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Q4 2013 | INDUSTRIAL USE

BALTIMORE mEtRO AREA

IndUstrial MarkEt REport

Large Blocks of Space Becoming Scarce


REGIONAL OVERVIEW
The Baltimore Metropolitan industrial market has a real problem: it is running out of space. Industrial/Flex vacancy rates for the Baltimore region stayed under 10% for most of the year, ending at 9.7%. Much of this activity can be attributed to the success of the Baltimore Port which ranks #1 in the country for roll on/roll off product, 2nd largest exporter of iron ore and #1 importer in aluminum and gypsum. As one of only two east coast ports postpanamax ready, Baltimore is positioned to see increased import/export business heading into 2015, particularly if the proposed CSX intermodal facility near Morrell Park proceeds. The continued theme in the market of bigger is better has caused the region to suffer from an alarming lack of space as larger tenants continue to absorb space. Principio Business Park, listed by Colliers International, will be fully permitted by Q1 2014 and will be the only developable land site north of the tunnel capable of over 700,000 sf of space. One of the flashier stories of the year was Amazon announcing they would build a 1 million square foot fulfillment center in Southeast Baltimore on the site of the former General Motors assembly plant, creating more than 1,000 new jobs in the city. Another build-to-suit, Sephora signed a lease for 656,000 sf in Harford County. Reliable Churchill also announced that they would relocate to a new 449,000 sf build-to-suit warehouse at Crossroads @ 95 which will create a 330,000 sf vacancy in northern Anne Arundel County later in 2014. Though it was not all good news this quarter as Worthington Industries announced they would close their 225,000 sf facility at 8911 Kelso Drive next year. > Vacancy rate for bulk distribution space decreased to 9.5%, but will likely rise in the second part of 2014 due to several large deliveries expected > Vacancy rates for flex space rose slightly to 11.8% as a result of new deliveries
Q3 2010 Q3 2011 Q4 2012 Q4 2013

Net Absorption
(all product types)
Thousands

2,000 1,500 1,000 500 0 -500 -1,000 -1,500 -2,000


2009 2010 2011 2012 2013

Vacancy Rate
(all product types)
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% Q3 2009

> Larger spaces are being leased quickly, which should translate to higher rents in the second half of 2014 > Continued cap rate compression

mARKEt INDICAtORS
Q3 2013 VACANCY NET ABSORPTION CONStRUCtION RENtAL RAtE Q4 2013

> Average rental rates for bulk Class A & B space has changed very little, hovering around $4.50 NNN for the past two years > Average rental rates for flex Class A & B space rose the second half of 2013 to $11.50 NNN

www.colliers.com/greaterbaltimore

RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL usE | BaltiMOrE MEtrO arEa
Distribution Warehouse Asking Rental Rates
$5.40 $5.20 $5.00 $4.80 $4.60 $4.40 $4.20 $4.00 Q4 2012 Q1 2013 Q2 20113 Q3 2013 Q4 2013

Flex Space Asking Rental Rates


$12.00 $11.50 $11.00 $10.50 $10.00 $9.50 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

DEfINItIONS > Catalogued Inventory: > Market Area: > Vacancy Rate: > Net Absorption: > Average Asking Rent: Class A & B flex buildings over 10,000 sf and distribution warehouse buildings over 100,000 sf. This inventory includes a total of 1,446 buildings consisting of more than 137,000,000 square feet of space. Baltimore City and the surrounding counties of Anne Arundel, Howard, Baltimore, Cecil, Harford and Carroll. Total vacant space divided by the total inventory. The difference in physically occupied space within a given time period. Weighted average rent per square foot, triple net

INVESTMENT SALES ACTIVITY


PROpERty ADDRESS 7521 Pulaski Highway 1502 Joh Avenue 3601 Pennsy Drive 7785 E Waterloo Road 740-760 Generals Highway SELLER Rays Envelope Corp. First Potomac Realty Trust Clark Enterprises J&R Partnership NWC Land, LLC bUyER Blue Ocean Realty Klein Enterprises Terreno Realty Realty West, LLC Benfield Investments, LLC SALE DAtE Oct-13 Oct-13 Dec-13 Oct-13 Oct-13 SALE pRICE $3,270,000 $1,247,000 $7,000,000 $1,700,000 $4,500,000 PRICE/SF $31.00 $16.89 $97.97 $68.00 $83.02 SF 105,486 20,730 71,448 116,650 54,205 SUbmARKEt Baltimore County East BWI Landover Route 1 Corridor I-97/Crain Highway Corridor

LEASING ACTIVITY
PROpERty ADDRESS Keith Ave @ Broening Hwy 8235 Patuxent Range Road 7629 Gambrills Cove Road 1413 Tangier Drive 7521 Pulaski Highway 4801 Hollins Ferry Road 531 Chelsea Road LEASE DAtE Nov-13 Nov-13 Nov-13 Oct-13 Oct-13 Oct-13 Oct-13 LEASE SF 1,150,000 192,179 352,850 449,299 105,486 sf 101,945 655,000 Amazon Feld Entertainment Metro Logics Reliable Churchill Price Busters Furniture FedEx Sephora LESSEE RAtE Withheld $6.95 $4.50 $4.85 Withheld Withheld Withheld TypE Warehouse Warehouse Warehouse Warehouse Warehouse Warehouse Warehouse SUbmARKEt Baltimore Southeast Route 1 Corridor Route 2 Corridor Baltimore County East Baltimore County East Arbutus Aberdeen

UpDAtE: mARKEt COmpARISONS


Net Absorption SUbmARKEt/COUNty Howard County Prince Georges County Anne Arundel County Harford/Cecil County Baltimore East Baltimore SW TOtAL SF 30,103,624 21,456,257 23,872,097 26,231,026 24,725,770 7,273,491 VACANt SF 3,690,219 2,919,962 2,408,400 805,543 3,071,770 1,088,828 VACANCy % 12.3% 13.6% 10.1% 3.1% 12.4% 15.0% CURRENt QUARtER 179,774 67,698 sf (62,331) sf 264,152 sf 87,329 sf (125,728) sf YTD 342,757 sf (28,394) sf (170,049) sf 1,472,580 194,484 sf (94,592) sf New Construction CURRENt 241,457 sf 360,550 sf 243,500 sf 1,600,742 sf 1,599,299 sf 0 sf COmpLEtED 80,847 sf 401,530 sf 51,120 sf 0 sf 0 sf 0 sf Rental Rates WH/DISt $4.82 NNN $6.12 NNN $5.23 NNN $4.38 NNN $4.09 NNN $3.32 NNN R&D/FLEX $12.55 NNN $9.54 NNN $13.16 NNN $11.71 NNN $9.40 NNN $9.06 NNN

www.colliers.com/marketname

RESEARCH & FORECAST REPORT | Q4 2013 | INDUSTRIAL usE | BaltiMOrE MEtrO arEa

QUARTERLY COMPARISON AND TOTALS


QUARtER TOtAL RBA VACANt SF VACANCy % CURRENt Q AbSORptION CURRENt CONStRUCtION COmpLEtED DELIVERIES AVERAGE RENtAL RAtES

Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012

137,212,443 137,141,096 137,089,976 137,047,356 136,697,356

13,369,858 13,608,044 13,903,972 14,636,489 14,899,003

9.7% 9.9% 10.0% 10.7% 10.9%

309,533 347,048 775,137 612,514 760,513

3,715,118 999,967 777,467 126,860 443,740

71,347 51,120 42,620 350,000 67,120

$5.70 $5.74 $5.64 $5.89 $5.73

482 offices in 62 countries on 6 continents


United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85
$2

Submarkets
HOWARD COUNty The industrial market in Howard County straddles I-95 and Route 1. The industrial market represents over 30,000,000 square feet of space. Vacancy rates dropped to 12.3%, the lowest they were all year. One of the largest deals of the quarter was Feld Entertainment, which took 192,179 sf at 8235 Patuxent Ridge Road in Jessup. Terreno Realty acquired 8215 Dorsey Run Road for $6 million, and 7715 Assateague Drive sold for $1,900,000 to Baldor Specialty Foods. United Stationers renewed their lease for 186,500 sf at 7090 Troy Hill Drive, while Sutherland Logistics signed a 38,802 sf lease at 7045 Troy Hill Drive. A win for Howard County beer connoisseurs, Black-Eyed Susan Brewery signed a 22,500 sf lease at 9570 Berger Road. ANNE ARUNDEL COUNty The industrial and flex market in Anne Arundel County is adjacent to Howard County and consists of over 23,700,000 square feet of space. Major employers include Fort George G. Meade, Under Armour and the National Security Agency. With a second consecutive quarter of negative absorption, vacancy rates rose again to 10.1%. ADSCOM signed a lease for 33,748 sf at 7600 Energy Parkway, and Cort Furniture signed a 38,000 sf lease at 7466 Candlewood Road. Thompson Pump and Manufacturing leased 4.61 acres at 711 Pittman Road for their regional office and distribution center. HARfORD/CECIL COUNtIES The Harford and Cecil County submarket spans the I-95 & the Rt 40 corridor up to the Delaware line and represents over 26,000,000 square feet of space. Vacancy rates in this submarket are at record lows at 3.1%, dramatically lower than 16.7% vacancy the market showed at the beginning 2011. One of the more significant transactions for the region was Sephora signing a 656,000 sf build-to-suit lease at 531 Chelsea Road due to deliver in June of 2014. Zenith Global Logistics will relocate and expand their local hub to 1501 Perryman Road. Acer Exhibits purchased 1601 Clark Road, a 167,270 sf warehouse which will become their new headquarters. BALtImORE EASt This submarket encompasses the northeast and southeast portions of Baltimore City, as well as the eastern portion of Baltimore County, and contains over 24,700,000 square feet of industrial and flex space. Vacancy rates decreased to 12.4% with the help of positive absorption rebounding from the 3rd quarter, and several large deals announced. Amazon quieted rumors by signing a 1,150,000 sf lease for a fulfillment center at a to-be-built warehouse on the site of the former General Motors Assembly plant. Reliable Churchill signed a 449,299 sf lease at 1413 Tangiers Drive, another build-to-suit. 7521 Pulaski Highway was recently purchased by Blue Ocean Realty, which also signed Price Busters Furniture to a 105,489 sf lease. BALtImORE SOUthWESt The Southwest Baltimore submarket includes properties within the citys Central Business District, Midtown, as well as Woodlawn and Catonsville. This smaller submarket contains approximately 7,300,000 square feet of space. Vacancy rates rose to 15.0% as absorption went negative for only the second time in nearly two years. Leasing was relatively slow in this submarket, but there was sales activity. A five building 263,000 sf industrial warehouse complex on Washington Boulevard sold for $8 million to FRP Development. The Horstmeier Lumber Company sold its warehouse at 1600 Ridgely Street for a reported $3.4 million. PRINCE GEORGES COUNty Although Prince Georges county is not included in the Baltimore regional statistics, it remains an important and strategic location for the Baltimore area. P.G. County consists of 230 buildings and approximately 21,400,000 square feet of space. At the end of the 4th quarter of 2013 more than 3,000,000 square feet of that space was vacant, equivalent to a vacancy rate of 14.7%.

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Over

RESEARChER: Nadia Kahler Vice President, Research & Transaction Management | Baltimore 100 North Charles Street Suite 1710 Baltimore, MD 21201
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