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THE TRUTH ABOUT B'MORE OFFICE

WASHINGTON DC 04.27.2017

FEDERAL MARKETS & REAL PROPERTIES

A New President & GSA: What Does That Mean For You?

Norman Dong -- U.S. General Services Administration (GSA)
Tom Finan -- Trammell Crow Company
Bruce Childs -- USAA Real Estate
THE TRUTH ABOUT B'MORE OFFICE
Sometimes it's hard to notice you've slowed down when you're already idling behind a Sunday driver. So you might not have noticed that Baltimore's office market tapped the brakes in Q2, JLL reports. Then again, Delta Associates says the first half of the year blew the first half of 2011 out of the water. (The motto here: Keep your eyes on the speedometer and on your portfolio strength.)
Stuart Rienhoff
JLL Baltimore head Stuart Rienhoff tells us any activity this year will be trading spaces. New requirements like U of M School of Medicine's 25k SF expansion at 250 W Pratt in March and the 35k SF Johns Hopkins took in Harbor East in May are pretty much in the past. (One possible exception: Stuart says word on the street is that the state attorney's office will put out a requirement for more space.) Stuart's colleague Patrick Latimer tells us why: All the large renewals and relocations from second and third-generation space happened in '10 and '11. Basically, there are no new deals left to be done. A good part of the musical chairs could be on the Baltimore Street corridor, where high vacancy gives a negotiating advantage to tenants and where the newer Class-B space is a nice alternative to Charles Street stock.

Patrick Latimer
Patrick, who was pulling double duty as research analyst and stay-at-home dad for his nine-month-old when we talked (the day care's power was still out), tells us Fort Meade is where the action is. One requirement that threw the market for a loop: At the end of May, the Army said it needed 160k SF of anti-terrorism-protected space within 10 miles of Fort Meade by August (grace period until February). That's not enough time to build new or retrofit, and so the options are limited. One of the likeliest, he says, is Emerson Corporate Center in Southeast Howard County.
Greg Leisch
Delta Associates CEO Greg Leisch tells us job growth in the city and 'burbs has been ?way ahead? of its historical pace. (Back in Colonial times no one made new jobs; they were too busy fighting rogue bears.) Greg's optimistic take is reflected in Delta's latest numbers, released earlier this week: Baltimore saw 283k SF in positive net absorption in the first half of this year, up from 142k SF during the same period last year. ?The jobs that are growing are the ones more typically associated with office uses,? like healthcare, Greg says. Asking rents are down slightly, and don't expect any big changes: ?This is a steady-as-she-goes market.?