suburban maryland quarterly market report · absorption (sf) 51,220 247,208 -503,622 leasing...

Quarterly Market Report

2nd Quarter 2018

Suburban Maryland

lpcwashingtondc.com

2

Table of Contents

Metropolitan D.C. Market Overview .....................................3

Suburban Maryland Quarterly Overview ............................5

Suburban Maryland Top Leases ........................................... 9

Suburban Maryland Top Sales .............................................10

Market Spotlight, 2Q 2018:

Bethesda-Chevy Chase ..................................................... 11

North Bethesda-Potomac ................................................ 13

Rockville ................................................................................ 15

North Rockville .................................................................... 17

Gaithersburg-Germantown ............................................. 19

Silver Spring .......................................................................... 21

Beltsville-Calverton .......................................................... 23

Greenbelt-College Park ................................................... 25

Landover-Largo-Capitol Heights ...................................27

National Harbor-Oxon Hill .............................................. 29

Columbia South .................................................................. 31

Prince George’s County Industrial ................................ 32

Baltimore-Washington Corridor Industrial ................. 33

Frederick .............................................................................. 34

Frederick Flex ..................................................................... 35

Tysons Corner ..................................................................... 13

Paul Kern Senior Vice President

[email protected] | 301.304.8399

Brent Prossner Vice President


Jennifer Orr Senior Associate


Tim Weitzel Market Research Associate


Maryland Leasing & Market Research

Overall Market Summary

Metropolitan D.C. Market Overview 2nd Quarter 2018

The Washington, DC Metropolitan commercial real estate market is comprised of approximately 420.5 million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland.

The total vacancy rate decreased to 14.6% at the end the second quarter 2018, down from 14.8% at the end of the first quarter. The market recorded 367,301 square feet of net absorption in the second quarter, representing a 1.2% decrease from the 371,628 square feet absorbed in the first quarter.

Leasing activity totaled approximately 6.2 million square feet in transactions signed. The largest lease executed was signed by Appian for 204,547 square feet at 7950 Jones Branch Drive - Valo Park in McLean, Virginia.

Three buildings, totaling 1,339,000 square feet, broke ground; bringing the year-to-date 2018 construction pipeline total to 8,174,482 square

feet (66% pre-leased). Six buildings delivered this quarter (5 DC, 1 VA, 0 MD) totaling 2,177,996 square feet including; 1100 15th Street, NW - Midtown Center (875,000 sf, 80% leased to Fannie Mae).

There were eighteen sale transactions in the second quarter, totaling $1.21 billion. The largest sale was in the District with 875 15th Street, NW - The Bowen Building trading for $140,000,000 ($598 psf).

Average asking rental rates increased $1.05 to $37.39 per square foot, Full Service.

From May 2017 - May 2018 the DC Metropolitan area had a net increase of 41,300 jobs (45,100 private sector, -3,800 government) representing 1.3% growth, while the unemployment rate decreased to 3.2%.

DC VA MDMetro Area (YTD)

Direct Vacancy (2Q 2018) 10.1% 14.9% 13.7% 13.9%

Total Vacancy (2Q 2018) 10.9% 15.8% 14.2% 14.6%

Total Net Absorption(YTD 2018) 315,240 125,261 298,428

738,929 SF

Leasing Activity (YTD 2018) 4,270,536 7,288,651 1,433,502

13.0 M SF

3 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.46008120 Woodmont Ave., Suite 560 | Bethesda, MD | 301.304.8300

Outlook

Metropolitan D.C. Market Overview 2nd Quarter 2018


Looking ahead, the GSA will continue reducing the federal real estate footprint and begin to execute longer lease terms (15-20 year terms) while minimizing/eliminating short-term extensions to reduce costs. While market fundamentals appear strong, the region remains a “tenant’s market.” Aggressive landlords will continue to perform significant capital improvements on their buildings to remain competitive, while also offering generous rent concessions (TI Allowance and Free Rent). The Metro should continue be a catalyst for demand (leasing and sales) around Phase II of the Silver Line in Virginia and the Purple Line in Maryland.

The Metropolitan Washington, DC market posted another solid quarter and a rather strong first half of 2018, as total vacancy decreased (across all three regions), asking rents ticked up, and the region has absorbed nearly 740,000 square feet of space YTD 2018. There has been $3.21 billion in sales volume through the first half of 2018, representing a 34% increase in sales compared to the first half of 2017. Regional employment experienced 1.3% of growth YOY ending May 2018, primarily driven by the private sector, specifically the Professional & Business Services industry. The DC Metro area’s unemployment rate decreased to 3.2%, out-pacing the 4.0% national average.

5lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.46008120 Woodmont Ave., Suite 560 | Bethesda, MD | 301.304.8300

Market Summary

Suburban Maryland 2nd Quarter 2018

The Suburban Maryland office market, which encompasses Montgomery and Prince George’s Counties, totals approximately 87.8 million square feet of rentable space in 885 office buildings of 25,000 square feet and greater.

The market recorded a decrease in net absorption in the second quarter of 2018 with 51,220 square feet absorbed, down from the 247,208 square feet absorbed in the previous quarter.

Direct vacancy decreased to 13.7%, down from 14.1% and total vacancy decreased to 14.2% from 14.7%.

There was one sale transaction in Suburban Maryland this quarter. 15001 and 15005 Shady Grove Road, in the North Rockville submarket, sold to Capital Digestive Care, LLC for $15.6 million and $15.7 million, respectively. Both properties were a part of a portfolio sale, totaling $31.3 million ($301/SF).

The largest public sector lease was the US Public Health Service renewing 86,645 square feet at 1101 Wootton Parkway.

The largest private sector lease was a 146,142 square-foot renewal and expansion signed by the Henry M. Jackson Foundation at 6720-A Rockledge Drive in the North Bethesda submarket.

The year-over-year unemployment rate in Suburban Maryland increased to 3.1% in April 2018, up from 3.0% in April 2017.

From April 2017 to April 2018 employment in Suburban Maryland had a net increase of 5,400 new jobs, representing 0.9% growth. Sectors with the greatest amount of job growth were the Education and Health Services with 2,800 jobs, Mining, Logging, and Construction with 2,100 and Trade, Transportation, and Utilities with 800 jobs. The Government decreased by 400 jobs.

2Q 2018 1Q 2018 2Q 2017

Direct Vacancy 13.7% 14.1% 15.1%

Total Vacancy 14.2% 14.7% 15.7%

NetAbsorption (SF) 51,220 247,208 -503,622

Leasing Activity (SF) 869,084 564,418 726,067

Under Construction (SF) 1.9 M 1.1 M 292,724

Deliveries (SF) 0 0 0

Rental Rates(PSF, FS) $27.18 $27.12 $26.73

U/C Percent Pre-Leased 66% 56% 60%


Deliveries vs. Under Construction

0.0

0.5

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'18'17'16'15'14'13'12'11'10'09'08

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Deliveries Under Construction


Vacancy Rate

The direct vacancy rate decreased to 13.7% in the first quarter, down from 14.1%, totaling approximately 12.1 million square feet. Total vacancy decreased to 14.2%, down from 14.7%, totaling approximately 12.5 million square feet.

The sublease vacancy rate decreased to 0.5% at the end of the first quarter, representing 432,397 square feet of vacant space.

The Class A total vacancy rate decreased to 15.2% from 15.4% in the second quarter, totaling approximately 6.9 million square feet. The Class B total vacancy rate decreased to 13.6% from 13.8% in the second quarter, totaling approximately 5.0 million square feet.

Class Vacancy Rates

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15.2%

13.6%

10.2%

Construction

At the end of the second quarter 2018, there were seven buildings under construction, totaling 1,902,333 sf. 1000 Spring Street (Class A, 121,724 sf, 100% pre-leased) is set to deliver in July 2018. 251 National Harbor Boulevard (Class A, 95,000 sf, 60% pre-leased) is set to deliver in October 2018. 4000 Garden City Drive (Class A, 176,000 sf, 100% pre-leased) is set to deliver in November 2018. 5801 University Research Court (Class A, 75,000 sf, 0% pre-leased) is set to deliver in December 2018.

4747 Bethesda Avenue (Class A, 300,000 sf, 71% pre-leased) is set to deliver in August 2019.

7272 Wisconsin Avenue (Class A, 357,000 sf, 16% pre-leased) are set to deliver in 2020.

The Marriott Headquarters at 7750 Wisconsin Avenue (Class A, 785,000 sf, 100% pre-leased) is now under construction and is scheduled to deliver in 2022.



Montgomery CountyAbsorption & Gross Leasing

The Suburban Maryland market recorded 51,220 square feet of net absorption in the second quarter 2018, a decrease from the 247,208 square feet absorbed in the first quarter.

Eight of the Top Ten leases signed this quarter were in Montgomery County and ranged between 146,142 and 21,748 square feet.

Nine of the leases in the Top Ten this quarter were private sector transactions.

In the second quarter, total leasing activity totaled 869,084 square feet, a 54% increase from the 564,418 square feet leased in the first quarter.

The total average asking rental rate was $27.18 Full Service, up $0.06 from the previous quarter. The Class A asking rental rate was $29.46 Full Service in the second quarter, a $0.23 increase from the $29.23 asked in the first quarter.

2Q 2018 1Q 2018 2Q 2017

Inventory (SF) 65.5 M 65.5 M 65.5 M

Direct Vacancy 12.7% 12.9%% 13.4%

Total Vacancy 13.3% 13.4% 13.9%

Net Absorption (SF) 65,055 219,972 -320,976


Under Construction (SF) 1.6 M 409,724 121,724


Rental Rates (PSF, FS) $29.15 $29.05 $28.65

Prince George’s County

2Q 2018 1Q 2018 2Q 2017

Inventory (SF) 22.4 M 22.4 M 22.4 M

Direct Vacancy 16.7% 16.6% 17.5%

Total Vacancy 16.8% 16.7% 17.6%

Net Absorption (SF) -13,835 31,880 -41,637


Under Construction (SF) 346,000 346,000 75,000


Rental Rates (PSF, FS) $22.06 $22.37 $21.86



The Suburban Maryland office market, especially Montgomery County, continues to cut into its vacancy. Absorption remained positive and a handful of substantial renewals helped to maintain stability in the market.

There is reason for continued cautious optimism. Bethesda remains attractive and vacancy rates hold stable, but there is rising pressure as companies become frustrated by the higher rental rates, increased traffic, and tightness of parking in downtown Bethesda and the Woodmont Triangle. It is anticipated that traffic and parking will worsen when construction commences on Marriott’s headquarters. Migration out of Bethesda will continue in the foreseeable future. The Executive Boulevard corridor has become an attractive landing spot having completed several new leases recently as the Pike & Rose development is a major draw. Another bright spot is the biotech industry. Lab users continue to lease flex space as well as one – three story buildings. This is causing an uptick in traditional office buildings being converted into lab spaces. This is healthy for both the office and lab markets along the I-270 corridor. Submarkets from Rockville to Frederick will benefit from this. The Prince George’s County office market continues to lack substantial demand. Vacancy rates and absorption remain unchanged. Perhaps a major event such as FBI committing to the County or the Purple Line will become major demand drivers. With that said, the industrial market in Prince George’s remains solid with several substantial companies looking for Class A industrial space. Overall, the market will continue to enjoy higher absorption and lower vacancy as there are a handful of large requirements and a few mid-sized requirements in Montgomery County. The question is once these deals land in the next few months, will there be enough steam left in the economy to keep leasing momentum going into 2019.

Market Outlook



Top Ten LeasesIn the second quarter 2018, eight of the Top Ten leases were in Montgomery County and two were in Prince George’s County, with six of the top leas-es being renewals. Nine of the leases in the Top Ten this quarter were private sector transactions.

The largest lease executed in Montgomery Coun-ty was a renewal and expansion lease totaling 146,142 square feet by the Henry M. Jackson Foun-dation at 6720-A Rockledge Drive in the North Bethesda submarket. The expansion was for 21,625 SF.

There were three new leases signed this quarter in Montgomery County. Industrious Realty signed

a 28,000-square-foot lease at 7200 Wisconsin Avenue, Lockheed Martin signed for 23,923 square feet at 6901 Rockledge Drive, and Orano signed a pre-lease for 21, 748 square feet at 4747 Bethesda Avenue.

In Prince George’s County, Atkins signed the larg-est lease of the quarter, renewing 27,960 square feet at 3901 Calverton Boulevard in the Beltsville/Calverton submarket.

The Suburban Maryland market totaled 869,084 square feet of leasing activity in the second quar-ter 2018, an increase from the 564,418 square feet leased in the first quarter. This represents a 54% increase in leasing activity.

6720-A Rockledge Dr.

Tenant Henry M. Jackson Foundation

Size 146,142 SF

Type Renewal/Expansion

3901 Calverton Blvd.

Tenant Atkins

Size 27,960 SF

Type Renewal

9234-9298 Gaither Rd.

Tenant Westat

Size 88,742 SF

Type Renewal

6901 Rockledge Dr.

Tenant Lockheed Martin

Size 23,923 SF

Type New

1101 Wootton Pky.

Tenant US Public Health Service

Size 86,645 SF

Type Renewal

2275 Research Blvd.

Tenant Capital Bank

Size 22,473 SF

Type Sublease

6404 Ivy Ln.

Tenant Joseph, Greenwald, & Laake

Size 21,243 SF

Type Renewal

12211 Plum Orchard Dr.

Tenant Children’s Hospital

Size 71,259 SF

Type Renewal

7200 Wisconsin Ave.

Tenant Industrious

Size 28,000 SF

Type New

4747 Bethesda Ave.

Tenant Orano

Size 21,748 SF

Type Pre-lease


Suburban Maryland Sales


15001 & 15005 Shady Grove Road

Submarket North Rockville

Date Sold May 2018

Price

$15,553,000 ($301 PSF)$15,697,000($301 PSF)

Buyer Capital Digestive Care, LLC

Seller Harrison Street Capital

RBA 103,856 SF

Class A

Occupancy 54.1%

CommentsPortfolio sale totaling $31,250,000


HighlightsThe direct vacancy rate increased to 10.0% in the second quarter 2018, up from 9.2% in the first quarter. Total vacancy increased in the second quarter to 11.2%, up from 11.0% in the first quarter. Class A total vacancy increased to 9.8% in the second quarter, up from 8.4% in the first quarter, while the asking rental rate average increased to $41.98 Full Service in the second quarter, up $0.83 from the previous quarter.

Total net absorption was -123,332 square feet in the second quarter, down from the 3,428 square feet absorbed in the first quarter 2018.

Total leasing activity increased in the second quarter to 159,531 square feet, up from 144,316 square feet leased in the previous quarter. Contributing tenants included Industrious signing a 28,000-square-foot lease at 7200 Wisconsin Avenue and Orano signing a 21,748 square-foot pre-lease at 4747 Bethesda Avenue.

There are currently three buildings under construction in the Bethesda/Chevy Chase submarket: 4747 Bethesda Avenue, a 288,000- square-foot, Class A Office building, 7272 Wisconsin Avenue, a 361,609-square-foot, Class A office building and 7750 Wisconsin Avenue, Marriott’s 785,000-square-foot headquarters.

10 Year Averages (2008 - 2017)

Total Absorption 33,452 SF / Year

Deliveries (SF) 58,550 SF / Year

Leasing Activity 867,443 SF / Year

Market Stats

Inventory 10.9 M SF

Direct Vacancy 10.0 %

Total Vacancy 11.2 %

YTD 2018 Absorption -119,904 SF

Under Construction 1.4 M SF

Percent Pre-Leased 73.1 %

YTD 2018 Deliveries 0 SF

Asking Rental Rates (Full Service)

2008: $36.69

PSF

2017: $36.73

PSF

YTD 2018: $37.96

PSF

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Deliveries Under Construction Total Net Absorption

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Market Spotlight

2nd Quarter 2018Bethesda-Chevy Chase


Market Spotlight

2nd Quarter 2018Bethesda-Chevy Chase

Major Leases

Under Construction

Sales

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

7272 Wisconsin AveBethesda/Chevy Chase

361,609 SF 299,700 SF 19.6% 2020 Carr Properties Fox 5

4747 Bethesda AveBethesda/Chevy Chase

288,000 SF 87,057 SF 75% 8/2019 JBG SmithBooz Allen; Host Hotels & Resorts; JBG Smith; Orano

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

No sales this quarter.Bethesda/Chevy Chase

N/A N/A N/A N/A N/A N/a N/A

7200 Wisconsin Ave.

Tenant Industrious

Size 28,000 SF

Type New

4747 Bethesda Ave.

Tenant Orano

Size 21,748 SF

Type Pre-lease

8101 Glenbrook Rd.

Tenant DPM Kids, LLC

Size 19,000 SF

Type New

4445 Willard Ave.

Tenant Federal Capital Partners

Size 14,000 SF

Type New

Marriott Headquarters 7750 Wisconsin Ave

Bethesda/Chevy Chase

785,000 SF 0 SF 100% 2022Bernstein Co. / Boston Properties

Marriott International


HighlightsThe direct vacancy rate decreased to 18.0% in the second quarter 2018, down from 19.7% in the first quarter 2018. Total vacancy decreased to 18.3% in the second quarter, down from 19.9% in the previous quarter. Class A total vacancy decreased to 18.9% in the second quarter, down from 21.3% in the first quarter, while the asking rental rate average decreased to $29.11 Full Service in the second quarter, down $0.29 from the previous quarter.

Total net absorption was 153,441 square feet in the second quarter, up from the 85,444 square feet absorbed in the first quarter. Contributing to the large posotive net absorption was ABT Associates moving into 151,451 square feet at 6130 Executive Boulevard.

Total leasing activity increased in the second quarter to 233,786 square feet, up from 72,950 square feet leased in the previous quarter. Contributing tenants included the Henry M. Jackson Foundation renewing a 124,517-square-foot lease and expanding into 21,625 square feet at 6720-A Rockledge Drive and Lockheed Martin signed a 23,923-square-foot lease at 6901 Rockledge Drive.


Total Absorption -40,337 SF / Year



Market Stats

Inventory 10.7 M SF



YTD 2018 Absorption 238,885 SF

Under Construction 0 SF

Percent Pre-Leased 0 %



2008: $31.52

PSF

2017: $28.59

PSF

YTD 2018: $28.41

PSF

-0.75

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Market Spotlight

2nd Quarter 2018North Bethesda-Potomac


Market Spotlight

2nd Quarter 2018North Bethesda-Potomac

Major Leases

Under Construction

Sales


No new construction during this quarter.

North Bethesda - Potomac

N/A N/A N/A N/A N/A N/A


No sales this quarterNorth Bethesda - Potomac

N/A N/A N/A N/A N/A N/A N/A

6720-A Rockledge Dr.

Tenant Henry M. Jackson Foundation

Size 146,142 SF

Type Renewal/Expansion

6430 Rockledge Dr.

Tenant Wilmer Eye Clinic

Size 18,961 SF

Type New

6901 Rockledge Dr.

Tenant Lockheed Martin

Size 23,923 SF

Type New

6101 Executive Blvd.

Tenant Geisinger Health

Size 8,245 SF

Type New


HighlightsThe direct and total vacancy rates both decreased to 11.0% in the second quarter, down from 11.2% and 11.4% in the first quarter, respectively. Class A total vacancy decreased to 18.6% in the second quarter, down from 19.1% in the first quarter, while the asking rental rate average increased to $32.82 Full Service in second quarter, up $0.01 from the previous quarter.

Total net absorption was 34,093 square feet in the second quarter, up from 500 square feet absorbed in the first quarter. Contributing to the positive net absorption was Planet Depos moving into 14,254 square feet at 451 Hungerford Drive.

Total leasing activity increased in the second quarter to 163,459 square feet, up from the 35,048 square feet leased in the previous quarter. Contributing tenants included US Public Health Services renewing a 86,645-square-foot lease at 11101 Wootton Parkway and CUA OPCO, LLC renewing a 16,420 square-foot lease at 12435 Park Potomac Avenue.





Market Stats

Inventory 9.7 M SF








2008: $33.65

PSF

2017: $31.06

PSF

YTD 2018: $31.14

PSF

-0.2

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Deliveries Under Construction Total Net Absorption0

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Vaca

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Market Spotlight

2nd Quarter 2018Rockville


Market Spotlight

2nd Quarter 2018Rockville

Major Leases

Under Construction

Sales


No new construction during this quarter Rockville N/A N/A N/A N/A N/A N/A


No sales this quarter Rockville N/A N/A N/A N/A N/A N/A N/A

1101 Wootton Pky.

Tenant US Public Health Service

Size 86,645 SF

Type Renewal

12435 Park Potomac Ave.

Tenant CUA OPCO, LLC

Size 16,420 SF

Type New

451 Hungerford Dr.

Tenant Planet Depos

Size 14,254 SF

Type New

12300 Twinbrook Pky.

Tenant Deloitte

Size 10,000 SF

Type New


HighlightsThe direct vacancy rate decreased to 13.8% in the second quarter 2018, down from 15.9% in the first quarter. Total vacancy decreased to 15.0% in the second quarter 2018, down from 16.9% in the previous quarter. Class A total vacancy decreased to 14.5% in the second quarter, down from 17.6% in the first quarter, while the asking rental rate average increased to $28.55 Full Service in second quarter, up $0.13 from the previous quarter.

Total net absorption was 11,761 square feet in the second quarter, down from the 65,940 square feet absorbed in the first quarter.

Total leasing activity increased in the second quarter to 240,508 square feet, up from 107,747 square feet leased in the previous quarter. Contributing tenants included Westat signing a 88,742-square-foot renewal at 9234-9298 Gaither Road and Capital Bank signing a 22,473-square-foot lease at 2275 Research Boulevard.





Market Stats

Inventory 13.2 M SF








2008: $27.37

PSF

2017: $26.02

PSF

YTD 2018: $26.53

PSF

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Market Spotlight

2nd Quarter 2018North Rockville


Market Spotlight

2nd Quarter 2018North Rockville

Major Leases

Under Construction

Sales


No new construction during the quarter N. Rockville N/A N/A N/A N/A N/A N/A


No sales this quarter N. Rockville N/A N/A N/A N/A N/A N/A N/A

9234-9298 Gaither Rd.

Tenant Westat

Size 88,742 SF

Type Renewal

2275 Research Blvd.

Tenant Capital Bank

Size 22,473 SF

Type Sublease

1445-1455 Research Blvd.

Tenant Information Management Services

Size 12,300 SF

Type New

1300 Piccard Ave.

Tenant Management Solutions Plus, Inc.

Size 10,665 SF

Type New


HighlightsThe direct vacancy rate increased to 9.7% in the second quarter 2018, up from 9.2% in the first quarter. Total vacancy increased to 10.0% in the second quarter, up from 9.5% in the first quarter. Class A total vacancy increased to 10.7% in the second quarter, up from 10.0% in the first quarter, while the asking rental rate average decreased to $25.01 Full Service in second quarter, down $0.03 from the previous quarter.

Total net absorption was -79,896 square feet in the second quarter, down from the 56,493 square feet absorbed in the first quarter. Contributing to the negative net absorption was Teology Networks vacating 52,145 square feet at 20450 Century Boulevard.

Total leasing activity decreased in the second quarter to 51,022 square feet, down from 233,003 square feet leased in the previous quarter. Contributing tenants included Montgomery College signing a 14,747-square-foot renewal at 12 S. Summit Avenue and The Columbia Bank signing a 5,711-square-foot lease at 481 N. Frederick Avenue.





Market Stats

Inventory 9.1 M SF








2008: $23.34

PSF

2017: $23.63

PSF

YTD 2018: $23.92

PSF

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

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Market Spotlight

2nd Quarter 2018Gaithersburg-Germantown


Market Spotlight

2nd Quarter 2018Gaithersburg-Germantown

Major Leases

Under Construction

Sales


No new construction during the quarter

Gaithersburg - Germantown N/A N/A N/A N/A N/A N/A


No sales this quarter Gaithersburg - Germantown N/A N/A N/A N/A N/A N/A N/A

12 S. Summit Ave.

Tenant Montgomery College

Size 14,747 SF

Type Renewal

481 N. Frederick Ave.

Tenant The Columbia Bank

Size 5,711 SF

Type New


HighlightsThe direct vacancy rate decreased to 10.1% in the second quarter, down from 10.4% in the first quarter 2018. Total vacancy decreased to 10.4% in the second quarter, down from 11.0% in the first quarter. Class A total vacancy decreased to 11.0% in the second quarter, down from 11.6% in the previous quarter. The Class A asking rental rate average decreased to $30.61 Full Service in second quarter, down $0.15 from the previous quarter.

Total net absorption was 25,719 square feet in the second quarter, up from 2,542 square feet absorbed in the first quarter. Contributing to the positive netr absorption was Family Nursing Care moving into 12,381 square feet at 1010 Wayne Avenue.

Total leasing activity increased in the second quarter to 65,528 square feet, up from 38,779 square feet leased in the previous quarter. Contributing tenants included Exiger signing a 12,036-square-foot lease at 8403 Colesville Road and GCC Technologies signing a 9,140 sublease at 1010 Wayne Avenue.

1000 Spring Street (Class A, 121,724 sf, 100% pre-leased) is currently under construction, set to deliver in July 2018.





Market Stats

Inventory 6.3 M SF




Under Construction 121,724 SF




2008: $31.01

PSF

2017: $29.33

PSF

YTD 2018: $29.53

PSF

-0.3

-0.2

-0.1

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Market Spotlight

2nd Quarter 2018Silver Spring


Market Spotlight

2nd Quarter 2018Silver Spring

Major Leases

Under Construction

Sales


1000 Spring St. Silver Spring

121,724 SF 0 SF 100% 7/2018United Therapeutics Corporation

United Therapeutics Corporation


No sales this quarter Silver Spring


8403 Colesville Rd.

Tenant Exiger

Size 11,627 SF

Type New

1010 Wayne Ave.

Tenant GCC Technologies

Size 9,140 SF

Type Sublease


HighlightsThe direct and total vacancy rates increased to 27.4% in the second quarter 2018, up from 26.8% in the first quarter. Class A total vacancy increased to 41.2% in the second quarter, up from 41.1% in the first quarter, while the asking rental rate average decreased to $22.14 Full Service in second quarter, down $0.05 from the previous quarter.

Total net absorption was -6,527 square feet in the second quarter, down from 15,041 square feet absorbed in the first quarter.

Total leasing activity increased in the second quarter to 29,457 square feet, up from 23,942 square feet leased in the previous quarter. A contributing tenant included Atkins signing a 27,960-square-foot renewal at 3901 Calverton Boulevard.



Deliveries (SF) 0 SF / Year


Market Stats

Inventory 1.6 M SF








2008: $23.05

PSF

2017: $21.43

PSF

YTD 2018: $22.10

PSF

-0.50

-0.25

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Market Spotlight

2nd Quarter 2018Beltsville-Calverton


Market Spotlight

2nd Quarter 2018Beltsville-Calverton

Major Leases

Under Construction

Sales



Beltsville-Calverton



No sales this quarter Beltsville-Calverton


3901 Calverton Blvd.

Tenant Atkins

Size 27,960 SF

Type Renewal


HighlightsThe direct vacancy rate decreased to 19.6% in the second quarter 2018, down from 19.8% in the first quarter. The total vacancy rate decreased to 19.7% in the second quarter, down from 19.8% in the first quarter. Class A total vacancy increased to 18.6% in the second quarter, up from 17.9% in the previous quarter. The Class A asking rental rate average decreased to $23.60 Full Service in second quarter, down $0.02 from the previous quarter.

Total net absorption was 9,824 square feet in the second quarter, up from -19,280 square feet absorbed in the first quarter.

Total leasing activity increased in the second quarter to 90,359 square feet, up from 6,987 square feet leased in the previous quarter. Contributing tenants include Joseph, Greenwald, & Laake renewing a 21,243-square-foot lease at 6404 Ivy Lane and Orbital Sciences Corporation renewing a 11,779-square-foot lease at 7500 Greenway Center Drive.

5801 University Research Court (Class A, 75,000 sf, 0% pre-leased) is currently under construction and set to deliver in December 2018.





Market Stats

Inventory 7.3 M SF








2008: $22.931

PSF

2017: $22.24

PSF

YTD 2018: $22.25

PSF

-0.3

-0.2

-0.1

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Market Spotlight

2nd Quarter 2018Greenbelt-College Park


Market Spotlight

2nd Quarter 2018Greenbelt-College Park

Major Leases

Under Construction

Sales


5801 University Research Ct.

Greenbelt-College Park

75,000 SF 75,000 SF 0% 12/2018Corporate Office Properties Trust

N/A


No sales this quarter Greenbelt-College Park


6404 Ivy Ln.

Tenant Joseph, Greenwald, & Laake

Size 21,243 SF

Type Renewal

7500 Greenway Center Dr.

Tenant Orbital Sciences Corporation

Size 11,779 SF

Type Renewal

6301 Ivy Ln.

Tenant Ciprani & Werner P.C.

Size 10,690 SF

Type New


HighlightsThe direct vacancy rate increased to 19.4% in the second quarter 2018, up from 19.1% at the end of the first quarter. The total vacancy rate increased to 19.7%, up from 19.3% in the first quarter. Class A total vacancy decreased to 18.3% in the second quarter, down from 18.6% in the previous quarter. The Class A asking rental rate average increased to $25.95 Full Service in the second quarter, up $0.11 from the previous quarter.

Total net absorption was -16,941 square feet in the second quarter, up from -29,671 square feet absorbed in the first quarter.

Total leasing activity decreased in the second quarter to 21,657 square feet, down from 83,903 square feet leased in the previous quarter. A contributing tenant included HeiTech Services signing a 7,490-square-foot renewal at 8400 Corporate Drive.





Market Stats

Inventory 3.1 M SF








2008: $23.38

PSF

2017: $22.65

PSF

YTD 2018: $21.95

PSF

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

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Market Spotlight

2nd Quarter 2018Landover-Largo-Capitol Heights


Market Spotlight

2nd Quarter 2018Landover-Largo-Capitol Heights

Major Leases

Under Construction

Sales



Landover - Largo - Capitol Heights



No sales this quarterLandover - Largo - Capitol Heights


8400 Corporate Dr.

Tenant HeiTech Services Inc.

Size 7,490 SF

Type Renewal


HighlightsBoth the direct and total vacancy increased to 14.9% in the second quarter 2018, up from 13.7% in the first quarter. Class A total vacancy increased to 14.6% in the second quarter, up from 11.2% in the first quarter, while the asking rental rate average increased to $33.67 Full Service in second quarter, up $1.46 from the previous quarter.

Total net absorption was -13,087 square feet in the second quarter, down from 2,383 square feet absorbed in the first quarter.

Total leasing activity decreased in the second quarter to 3,700 square feet, down from 3,810 square feet leased in the previous quarter.

251 National Harbor Boulevard (Class A, 95,000 sf, 60% pre-leased) is currently under construction and set to deliver in October 2018.





Market Stats

Inventory 1.0 M SF








2007: $28.89

PSF

2017: $29.21

PSF

YTD 2018: $29.02

PSF

-0.050

0.025

0.100

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Market Spotlight

2nd Quarter 2018National Harbor-Oxon Hill


Market Spotlight

2nd Quarter 2018National Harbor-Oxon Hill

Major Leases

Under Construction

Sales


251 National Harbor Blvd.National Harbor - Oxon Hill

95,000 SF 38,000 SF 60%October 2018

Peterson Companies / CBRE

Bariatric Medicine, Willpower Wellness


No sales this quarterNational Harbor - Oxon Hill


No major leases this quarter


HighlightsThe direct vacancy rate decreased to 7.6% in the second quarter 2018, down from 8.8% in the first quarter. Total vacancy decreased to 7.9% in the second quarter, down from 9.1% in the first quarter. Class A total vacancy increased to 7.8% in the second quarter, up from 7.6% in the first quarter. Class A asking rental rate average decreased to $28.23 Full Service in the second quarter, down $0.28 from the previous quarter.

Total net absorption was 114,073 square feet in the second quarter, up from the -116,243 square feet absorbed in the first quarter.

Total leasing activity decreased in the second quarter to 117,300 square feet, down from 168,362 square feet leased in the previous quarter.

Two buildings were under construction at the end of the quarter; 8120 Maple Lawn Boulevard (Class A, 105,556 sf, 0% pre-leased), set to deliver in July 2018 and 11810 W. Market Place (Class A, 29,700 sf, 0% pre-leased), set to deliver in January 2019.





Market Stats

Inventory 9.2 M SF


Total Vacancy 7.9 %






2008: $23.39

PSF

2017: $25.12

PSF

YTD 2018: $25.41

PSF

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Market Spotlight

2nd Quarter 2018Columbia South


HighlightsThe direct vacancy rate decreased to 10.9% in the second quarter 2018, down from 11.1% in the first quarter. Total vacancy decreased to 11.3% in the second quarter, down from 12.0% in the first quarter.

Total net absorption was 134,158 square feet in the second quarter, up from -142,864 square feet absorbed in the first quarter. Contributing to the large positive net absoprtion was Upper Crust Bakery moving into 129,988 square feet at 7100 Holladay Tyler Road.

Total leasing activity increased in the second quarter to 172,577 square feet, up from 153,876 square feet leased in the previous quarter. Contributing tenants included NEFCO signing a 40,636 square-foot lease at 1101 Hampton Park Boulevard in the Capital Heights submarket.

There are currently two buildings under construction in Prince George’s County. 7501 Andrews Federal Campus Drive (167,033 sf, 0% pre-leased) is set to deliver in September 2018. 9300 Alaking Court (now 20,000 sf, 100% pre-leased) downsized and is scheduled to deliver in February 2019. Frito-Lay will be the sole tenant.




Leasing Activity 1.2M SF / Year

Market Stats

Inventory 21.2 M SF







Asking Rental Rates (Triple Net)

2008: $6.27

PSF

2017: $6.54

PSF

YTD 2018: $6.85

PSF

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Market Spotlight

2nd Quarter 2018Prince George’s County Industrial


HighlightsThe direct vacancy rate decreased to 10.3% in the second quarter 2018, down from 10.8% in the first quarter. The total vacancy rate remained flat at 11.1% in the second quarter.

Total net absorption was -40,495 square feet in the second quarter, down from the 21,088 square feet absorbed in the first quarter.

Total leasing activity increased in the second quarter to 1,013,789 square feet, up from 342,313 square feet leased in the previous quarter. Contributing tenants included Taylor Farms signing a 80,000 square-foot lease at 9050 Junction Drive in the Route 1 Corridor submarket.

There are currently four buildings under construction. 7157 Ridge Road (220,000 sf, 100% pre-leased) is set to deliver in July 2018. 7171 Dorsey Run Road (93,500 sf, 0% pre-leased) is set to deliver in July 2018. 7200 Dorsey Run Road (126,000 sf, 0% pre-leased) is set to deliver in July 2018. 7550 Perryman Court (500,400 sf, 0% pre-leased) is set to deliver in August 2018.




Leasing Activity 4.1 M SF / Year

Market Stats

Inventory 50.4 M SF






YTD 2018 Deliveries 140,400 SF


2008: $5.17 PSF

2017: $5.15 PSF

YTD 2018: $4.83

PSF

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Market Spotlight

2nd Quarter 2018

Baltimore-Washington Corridor Industrial


HighlightsThe direct vacancy rate increased to 17.0% in the second quarter 2018, up from 11.3% in the first quarter. Total vacancy increased to 17.1% in the second quarter, up from 11.5% in the first quarter.

Total net absorption was -255,234 square feet in the second quarter, down from 15,701 square feet absorbed in the first quarter. Contributing to the negative net absorption was State Farm Insurance Company vacating 272,008 square feet at 1 State Farm Drive.

Total leasing activity increased in the second quarter to 28,630 square feet, up from the 24,540 square feet leased in the previous quarter. Contributing tenants included CBIZ Medical Management signing a 20,000 square-foot lease at 5235 Westview Drive.





Market Stats

Inventory 4.4 M SF





Percent Pre-Leased 0%

YTD 2018 Deliveries 47,727 SF


2008: $24.02

PSF

2017: $20.08

PSF

YTD 2018: $19.30

PSF

-0.4

-0.2

0.0

0.2

0.4

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Market Spotlight

2nd Quarter 2018Frederick Office


HighlightsThe direct vacancy rate decreased to 8.5% in the second quarter 2018, down from 9.5% in the first quarter. Total vacancy decreased to 8.6% in the second quarter, down from 9.7% in the first quarter.

Total net absorption was 41,987 square feet in the second quarter, up from 23,717 square feet absorbed in the first quarter.

Total leasing activity increased in the second quarter to 26,780 square feet, up from the 3,365 square feet leased in the previous quarter.





Market Stats

Inventory 3.8 M SF


Total Vacancy 8.6 %






2008: $10.59

PSF

2017: $10.38

PSF

YTD 2018: $10.84

PSF

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Market Spotlight

2nd Quarter 2018Frederick Flex

suburban maryland quarterly market report · absorption (sf) 51,220 247,208 -503,622 leasing...

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