Parking Helps Drive Baltimore's Suburban-Style Offices Ahead Of Downtown Towers
Office tenants in the Baltimore metro area are increasingly embracing workspaces at more suburban-style properties, and they are willing to pay higher rents for those spaces.
Tenants don’t necessarily want to be in suburban jurisdictions, according to local brokers. But assets with typically suburban amenities, such as abundant parking, have outperformed those in Baltimore's denser urban areas.
“It gives them the advantage of location, in not being in the [central business district] and having accessibility to other county amenities,” MacKenzie Commercial Real Estate Services Senior Vice President Matt Mueller said.
Questions still linger about the impact of the pandemic on office leasing, including how to determine the right amount of office space. Yet companies have shown an inclination to pay high rents to lease in less dense settings.
Kate Jordan, broker and principal in Lee & Associates' Chesapeake region, helped a company relocate from downtown Baltimore to Canton. The now-defunct City Paper once mocked the Canton neighborhood in southeast Baltimore by calling it the “Best New Suburb.”
Jordan declined to share the name of the firm that relocated, but she said it has younger employees. The company wanted to invest in space that felt safer and had nearby amenities and parking because it believed it would help retain those workers.
“People are not afraid to pay for office,” Jordan said.
In the third quarter, Baltimore’s southeast submarket posted the highest direct asking rents of the metro area’s six largest submarkets for Class-A offices, according to JLL. Last quarter, rents for top-end office buildings in that submarket averaged $39.70 per SF, more than $3 per SF higher than the next-highest-priced area.
As a result, developers are responding to demand and delivering new offices in the Canton area. According to JLL, there is more than 1.1M SF of office space under development in southeast Baltimore, the most of any submarket in the region.
One of those new projects coming online is 40Ten Boston. Owner 28 Walker Development expects to deliver 40Ten Boston, Baltimore’s first heavy timber office building, early next year.
That building, part of The Collective mixed-use project in Canton, has 115K SF of office space. It features 15-foot ceilings, a roof deck and modern amenities.
40Ten Boston has already attracted a significant tenant from outside the area. Developer Greenberg Gibbons said this fall it is consolidating offices in Owings Mills and Annapolis into a headquarters at that building.
When the firm announced its move in October, Greenberg Gibbons explained it selected 40Ten Boston because southeast Baltimore is easily accessible to employees who live throughout the region and regularly visit nearby developments.
Offices at the Village of Cross Keys, designed by legendary developer Jim Rouse’s firm in the 1960s, have also attracted substantial leasing activity.
Set in north Baltimore near Interstate 83, the Cross Keys complex has suburban-style amenities like large parking lots, and its location makes it accessible for workers coming from the city and the suburbs. Owned by Caves Valley Partners, the property also offers retail amenities.
Caves Valley Partners bought the property more than two years ago from Ashkenazy Acquisitions Corp. Since then, the leasing velocity at the property has consistently accelerated.
MacKenzie's Mueller handles the leasing at Cross Keys. In the last year and a half, he said Caves Valley has landed at least 60K SF of deals at the complex’s Village Square office building, which is about 99% leased.
He said the complex's other office building, referred to as the Quadrangle, has found a niche with tenants in the healthcare and medical fields and is about 75% leased.
“There are a bunch of pros [to leasing at Cross Keys]. You get free parking, proximity to Johns Hopkins and other hospitals, accessibility to nearby private schools and it's close to where C-suite executives generally live,” Mueller said.
Before the coronavirus pandemic, developers and brokers expected companies to favor offices in centrally located urban centers. Those predictions were informed by research that younger workers wanted to be in live-work-play environments.
With three-year leases signed just before the pandemic began now nearing their expiration, demand is running counter to those predictions. And it isn't just the city's less dense areas that are benefiting.
Suburban submarkets surrounding Baltimore are benefiting from a trend the pandemic accelerated: the flight to quality.
Three of the four largest suburban submarkets outperformed their city counterparts in Class-A vacancy, according to JLL.
Suburban office space in the Columbia South and the Anne Arundel County portion of the Baltimore Washington International Airport submarket are averaging higher Class-A rents than the city’s traditional downtown.
Those markets landed some of the biggest leases in the metro area last quarter, according to research by CBRE.
Amazon Web Services leased more than 122K SF at 550 National Business Parkway near BWI. Johns Hopkins University leased more than 115K SF at 8130 Maple Lawn Blvd. in Columbia, and Window Nation took more than 12K SF at 8110 Maple Lawn Blvd. in Columbia.
Class-A offices in sections of Anne Arundel County surrounding BWI Airport last quarter posted a sub-10% direct vacancy rate and the second-highest direct asking rent at $36.14 per SF.
The Columbia market, particularly the Columbia South area, continues to emerge as a rival to the city’s top submarkets in inventory and performance.
It is the second-largest submarket in the Baltimore metro by inventory, in both Class-A and overall office space. Columbia South also posted a direct vacancy lower than downtown and southeast Baltimore. That area also collected the third-highest rents in the region for Class-A properties.
“If you have a nice, well-cared-for building in Columbia, you’re getting deals done,” Jordan said.