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News release

BALTIMORE, MD

Jones Lang LaSalle Releases Fourth Quarter Office Outlook for Baltimore Region

Optimism high despite slow close to 2013


BALTIMORE, Jan. 6, 2014 -- Leasing and investment activity in the greater Baltimore market slowed significantly during the fourth quarter, but industry sentiment for 2014 is more optimistic than it has been in several years, according to the fourth quarter office market report for Baltimore from Jones Lang LaSalle.

The fourth quarter employment base for Baltimore City grew more quickly than the overall metro area, a break from recent tradition, and unemployment for the entire metropolitan region dropped below seven percent. Professional business services, healthcare, education and defense/cyber security jobs all showed growth, while the government payroll continued to shrink with a year-over-year decline of 2.4 percent.

“As we move into the new year, developers and tenants alike are expected to respond to the positive economic indicators with increased confidence,” said Mark Levy, Managing Director and Baltimore Market Leader for Jones Lang LaSalle. “Select Baltimore markets and submarkets are positioned extremely well to take advantage of this anticipated growth and activity.”

Construction of available office space in the market is essentially done. A 150,000-square-foot building that has yet to deliver is fully pre-leased, and some of the requirements in the market will need new product. Regional ground-breakings are expected in the first half of 2014.

In addition to the continuing work at Harbor Point, the major news in downtown Baltimore in the fourth quarter was the executive announcement from T. Rowe Price that the firm had signed a letter of intent to remain in 427,000 square feet at 100 East Pratt Street. This helped stabilize the Pratt Street Corridor, which may solidify the sale of 1 East Pratt, the 352,000-square-foot building that hit the market in October.

The conversion of obsolete office buildings into apartments in Baltimore City accelerated in the fourth quarter. This included the building at 10-12 N Calvert St, which is 62 percent leased. Previous conversions were limited to vacant buildings, but the conversion of 10-12 N Calvert will displace up to 100,000 square feet of tenants, potentially helping to fill some Class B product off Pratt Street.

In Howard County, market dynamics have shifted to favor landlords, and some assets are seeing rental rate growth. Only five blocks of 50,000 square feet or greater remain in the county, placing the market in a good position for growth. Some shovel-ready projects are expected to move forward very soon.

Sequestration and uncertainty over defense budget cuts kept leasing activity in Anne Arundel County very quiet, and the BWI North/Linthicum submarket continues to struggle with an abundance of dated inventory. Vacancy rates in BWI North topped 25 percent, but leasing activity could rebound with clarity on the federal fiscal deficit and defense spending.

North of Baltimore, a diverse tenant mix continues to aid the I-83 Corridor and Towson, where a flight to quality has left limited large blocks of Class A availabilities. The Reisterstown Corridor and Owings Mills, submarkets with a high concentration of financial tenants, have not fared as well.

Along with the aforementioned 1 East Pratt listing, capital markets have been active. A major REIT is expected to close on the sale of a 6.6 million-square-foot east coast portfolio that includes more than one million square feet of Baltimore area office product.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.7 billion of real estate assets under management. For further information, visit www.jll.com.