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Despite recent uptick, pace of Baltimore office development far below pre-recession levels

•While development activity has rebounded over the past several years after stalling in 2014, the pace of new construction still falls far below the levels seen pre-2008. Additionally, the product that has delivered has become increasingly concentrated in a handful of developers. Since 2015, the top 3 developers (St. John Properties, Corporate Office Properties Trust, and Beatty Development) in the market by square feet delivered have accounted for nearly half of all new supply.

•With development activity still far below historic norms and the construction pipeline concentrating in a handful of developers, large tenant requirements may face increasing challenges when in the market for Class A new construction in desirable submarkets.

•The potential impact on the office market from Suburban Maryland to Baltimore City is large: the area’s largest cybersecurity success story, Tenable, recently preleased 150,000 s.f. of Class A new construction in Downtown Columbia. Today, however, the footprint of cybersecurity venture capital funded startups in Maryland is approximately 425,000 s.f., with a median size of only 3,650 s.f. In order to grow and attract venture capital investment, Maryland’s cybersecurity industry will need to mature from service-oriented companies catering towards government customers, to cybersecurity start ups that are developing products and platforms for commercial uses. Local and state government programs, including the Maryland Cybersecurity Investment Incentive Tax Credit, along with private industry efforts, such as DataTribe, a cybersecurity incubator, will help Maryland make the transition to developing platform-based cybersecurity companies that will generate greater, and more consistent venture capital fundraising. As the industry continues to mature locally, cybersecurity will have the potential to increasingly impact commercial real estate in a meaningful way.

Source: JLL Research

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