Contact Us

Annapolis Has Healthy CRE Demand, But Developers Say 'Insane' Restrictions Are Slowing Growth


In contrast to nearby major cities D.C. and Baltimore, demand for commercial real estate in Anne Arundel County remains strong across all sectors, industry executives who work in the area said. 

Yet some developers argued on Wednesday during Bisnow's Exploring Annapolis & Anne Arundel County event that bureaucracy and local government hostility to development hampers their ability to meet the appetite for new buildings. 

Katz Day’s David Katz, Hyatt Commercial’s Justin Mullen, St. John Properties’ Matt Lenihan and Hogan Cos.’ Timothy Hogan at Bisnow’s Exploring Annapolis & Anne Arundel County event.

"'Modification' is a dirty word. Developers are evil. You go into a lot of these planning meetings, and there are crossed arms and you feel like you're the enemy, and that's not good," Hogan Cos. President Timothy Hogan said at the event, held at Crowne Plaza Annapolis. 

"So what do people do? They go elsewhere. And that's really sad because we want good-quality development here in the county."

Hyatt Commercial President Justin Mullen said the county's zoning process allows officials to pick and choose which developments to assist.  

An example of that, he said, was when Wegmans wanted to open a store in a planned development at 2500 Riva Road. The county opposed that project, Mullen said, leading the grocer to ultimately walk away from the project

However, six to nine months after Wegmans backed out, Mullen said an Atlanta-based developer approached him about building a grocery-anchored vertical mixed-use project. That developer was able to close on the project and break ground in a little more than two years, Mullen said. 

"Go try to build a 10K SF retail center anywhere else in the county, and it'll take you three years to get through the same process," Mullen said. "So it's not that it can't be done. Right now, the code is written so that the county has a lot of discretion as to what they want to support and get pushed through."

While nearby urban areas Baltimore and Washington, D.C., are struggling with a glut of unwanted office space and the ripple effect of those vacancies, panelists said Annapolis and the larger Anne Arundel County market have avoided the headwinds that have hurt the office sector.  

"Some of the bigger markets that have traditionally been really strong are now seeing a mass exodus of office space in particular ... and with the exodus of office, it causes a lot of stress on retail and the other things surrounding it," Mullen said. "That's not a problem that we're having in any way in the county or Annapolis, for that matter." 

Logistics Property Co.’s Mark Glagola, the city of Annapolis’ Stephen Rice, Rosso Commercial Real Estate Services’ John Rosso and Visit Annapolis & Anne Arundel County’s Kristen Pironis.

Rosso Commercial Real Estate Services principal John Rosso said the county and the Annapolis submarket aren't home to massive office towers like those in traditional urban central business districts. As a result, those submarkets aren’t saddled with large swaths of vacancies.  

The waterfront property in and around Annapolis, along with its proximity to the homes of executives and their employees, means those offices present attractive options for companies looking to downsize due to the rise of remote working.

"When you go to Baltimore city and D.C. ... some of these areas are just ghost towns, but we're not experiencing that here," Rosso said. 

The Baltimore-area office market experienced nearly 420K SF of occupancy loss in the second quarter, with roughly 26% of that decline coming from Baltimore city, according to JLL's quarterly market report. The city's central business district posted a year-to-date negative net absorption of 27.4K SF, representing nearly 57% of citywide office losses year-to-date. 

D.C.'s office market has posted a year-to-date negative net absorption of nearly 21K SF, according to JLL research. Much of that loss comes from D.C.'s central business district and Georgetown submarkets, where tenants have left more than 177K SF and 153K SF of office space, respectively, year-to-date. 

Meanwhile, Anne Arundel County submarkets have posted relatively strong office demand figures this year. The county's portion of the Baltimore-Washington International Airport submarket recorded nearly 183K SF of net absorption this year, according to JLL. The Annapolis submarket absorbed 17.4K SF of office space through the first half of 2023. 

Anne Arundel County submarkets also outperformed Baltimore in rents. Citywide, Baltimore office properties earned an average direct asking rent of $26.67 per SF. Annapolis offices pulled in average direct rent of $32.69 per SF, while county offices near BWI pulled in average direct rent of $27.70 per SF. 

Those prices are still nowhere near office rents in D.C., which posted a citywide average direct asking rent of $58.84 per SF, according to JLL. 

However, developers and brokers at the event said that Anne Arundel County and Annapolis aren’t positioned to capitalize on the demand in the area for properties across the asset spectrum. That is primarily due to cumbersome permitting processes, antiquated zoning and local governments that remain indifferent to new projects, they said.

Anne Arundel County and Annapolis officials who spoke at the event acknowledged the need to streamline local development processes. They said local officials want to improve land use and zoning issues that slow development.  

Anne Arundel County Council Member Allison Pickard

Even so, Anne Arundel County Council Member Allison Pickard said land use issues remain among the most controversial the council handles. While the council passes roughly 70% of its legislation unanimously and 85% with bipartisan votes, Pickard said, the 15% creating division among lawmakers generally involves land uses.

In the next few months, the council will start addressing issues like the Parole and Odenton town center master plans, Pickard said. Council members will also consider the first three regional plans as part of the jurisdiction's comprehensive rezoning process. Pickard also said she plans to introduce legislation to "insert missing-middle housing concepts into our code."  

"I'm proud of the work that I've done to address new industries, housing attainability and affordability, and revitalization," Pickard said. "Ultimately, it all boils down to breaking down barriers in order to create thriving communities and incentivize economic growth."

Hogan, the brother of former Republican Gov. Larry Hogan, blamed Anne Arundel County Executive Steuart Pittman, a Democrat, for the growing opposition to development in the county. He described Pittman as anti-development and said Pittman had been "very effective at shutting down residential development in the county."

Describing himself as jaded after 20 years of "gut punches," Hogan praised Pickard, a Democrat, and the council as a whole for taking action to solve issues restraining development in Anne Arundel County.

"The council is trying to solve these problems, and I'm really hoping they do, and they're making some headway," Hogan said. "But the bureaucracy is insane. I mean, you can't even meet with people. You drop off plans into like a drop box, and then they lose them. Then they're working from home, and they spill breakfast on them. ... We can do a lot better."