NAI KLNB Baltimore Metropolitan Region desks and more social spaces outfitted with entertainment and team-building equipment such as foosball tables and inter-active screens. Nap rooms designed to re-energize hard-working employees are in vogue. Flexible and accessible work spaces are the new normal. Real estate trends and economic issues expected to shape the 2015 other governmental agencies. Areas of employment strength in Baltimore include the hospitality and leisure categories (look no further than the opening of the downtown casino), professional and business services, and technology sectors. Companies, in general, are re-discovering the advantages of locating or expanding into the city, particularly among millennials. 24/7. Office workers can now access files remotely and work collaboratively with colleagues from nywhere in the world. Millennials crave less office
reduce department overlap, which affects real estate usage. Urgent-care facilities are cropping up at every street corner—soon, some will deal with dental emergencies only. GBMC’s new Family Care Associates medical building was designed with no waiting room or private physician offices but, instead, features fourteen wellness rooms. Each is fully-equipped so patients can receive the entire spectrum of care without moving to a different location. “Huddle spaces” provide areas for meetings and patient communication.
www.marejournal.com
10C— February 27 - March 12, 2015 — Commercial Office Spotlight — Mid Atlantic Real Estate Journal
I n early November, voters throughout Maryland issued a resounding “no
normal. MOB mentality comes back in healthcare and medical industry. The Medical Office Build- ing (MOB) marketplace bears watching, as a newMOBmen- tality starts to emerge. There are several reasons for this shift, led by the reshaping of the entire healthcare industry caused by the measured roll- out of the Affordable Care Act (ObamaCare). Providers—especially hos- pitals—are re-evaluating op- erational practices in search of efficiencies to improve the de- livery and quality of services. Some are opening new off-site locations offering surgi-center capabilities or services target- ing the elderly population. Hospitals and private practice group are consolidating to reduce department overlap, which affects real estate us- age. Urgent-care facilities are cropping up at every street corner—soon, some will deal with dental emergencies only. GBMC’s new Family Care As- sociates medical building was designed with no waiting room or private physician offices but, instead, features four- teen wellness rooms. Each is fully-equipped so patients can receive the entire spectrum of care without moving to a dif- ferent location. “Huddle spac- es” provide areas for meetings and patient communication. Investment Overview The typical office building sale included some kind of “upside” scenario, offering the opportunity for the buyer to create value through leasing vacant space. While Baltimore is perceived as a “core” indus- trial market, it is generally not a target for nearly as many institutional investors (while Washington, DC is). Thus, the sales are skewed toward more opportunistic buyers. The aver- age sale price psf of Baltimore office buildings has not in- creased over the past five years, while we have seen a slow but steady increase in average sale price on the industrial side over the past three years. Medical office continues to remain an exception, with buyers of medical buildings on the campus of hospitals and immediately adjacent transacting at record prices even in Baltimore. We expect a frothy sales market across both product types in Balti- more in 2015. n
confidence” vote for the Demo c r a t - i c r e g i me charged with the day-to- day manage- ment of our State , and instal led
Andy Georgelakos
Larry Hogan as our next Governor, replete with his long-term experience as a com- mercial real estate developer and broker. The “pro-business” platform that marked his underdog campaign should be the signal of a more business friendly environment, as we compete with neighbors to the south (Virginia) and north (Penn- sylvania and Delaware) to attract new companies to the region and retain our existing business base. Possibly, but not so fast. The Republican Governor will need to contend with a $900 million budget deficit that is expected to expand to nearly $1 billion in 2020, as well as a hostile Democratic legislature interested in lining his fiscal path to recovery with red- taped potholes. The early success of the Governor, along with his new Cabinet team, is among the most interesting and com- pelling story lines of 2015, especially during the inau- gural legislative session. The administration’s ability to “right the financial ship” and adopt a clear “pro-business” mentality for our State, will have significant impact on the fortunes of local businesses and the commercial real estate industry alike. In a sign of what might be “good things to come,” Mary- land Comptroller Peter Fran- chot and Hogan toured several small businesses along the Eastern Shore of Maryland during the holiday shopping season. According to The Star Democrat, Franchot said to Hogan, “You’re a business- man. You understand the im- portance of these businesses, of a stable tax environment and reigning in spending. Frankly, spending is definitely a bit out of control. I’m looking forward to a positive relation- ship.” Coupled with this political scenario, the NAI KLNB team has analyzed the Baltimore-
Office Market Statistics Capital Region
4
6011 University Boulevard | Suite 350 | Ellicott City, MD 21043 | Main 410 290 1110 | naiklnb.com
C lass a & B V aCanCy R ates & a BsoRption Frederick County – Office 12/3/14
Prince George’s County – Office
12/3/14
Vacancy Rate – Class A
Vacancy Rate – Class A
Montgomery County – Office
12/4/14
Montgomery County – Office Vacancy – Class A
12/4/14
Prince George’s County – Office
12/3/14
Frederick County – Office
12/3/14
FREDERICK COUNTY
MONTGOMERY COUNTY
Vacancy Rate – Class A PRIN E GEORGE’S COUNTY
Vacancy – Class A
Vacancy Rate – Class A
Class A Vacancy Rate (%)
Class A Vacancy Rate (%)
Class A Vacancy Rate (%)
Vacancy Rate – Class B
Vacancy Rate – Class B
Direct
Direct
Direct
Sublet
Sublet
Sublet
Vacancy – Class B
Vacancy – Class B
lass B Vacancy Rate (%)
Class B Vacancy Rate (%)
lass B Vacancy Rate (%)
Vacancy Rate – Class B
Vacancy Rate – Class B
Montgomery County – Office
12/4/14
Prince George’s County – Office
12/3/14
Frederick County – Office
12/4/14
Absorption
Direct
Sublet
Direct
Sublet
Direct
Sublet
Absorption
Absorption
Absorption (SF)
Absorption (SF)
Absorption (SF)
Class A
Class B
Class A
Class B
Class A
Class B
END OF YEAR 2014
# OF BUILDINGS
TOTAL VACANT (SF)
TOTAL VACANCY RATE %
NET ABSORPTION
laughable, replaced by the all- access 24/7. Office workers can now access files remotely and work collaboratively with col- leagues from anywhere in the world. Millennials crave less office desks and more social spaces outfitted with entertain- ment and team-building equip- ment such as foosball tables and inter-active screens. Nap rooms designed to re-energize hard-working employees are in vogue. Flexible and acces- sible work spaces are the new CONSTRUCTION COMPLETIONS (SF) $22.09 20,909 $20.99 56,100 $30.57 1,023,545 $25.27 0 $21.35 0 $20.39 0 5 RENTAL RATE PSF (AVERAGE)
RBA
Washington, D.C. commercial real estate marketplace to present four real estate trends and economic issues that we expect to make a difference in 2015. NAI KLNB profession- als stand ready to assist your company in the formulation and execution of plans that ad- dress any real estate strategy. Our analysis is as follows: Technology and younger workforce altering office space layouts and usage. 10’ x 10’ office cubicles aren’t FREDERICK COUNTY Total Class A 25 Total Class B 107 MONTGOMERY COUNTY Total Class A 208 Total Class B 503 PRINCE GEORGE’S COUNTY Total Class A 66 Total Class B 302
dead yet, but they seem head- ed towards life-support. The proliferation of smart phones, tablets, web video conferences, document sharing and white boards - coupled with the col- laborative style of working among the expanding millen- nial population - is translating to more conference rooms and shared office spaces (or no space at all). People work differently in today’s modern world – and at different times. 9-5 has become 447,521 15.3% 502,436 15.4% 5,623,746 15.3% 4,550,845 2,196,652 2,457,250 21.0%
2,923,899 3,273,058
33,789 26,626
36,697,489 27,309,147
484,652
16.7% (313,380)
8,967,549 11,854,002
24.5% (393,709)
45,020
6011 University Boulevard | Suite 350 | Ellicott City, MD 21043 | Main 410 290 1110 | naiklnb.com
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