Baltimore metro area office tenants continue leasing less space as firms rent smaller workplaces in newer, amenity-rich buildings.

The third quarter of 2022 marked the seventh consecutive quarter that Baltimore’s office market generated negative absorption, according to a recently released JLL market report. Despite occupancy gains downtown from a handful of large relocations, JLL found those additions did not offset losses from other tenant moves to swankier digs.

“New, Class A buildings with high-quality amenities are the primary beneficiaries of tenant relocations, but in most instances, relocations are driven in part by rightsizing, as companies reconceptualize their workplace needs,” JLL analysts said.

Cushman & Wakefield’s third-quarter Baltimore office market performance report recorded similar findings. That firm’s analysts report the Baltimore metro area pegged 614K SF of negative absorption year-to-date, and the bulk of that space was vacated in the third quarter.

Those analysts also found that flight-to-quality is the primary culprit for reducing the amount of leased space. Deals for Class-A space represented 76% of deals inked in the last quarter.

Major companies choosing to relocate include law firm DLA Piper, which is moving its offices from Baltimore County to Harbor East. Interior design firm Chambers Co. plans to relocate from Montgomery Park in southwest Baltimore to Port Covington.

Other notable firms that previously announced moves from downtown include T. Rowe Price ditching Pratt Street for Harbor Point and Bank of America relocating to Harbor East.

Terri Harrington, the founder of Harrington Commercial Real Estate, said the flight-to-quality trend substantially impacts vacancy in the city’s traditional Central Business District. In the long term, she’s worried about the future of office space downtown north of Pratt Street and west of President Street.

In recent years, conversions from offices to apartments reduced the inventory of vacant Class-B workspaces. More recently, state government relocations from the State Center site near Mount Vernon to downtown helped backfill vacancies.

Maryland’s spending board approved a roughly 150K SF lease for the Department of Human Services at 25 South Charles St. earlier this year. In late October, the state approved about 611K SF of new leases at five buildings for five state agencies currently located at the dilapidated State Center complex.

Now that the state has settled almost all State Center relocations, she said, the market needs new blood. The downtown office market can’t sustain itself by shuffling tenants to different locations in the city.

“In the future, I don’t know what the next backfill will be,” she said.

However, some recent market reports found positive signs for Baltimore’s office market.

Analysts at Marcus & Millichap project the office market will create positive absorption by the end of the year, even with an increase in the amount of office space delivered.

While those same researchers expect vacancy to increase by 40 basis points to 13.7% overall, they also project rents to increase by 2.4%, reaching a metro average of $22.70 per SF.