see this product rebound as
Class A space becomes more scarce.
Towson | Bill Whitty, Senior Vice President/Principal
Market activity in Towson continues to be driven by the retail and

housing sectors while the office market remains stagnant with
tenants either renewing in place, or playing other buildings against
each other. We are seeing very few new tenants from outside the
Towson core; however, a few tenants have recently inquired about
adding space to their existing locations. Recent information confirms
the Towson Row project is in redesign after finding below surface
rock, meaning parking will need to be above surface. This delay will
ultimately impact office leasing. There are two housing projects
being developed; one multifamily project at Washington Avenue and
Joppa Road, and a Towson home community east of York Road and
Pennsylvania Avenue, just south of the movie theatre parking garage.
Retail and residential development will ultimately help the stagnant
office market over the next several years.
SOUTHERN METRO
Annapolis | Justin Mullen, Vice President
BWI | Chris Bennett, Executive Vice President/Principal
While the BWI submarket experienced a setback in the 4th Quarter,

it can be partially attributed to some circumstances that should
have positive effects in the long term. Several buildings sold to both
investors and investor/users, which should, if marketed correctly,
result in renewed interest in the troubled Airport Square portion of the
market, as well as the other quadrants of the submarket. With national
security (Fort Meade, NSA, Cyber Command) being a main driver in
the submarket and post-election indications that this line item will
only be strengthened in 2017, we should see an increase in activity.
When coupled with decreasing vacancy rates, resulting in increasing
rents elsewhere in the Baltimore Washington Corridor, the submarket
should experience a reduction in vacancy through the course of 2017.
Columbia | Dave Sciamarelli, Vice President
The Columbia submarket closed out 2016 with a strong finish,

adding approximately 93,000 sf of positive absorption. Maple Lawn,
currently building its 7th of 10 mid-rise office buildings, continues
to lease up its new product in under 18 months, while the overall
project maintains at 93% occupancy. Just up the road, the Howard
County Council approved the $90 million TIF which allows The
Howard Hughes Corporation to move forward with its revitalization of
Downtown Columbia. Maple Lawn and Downtown Columbia are proof
that the Live, Work, Play concept is here to stay while employers
fight for Class A product in amenity-rich areas in efforts to attract the
top millennial talent from the employment pool.
Route 2 Corridor | Bethany Hobbs, Real Estate Advisor
The Route 2 Corridor market hangs in as one of the most stable in the
region. Rents are holding firmly between $20.00/sf and $22.00/sf for
the best spaces while vacancy hovers a few points on either side of
14%. Tenants in this area have a variety of choices, the quality levels
of which are directly reflected by price. Small tenants serving the
local area and a few larger medical groups dominate. Other than a
handful of planned industrial/flex and retail projects, no new projects
are proposed in the near future for this submarket.
Momentum continues in the Annapolis office market with two straight

quarters of positive absorption and decreasing vacancy rates. Yearto-date vacancy rate is down over 2%. Average rental rates are down
slightly, a change mostly driven by a small number of buildings
that substantially reduced rates in order to boost leasing. Top-tier
buildings continue to push rental rates into the mid- to high $30.00/
sf range. Brokers in the market are fielding calls daily as interest
from investors and owner-occupied buyers remains strong and
growing. With dropping vacancy rates, strong positive absorption,
and potentially rising interest rates, 2017 is lining up to be a good
year for sellers in the market.
Newly developed, mixed-use Little Patuxent Square, Columbia, MD

Direct Vacancy % by Region
DIRECT VACANCY
Baltimore City
Northern Metro
Overall Vacancy Continues to Drop

Direct vacancy for the entire Baltimore Metropolitan area has
remained consistent over the past year, adjusting slightly
between 13% and 14%, ending the year with an average vacancy
rate of 13.7%. Baltimores City Center saw the most significant
change in vacancy this quarter, an increase of 2.6%. This is to
be expected after experiencing a negative absorption of more
than 368,000 sf during the 4th Quarter. The I-83 and Columbia
submarkets continue to lead the Baltimore Metropolitan area
with the lowest vacancy rates, 7.6% and 9.0%, respectively.
Harford County ended the year again with a vacancy above 20%,
a rate mainly driven by the surplus of product that remains
vacant in the Aberdeen and surrounding portion of the county.
Southern Metro
22%
20%
Direct Vacancy Percent
18%
16%
14%
12%
10%
2011
2012
ABSORPTION
2013
2014
2015
2016
Absorption Remains Positive
Net Direct Absorption

Net Direct Absorption
Despite ending the 4th Quarter with a negative absorption of

58,023 sf, the Baltimore Metropolitan area absorbed a positive
272,880 sf during 2016. The Northern Metro contributed
mostly to this positive year-end number, absorbing more
than 531,000 sf. Unfortunately, this amount was offset by
Baltimore City and City Centers combined negative absorption
of 378,259 sf, most of which was among City Centers A+ and
B+ product. The highest year-to-date absorptions were present
in the suburban submarkets such as Columbia, Reisterstown
Road Corridor, and the I-83 Corridor, averaging absorptions of
190,090 sf, 130,334 sf, and 128,218 sf, respectively.
Average
500,000
400,000
300,000
Absorption SF
200,000
100,000
0
-100,000
-200,000
-300,000
-400,000
2011
2012
2013
2014
2015
2016
ASKING RENTAL RATES
Rental Rates on the Rise

While not drastic, average Baltimore Metropolitan area rental
rates have been slowly increasing since mid-2014, from
$21.93/sf in the 2nd Quarter 2014, to $23.31/sf in the 4th
Quarter 2016, an increase of $0.39/sf from the 3rd Quarter
2016 rate. Geographically, City Center A+, Baltimore City North,
and Annapolis lead the market with 4th Quarter average asking
rates of $29.66/sf, $27.19/sf, and $26.94/sf, respectively. The
lowest rates can be found in Baltimore City Midtown ($17.55/
sf) and City Center B ($18.63/sf).
Average Rental Rate

Average Rental Rate
Average
$23.50
$23.00
Asking Rental Rate/SF
$22.50
$22.00
$21.50
$21.00
$20.50
2011
2012
2013
2014
2015
2016
NEWS Highlights
Howard Hughes Corporation was approved financing to build a
large mixed-use development which will include two office towers
with 700,000 sf between them, residential units and street retail.
1812 Ashland Avenue will be occupied in early 2017 with Johns
Hopkins Universitys Fast Forward business project in a 30,000
sf expansion and 40,000 sf of medical research laboratory space
which will include JH Genomics, a gene sequencing lab.
Harbor Bank of Maryland plans to open a downtown co-working
space to support local entrepreneurs and startups. They are
using a formerly vacant floor in its headquarters building at 25 W
Fayette Street. The space will serve as a workforce accelerator and
community development hub .
Arundel Mills is expanding with a proposed 85,000 sf office
building at Town Center at Arundel Preserve. The address will be
7799 Arundel Mills Boulevard and will be Class A office space and
is designed as LEED Gold.
209 W Fayette Street, the Baltimore VA Annex, was recently sold to
a group of investors from the West Coast for $12.25 million. The
building is 80,000 sf and seven stories high.
Atapco Properties has entered a contract to purchase the 450,000
sf Baltimore Sun headquarters building at 501 N Calvert Street.
100 S Charles Street is in the planning stages of a $20 million

building renovation project. They will work on the first floor retail
space and a 30,000 sf co-working space on the second floor. They
are also considering rebranding the area as One Pratt Plaza.
Pearson PLC is merging its offices around Maryland into a new,
75,000 sf space in Two Merriweather, a Class A development under
construction by the Howard Hughes Corporation in Columbia.
Elevate Life took 3,000 sf at 1730 West in Annapolis. The company
is a wellness and chiropractic center out of Florida.
Hall, Render, Killian, Heath & Lyman is moving into 7,200 sf at
180 Admiral Cochrane Drive, which will bring the building to 80%
leased.
Three buildings at 1302, 1304 and 1306 Concourse Drive were
sold for $49.1 million ($166/sf) to Grander Capital Partners. The
office buildings total 296,489 sf and were 77% leased at the time
of sale.
True Citrus Co. signed a lease at 11501 Pocomoke Court (Baltimore
Crossroads) in Middle River and will relocate offices and operations
from its current location in Rosedale.
Notable Transactions
Lease
Location
Submarket
Tenant
Amount Leased SF
2200 Broening Hwy
Baltimore City
Henry Bath, LLC
532,515 sf
1470 Progress Way
Carroll County
Dal-Tile
356,400 sf
3901-3915 Benson Ave
Arbutus
ABC Supply Company
104,000 sf (1)
4611 Mercedes Dr
Aberdeen
McCormick & Co, Inc.
70,133 sf
Sale
Location
Submarket
6610 Cabot Dr
Annapolis/Route 2 Corridor
8309 Sherwick Ct
Price
PSF
Building Size
$17,525,000.00
$87.96
199,249 sf (2)
BW Corridor
$5,800,000.00
$58.00
100,000 sf (2)
6845 Deerpath Rd
BW Corridor
$3,800,000.00
$86.37
44,000 sf
7251 National Dr
BW Corridor
$3,632,800.00
$80.00
45,410 sf
(1) Renewal includes 28,000 sf of new expansion space; (2) Investment sale
Baltimore Retail Market
TRENDING FORWARD
John Schultz, Senior Vice President/Principal, MacKenzie Retail, LLC

As 2017 emerges into the land of the unknown with sweeping changes
in Washington, the retail sector will be following these trends in addition to
adapting to the new normal of Capital Beltway policy and politics.
Are you green and growing, or ripe and rotting? - Ray Kroc
Starbucks Corp. will nearly double the number of its shops to about 37,000
over the next five years and will also roll out two new formats. A rebirth into the
urban gathering place will take form under the reserve model as large format
Roasteries, Reserve bars, and Reserve stores. Starbucks says Starbucks
Reserve bars will account for as much as 20% of the company portfolio (new
and renovated shops) by 2021. In China, Starbucks operates approximately
2,500 stores across 118 cities and has plans to add to that number by 2021.
Industry-leading innovation is driving our core business and creating further
separation from competitors all around the world, said Chairman and CEO
Howard Schultz. Our Roasteries and Starbucks Reserve stores will further
transform and elevate the Starbucks experience we deliver to our
customers and are laying the foundation for our next wave of profitable global
growth. On a parallel path, Starbucks cannot, and will not, forgo their suburban
drive-thru model. Recent data has shown that adding a drive-thru to a nondrive-thru suburban store can almost double the annual sales.
RETAIL SUBMARKETS
The Amazon Effect

Amazon is forcing retailers to sell and market on every single platform possible, a.k.a. ominichannel retailing. At its core, omnichannel is defined as a
multichannel sales approach that provides the customer with an integrated shopping experience. The customer can be shopping online from a desktop
or mobile device, or by telephone, or in a bricks and mortar store and the experience would be seamless. They days of opening the front door of the
shop and expecting to survive are over. REI does an amazing job in communicating with consumers across touch points. The company ensures that
all shopping channels work together in enhancing the consumer experience. With the companys omnichannel initiative, you will find up-to-date and
accurate product information at every turn. That kind of internal communication will keep customers happy, satisfied, and returning back to their store
again and again.
Twas the Seasonof Improved Consumer Confidence*
The International Council of Shopping Centers (ICSC) released its Post-Holiday Shopping Survey, finding that consumers spent an average of $711 on
gifts and other holiday-related items this holiday season. This represents a 16 percent increase over 2015s post-holiday survey results ($611) and is
four percent ($27) above holiday shoppers intentions as measured in ICSCs Holiday Shopping Intentions Survey in October.
In total, consumers spent an average of $897 on gifts and related items, dining, movies and other entertainment experiences at malls and shopping
centers this holiday season. Gen X spent the most averaging $1,000, followed by Baby Boomers ($875) and Millennials ($867). Experiences accounted
for twenty percent of total consumer holiday expenditure, with Millennials topping this spending category at $220.
*Source: Holiday Shopping Surpasses Intentions, www.icsc.org
3.98%
Vacancy Rate
170,837
Absorption
$20.36
Avg. Rental Rate
Baltimore RETAIL Market

DIRECT VACANCYDirect Vacancy %
Vacancy Remains Steady and Low

Vacancy Rates for buildings greater than 10,000 sf fell from
4.3% to 4.18% in the past quarter. The lowest vacancies can
be found in Columbia, at 2.26%, and Annapolis at 2.39%;
the highest vacancies remain in Baltimore County East and
Baltimore South, at 8.10% and 6.18%, respectively. However,
by expanding the market this quarter to include some of
the smaller buildings (greater than 2,000 sf), average direct
vacancy falls to 3.8%, though the markets with the lowest
and highest vacancy levels remain the same as above, with
Baltimore County East at 7.1%, Baltimore South at 5.8%, and
Columbia and Annapolis at 2.25% and 2.43% vacant.
6.5%
6.0%
Direct Vacancy %
5.5%
5.0%
4.5%
4.0%
3.5%
2011
2012
ABSORPTION
2013
2014
2015
2016
Absorption Remains Positive
Absorption
Looking primarily at buildings greater than 10,000 sf, the

total net absorption for the 4th Quarter 2016 was a positive
170,837 sf. While there were notable losses in Baltimore
County East (-37,436 sf) and Baltimore South (-19,037 sf),
there was consistent absorption throughout the remaining
submarkets, averaging a positive 26,000 sf per area. The
highest positive absorption during the 4th Quarter was in
Harford County, 51,007 sf, closely followed by Baltimore City
with a positive absorption of 47,959 sf.
60,000
40,000
Net Absorption SF
20,000
0
-20,000
-40,000
-60,000
ASKING RENTALAsking
RATESRental Rates
Rental Rates Increase

Rental rates in the Baltimore retail market average around
$20.36/sf, compared to the 3rd Quarter 2016 rate of $18.70/sf.
The best tenant deals can be found in Carroll County at $15.42/
sf and Baltimore County East at $15.51/sf, closely followed by
Baltimore City and Baltimore South. The highest asking rental
rates can be found in White Marsh/Perry Hall at $26.98/sf and
Columbia at $25.71/sf, followed by the York Road Corridor and
Annapolis submarkets.
$20.50
$20.00
Asking Rental Rate/SF
$19.50
$19.00
$18.50
$18.00
$17.50
$17.00
$16.50
2011
2012
2013
2014
2015
2016
Baltimore Retail Market
NEWS Highlights
Five more restaurants opened at Foundry Row: Foundry Row Wine
& Spirits, Mission BBQ, Smashburger, Zoes Kitchen, and Chipotle.
331 Baltimore Pike in Bel Air will be redeveloped from an auto parts
store and shop to a multi-use retail center along Route 1.
Sagamore Spirit distillery, founded by Kevin Plank, expected to open

early 2017 in Port Covington
Caves Valley Partners plans to overhaul Cross Street Market Spring

2017 with a $6.5 million renovation. They want to add more light to
the building and reconfigure the tenant layout and interior.
Marley Station mall in Glen Burnie, which is 837,738 sf, was

auctioned for just over $21 million.
New Windsor State Bank is in the process of being purchased by a
Pennsylvania bank company. The purchaser will continue to operate
the new branches as New Windsor Bank.
Starbucks will host a job training site at 1812 Ashland Avenue in
early 2017 called a Starbucks Opportunity Caf, which will teach
job skills to Baltimore City residents.
Baltimore City Council voted to allow Towson Station to advance at
the corner of York Road and Bosley Avenue. Formerly a fire station,
there are plans to build a retail center with a Royal Farms gas station.
Chartley Park Shopping Center, a 144,000 sf retail center in

Reisterstown, recently sold for about $20 million to MD Equities
LLC. The center is comprised of four buildings across 15 acres.
COPT has proposed a three-story retail project that will be 23,000 sf
at the corner of Pratt and Light Street.
Nacho Mamas opened its Towson location at 2 W Pennsylvania
Ave. The restaurant spans 6,700 sf and seats 150 people.
Frisco Tap House II LLC, a restaurant and brewing company, paid
$4.03 million for 2406 Brandermill Boulevard in the Village at Waugh
Chapel. The building is 8,100 sf.
Tradepoint Atlantic submitted plans for a 130-acre mixed-use retail

space to its 3,100 acre Sparrows Point steel mill site.
Lease
Location
Submarket
Tenant
Amount Leased SF
2200 Broening Hwy
Baltimore City
Henry Bath, LLC
532,515 sf
1470 Progress Way
Carroll County
Dal-Tile
356,400 sf
Arbutus
ABC Supply Company
104,000 sf (1)
4611 Mercedes Dr
Aberdeen
70,133 sf
Sale
Location
Submarket
6610 Cabot Dr
8309 Sherwick Ct
Price
PSF
Building Size
$17,525,000.00
$87.96
199,249 sf (2)
BW Corridor
$5,800,000.00
$58.00
100,000 sf (2)
6845 Deerpath Rd
BW Corridor
$3,800,000.00
$86.37
44,000 sf
7251 National Dr
BW Corridor
$3,632,800.00
$80.00
45,410 sf
(1) Renewal includes 28,000 sf of new expansion space; (2) Investment sale
10
Baltimore Industrial Market

2016 INDUSTRIAL YEAR IN REVIEW
Dan Hudak, Senior Vice President/Principal
Looking in the rear view mirror, the 2016 Baltimore Metropolitan Industrial
market, as compared to the previous year, saw overall warehouse vacancy
rates drop from 9.85% to 8.78% YOY, as the e-commerce economy
kicked into high gear. With $1.8 trillion of on-line and web influenced retail
sales expected by 2017, the industrial market affected by e-commerce,
continues to be hot.
That said, the warehouse sector finished the year with a sputter. The
market gave back more than 250,000 sf of net absorbed space and asking
rental rates declined slightly, from $5.17/sf to $5.14/sf. With half of the
submarkets reporting negative absorption, it could have been a lot worse.
Although, the market clawed back from deeper negative absorption mainly
due to the 299,111 sf absorbed in the Baltimore Washington Corridor and
to the 575,034 sf absorbed in Harford County. XPO Logistics was single
handedly responsible for the gain in Harford County, thanks to its lease of
the entire building at 610 Chelsea Road, 571,762 sf.
A more telling story, of a stabilized economy that has begun to heat up,
is the dramatic decline of available space in the market (space that is
being offered for lease but occupied by short term tenancies). For the
year, available space has declined by nearly four million square feet. This
could be seen as a show of optimism in the economy and a display of
confidence by corporate supply chain executives, as long term space
commitments are being shored up.
As small businesses began to gain traction and grow through 2016, the
flex market saw YOY vacancy levels drop to 8.78% from 9.85%. However,
asking rents ended remarkably unchanged from this time last year at
$11.51/sf; but fell $0.04/sf from the previous quarter. During the 4th
Quarter, flex absorption was relatively flat, as the market gave back 3,986 sf.
As small and middle market businesses remain bullish on the 2017
economy, increasing employment and accelerated wage growth will be
major factors affecting the flex and warehouse markets in the Baltimore
Metropolitan region. Greater consumer buying power will continue to fuel
e-commerce and thus the appetite of logistic companies seeking last mile
delivery space in the nations wealthiest and fourth largest combined market.
At quick glance...
FLEX
8.4%
WAREHOUSE
7.6%
Vacancy Rate
Vacancy Rate
-99,563
-192,920
$11.46
$5.12
Net absorption
avg. rental rate
Net absorption
avg. rental rate
LOOKING AHEAD...
Michael Spedden, Senior Vice President
Our prediction vacancy rates will continue to slowly decline over the
first half of the year, which should spur increased spec development.
Other factors that may affect the market in 2017 include the following:
1.) the Trump Effect consumer confidence up; infrastructure
spending up; Dodd Frank fixed; regulation down. Logically,
this should only be good for our market. 2.) Foreign investment
Global Logistics Properties (GLP), based in Singapore, has purchased
millions of square feet of industrial space throughout the United
States over the last two years. While there are several institutional
quality portfolios that they dont own, our prediction is that their
appetite has been somewhat satiated and no great purchases are in
the works. 3.) The Fed even if they slightly increase the rates, as
they are predicted to do, we believe the Trump Effect will trump
the small increases. And, 4.) Our great Post Panamax Port the
next several years are critical for our port. While we are ahead of the
game, having dredged our bay and added the wider cranes to unload
the bigger ships, it would be nave to think that other ports wont
catch up to us.
* Industrial market statistics are in comparison to this time last quarter
11
THE NUMBERS
FLEX INDUSTRIAL MARKET
Submarket
Arbutus
Market
Size SF
Total
Vacant SF
Total
Vacancy
Current
170
5,104,070
407,734
8.0%
-76,962
YTD
Available
SF %
Average
Asking Rent
-18,333
9.07%
$13.50
58
2,213,488
230,559
10.4%
-145,525
-117,536
13.01%
$7.80
Baltimore City
129
4,169,588
399,847
9.6%
36,567
131,678
18.01%
$8.61
113
3,711,641
270,360
7.3%
31,583
13,672
9.06%
$9.99
BW Corridor
334
15,010,231
1,392,165
9.3%
-34,111
142,555
12.85%
$14.05
Carroll County
53
1,167,065
113,206
9.7%
28,171
67,142
14.46%
$9.04
Harford/Cecil
135
3,030,634
228,472
7.5%
16,320
138,236
7.95%
$13.55
I-83 Corridor
108
4,959,888
166,939
3.4%
24,890
33,057
6.30%
$10.81
85
3,103,520
361,347
11.6%
15,270
76,759
16.81%
$9.16
Woodlawn/Catonsville
53
2,520,949
198,360
7.9%
4,234
69,021
15.52%
$9.10
1,238
44,991,074
3,768,989
8.4%
-99,563
536,251
12.01%
$11.46
198
8,985,272
188,940
2.1%
-30,471
6,108
6.74%
$6.45
Arbutus
102
7,716,711
890,505
11.5%
-107,225
187,872
21.54%
$3.75
Totals
WAREHOUSE INDUSTRIAL MARKET
Absorption
Bldgs
Baltimore City
1,092
40,320,740
2,327,393
5.8%
-271,281
480,441
8.55%
$4.96
332
20,284,170
3,333,411
16.4%
-714,987
-217,360
12.00%
$5.06
BW Corridor
562
43,917,357
4,129,939
9.4%
350,981
788,880
12.17%
$5.51
Carroll County
153
7,020,416
481,743
6.9%
-16,240
253,677
7.41%
$5.29
Harford/Cecil
335
32,899,723
1,366,055
4.2%
575,034
1,184,438
5.35%
$4.47
I-83 Corridor
83
4,382,081
108,554
2.5%
7,345
-10,655
3.83%
$10.52
56
1,542,983
27,890
1.8%
9,432
16,299
4.31%
$8.56
Woodlawn/Catonsville
48
1,287,509
12,000
0.9%
4,492
13,142
1.57%
$7.54
Totals
2,961
168,356,962
12,866,430
7.6%
-192,920
2,702,842
9.52%
$5.12
Industrial Market Totals
4,199
213,348,036
16,635,419
7.8%
-292,483
3,239,093
10.05%
$6.72
Highlights
Lost Ark Distilling Company opened in December on Berger Road in
Columbia.
After its purchase in 2015, Washington Logistics Center has been

redeveloped and expanded to have a total size of 850,000 sf.
Najoles Property, LLC paid $1.025 million for two industrial lots at
254 & 258 Najoles Road, both unimproved land about 3.3 acres each,
zoned for commercial use.
Walong, Inc. recently signed a deal to move into 100,000 sf of

space at 7801 Dorsey Run Road in Elkridge.
Chesapeake Real Estate Group bought 101 acres of industrial land

in Harford County, hoping to redevelop the Edgewood property (at
the intersection of Trimble and Emmorton Road), with 400,000 sf of
warehouse space.
Duke Realty is building its sixth warehouse in Chesapeake Commerce
Center. The new warehouse will be 169,000 sf and is expected to
complete in June.
A new 413,000 sf warehouse has begun construction at Port 95
Industrial Park, which has around one million sf of new commercial
space that is coming into the market early 2017.
Fidelitone, a delivery company, signed a lease for 41,642 sf at 7090

Troy Hill Drive.
FOAAB signed a lease at 7364 Baltimore Annapolis Boulevard for
32,760 sf.
6599 Washington Boulevard, a 12,060 sf building that includes
warehouse and showroom space, has been sold to KMR Properties
for $1.45 million.
Freshly signed a lease to occupy a large section of 8704 Bollman
Place, which is a 190,000 sf cold-storage warehouse previously
leased to Coastal Produce.
12

DIRECT VACANCY
Average Direct Vacancy %
Flex Vacancy
Vacancy Remains Consistent

4th Quarter industrial vacancy rates averaged 7.8% (8.4% in the
flex market; 7.6% in warehouse). Compared to 4th Quarter 2015,
this slightly decreased by 0.2%. In the flex market, the lowest
vacancy is along the I-83 Corridor (3.37%), followed by Baltimore
County East and Harford/Cecil at 7.3% and 7.5%, respectively.
The highest flex vacancies can be found along Reisterstown Road,
Arbutus, and Carroll County all ranging between 9.7-11.6%.
Looking at the past five years, flex rates have decreased by about
2%, while warehouse vacancy rates have generally stayed the
same around 8-9%. Most notable change in warehouse vacancy
this quarter was in Baltimore County East, an increase of 3.5% for
a total vacancy of 16.4%.
Warehouse Vacancy
Direct Vacancy Percent
13%
12%
11%
10%
9%
8%
7%
6%
2011
2012
2013
2014
2015
2016
YTD ABSORPTIONYTD Direct Absorption

Flex Direct Absorption
Greater Tenancy & Growth

Despite a negative absorption of 292,483 sf during the 4th
Quarter 2016, the overall industrial market ended the year on a
positive note, absorbing just over 3.2 million sf. The warehouse
segment contributed mostly to this year-end positive total,
specifically in the BW Corridor, Harford/Cecil County, and
Baltimore City submarkets, where absorption totaled a positive 2.45
million sf. Looking at the flex segment of the industrial market,
all submarkets except Annapolis/Route 2 and Arbutus ended the
year with positive absorption numbers. Top flex performers were
the BW Corridor and Harford/Cecil County submarkets, absorbing
a positive 142,555 sf and 138,236 sf, respectively.
Warehouse Direct Absorption
1,400,000
1,200,000
1,000,000
Net Absorption SF
800,000
600,000
400,000
200,000
0
-200,000
-400,000
ASKING RENTAL RATES
Reliable Asking Rates

Closely tied to the markets vacancy, rental rates have remained
consistent, fluctuating about $.01/sf - $0.15/sf over the past
quarter and year. The highest flex rates can be found along the
BW Corridor, Annapolis/Route 2, and Harford/Cecil counties,
ranging from $12.87-$14.08/sf. The lowest rates for flex product
remains in Arbutus and Baltimore City, at $7.80/sf and $8.61/
sf, respectively. The largest fluctuation in rates for flex was in
Harford/Cecil counties and Baltimore County East, both increased
by $0.67/sf. The warehouse average asking rate is at $5.12,
decreasing only slightly compared to the past couple quarters.
The best deals for warehouse space can be found in Arbutus
($3.75/sf) and Harford/Cecil ($4.47/sf) while the I-83 Corridor
remains the priciest, $10.52/sf.
Average Asking Rental Rates
Flex Asking Rents
Warehouse Asking Rents
$12
$11
Asking Rent/SF
$10
$9
$8
$7
$6
$5
$4
$3
2011
2012
2013
2014
2015
2016
13
Lease
Location
Submarket
Tenant
Amount Leased SF
2200 Broening Hwy
Baltimore City
Henry Bath, LLC
532,515 sf (1)
1470 Progress Way
Carroll County
Dal-Tile
356,400 sf (1)
Arbutus
ABC Supply Company
104,000 sf (2)
4611 Mercedes Dr
Aberdeen
70,133 sf
Sale
Location
Submarket
6610 Cabot Dr
8309 Sherwick Ct
Price
PSF
Building Size
$17,525,000.00
$87.96
199,249 sf (3)
BW Corridor
$5,800,000.00
$58.00
100,000 sf (3)
6845 Deerpath Rd
BW Corridor
$3,800,000.00
$86.37
44,000 sf
7251 National Dr
BW Corridor
$3,632,800.00
$80.00
45,410 sf
(1) Renewal ; (2) Renewal includes 28,000 sf of new expansion space; (3) Investment sale
REPORT CRITERIA
OFFICE:
Buildings 15,000 sf in size and greater in the Metro areas within Anne Arundel County, Baltimore City, Baltimore County, and Howard County, buildings 20,000 sf in size and greater
within Baltimores City Center, buildings 10,000 sf in size and greater in the Metro areas within Harford County, and buildings 5,000 sf in size and greater within Annapolis city limits.
MacKenzie includes all class types, but does not track owner occupied buildings or buildings leased exclusively to medical tenants. The office market is separated into the following
submarkets: Annapolis, Baltimore City, BWI, Baltimore County East, Baltimore County West, City Center, Columbia, Harford County, I-83 Corridor, Reisterstown Corridor, Route 2
Corridor, and Towson.
INDUSTRIAL:
Flex buildings and some single story office buildings that are greater than 5,000 sf, single story warehouse buildings that are greater than or equal to 5,000 sf, and some multi-story
warehouse buildings in Baltimore City. MacKenzie does not track owner occupied buildings. We have classified the properties into 10 submarkets for industrial identified as the following:
Annapolis, Arbutus, Baltimore County East, Baltimore City, BW Corridor, Carroll, Harford/Cecil, I-83 Corridor, Reisterstown Road Corridor, and Woodlawn/Catonsville. Flex buildings are
limited to properties 5,000 sf and greater, while warehouse buildings are limited to single-story properties. Data does not include under construction or proposed projects.
RETAIL:
Retail buildings greater than or equal to 2,000 sf in Baltimore City and surrounding counties of Baltimore, Howard, Carroll, Harford, Cecil and Anne Arundel. The Baltimore Retail Market
resembles a hub and spoke configuration, with many of the submarkets following the major roads in and out of Baltimore City. The region is broken down into twelve submarkets;
Annapolis, Baltimore City, Baltimore County East, Baltimore County South, Baltimore County West, Carroll County, Columbia, Fort Meade, Harford County (including Cecil County) the
Reisterstown Road Corridor, White Marsh/Perry Hall (Baltimore County East), and the York Road Corridor.
14

Mackenzie

Diunggah oleh

Informasi Dokumen

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Mackenzie

Diunggah oleh

Hak Cipta:

Format Tersedia

4TH quarter

BALTIMORE METROPOLITAN AREA market report

Investment sales & capital

FOURTH QUARTER | 2016

10-Year US Treasury Trailing 365 Days

By Brendan Harman, Assistant Vice President

Source: Federal Reserve Board, 2016

Historical Baltimore Metro Sales Volume (all property types)*

While sales in the Baltimore Metro area are still hovering

Source: CoStar Property Data

Avg. Price PSF

Industry Growth and Employment

FOURTH QUARTER | 2016

Regional Economy Filled with Promise in 17

Baltimore Metro Area*

Transportation & Utilities

Education & Health Services

The region can also point to a number of signature developments that

The year ahead should be another year of progress. Realtors are

Industry Employment Rates*

Baltimore Metro Area

the nations 25 largest metropolitan areas. The decline in regional

Source: United States Labor of Labor Statistics

Source: United States Bureau of Labor Statistics, 2016

Source: United States Bureau of Labor Statistics, 2016

HIGHEST PAYING INDUSTRIES

Baltimore Office Market

FOURTH QUARTER | 2016

ASKING RENTAL RATES*

Baltimore City East

Baltimore City Midtown

Baltimore City North

Baltimore City South

Baltimore City West

Baltimore County East

Baltimore County West

*Rental rates are weighted average.

Avg. Rental Rate

Baltimore Office Market

FOURTH QUARTER | 2016

Baltimore County West | Meghan Roy, Vice President

Baltimore City experienced significant leasing activity throughout

City Center | Mark Deering, Senior Vice President/Principal

After experiencing a relatively active 3rd Quarter 2016 where vacancy

Harford County | Beetle Smith, Senior Vice President

The Harford County market continues to see most activity in the

I-83 Corridor | Joe Bradley, Senior Vice President/Principal

The I-83 Corridor office market...steady as she goes! A slight drop

FOURTH QUARTER | 2016

Reisterstown Road Corridor | Matt Mueller, Vice President

Towson | Bill Whitty, Senior Vice President/Principal

Market activity in Towson continues to be driven by the retail and

BWI | Chris Bennett, Executive Vice President/Principal

While the BWI submarket experienced a setback in the 4th Quarter,

Columbia | Dave Sciamarelli, Vice President

The Columbia submarket closed out 2016 with a strong finish,

Route 2 Corridor | Bethany Hobbs, Real Estate Advisor

Momentum continues in the Annapolis office market with two straight

Newly developed, mixed-use Little Patuxent Square, Columbia, MD

Baltimore Office Market

Overall Vacancy Continues to Drop

Direct Vacancy Percent

Absorption Remains Positive

Net Direct Absorption