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Development activity has rebounded, but growth of leased office supply has not

• Office development activity has ticked upwards over the past three years, delivering 1.3 m.s.f. of new product in 2017. The bulk of growth has gone towards Howard County, which accounted for 54% of new supply in 2017, and helped push 2017 above the 10-year average of 1.2 m.s.f. of new supply per year.

• The growth of Baltimore’s leased office supply, however, has continued to fall short of long term trends. Conversions of obsolete supply to primarily multi-family and hospitality, combined with tenants taking advantage of soft submarkets to purchase their buildings, has offset new supply. Growth in leased office supply has fallen short of the long term average for the past seven straight years, and even dipped negative in 2014. The CBD and BWI North have been the most heavily impacted by the trend, and have respectively seen their inventory’s shrink by 14.1% and 7.0% over the past 10 years.

• The constrained supply has helped stabilize market dynamics, maintain low Class A vacancy, and encouraged rental rate growth in the upper tiers of the market despite sluggish net absorption.

Source: JLL Research

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