Office Market:

• For the third straight quarter, the Baltimore region’s office market experienced negative net absorption. Overall absorption in the Baltimore metro area during the fourth quarter totaled negative 164,000 SF, compared to negative 280,000 in the third quarter. Overall absorption for all of 2018 totaled negative 549,000 SF, significantly worse than the negative 14,000 SF total in 2017.

• Sagamore Development—a joint venture of Plank Industries and Weller Development—announced the creation of “Cyber Town USA” at the massive Port Covington development in South Baltimore. The goal of Cyber Town is to creative a central hub for innovation in the Baltimore metro area, especially for the region’s booming cybersecurity industry. Three tenants—AllegisCyber, DataTribe, and Evergreen Advisors—have already been announced.

• The direct vacancy rate for all classes of office space in the Baltimore metro area (including both single-tenant and multi-tenant properties) is 12.0% as of December 2018, up 30 basis points from the third quarter and up 110 basis points from the fourth quarter of 2017.

• The Baltimore office market endured a mild period of decline in 2018, after a long positive streak in prior years. We believe that the setback is temporary, and 2019 is poised to be a year of improvement if healthy economic conditions hold. We expect a return to positive absorption and a leveling off of vacancy in the coming year.

Economy:

Job growth in the Baltimore metro area picked up again in the fourth quarter after see-sawing for much of the year. With 25,400 new jobs added during the 12 months ended October 2018—the highest annual total since March 2016, and well above the long-term average of 11,700—the region’s economy is poised to finish the year strong.

In not-so-positive news, two large national employers announced this fall that they would be closing facilities in the Baltimore area. Most notably, General Motors announced that it would close its transmission assembly plant in White Marsh, Baltimore Co. laying off 310 workers in the process.

The Baltimore metro area economy is poised for additional growth in the year ahead, but likely at a slower pace. The private sector will continue to be the primary engine of economic growth. We expect job growth, housing demand, and consumer spending to all remain positive next year.

FOURTH QUARTER 2018 FIGURES

Net absorption: 894,000 SF during Q4 2018; Including 1.67 million SF of positive Class A space absorption.

Direct vacancy rate (single and multi-tenant): 12.7% at Q4 2018, down 10 basis points from 12.8% at Q3 2018, and up 50 basis points from one year prior.

Under Construction:771,500SF.

Effective rents: Up 1.9% since Q4 2017.

Investment sales:$155.4million ($190/SF) in Q4 2018, compared to $124.9million ($112/SF) SFin Q4 2017.

Delta Associates, the research affiliate of Transwestern, is a firm of experienced professionals which has been providing consulting and subscription data services to the commercial real estate industry for over 35 years.

Please visit our website at DeltaAssociates.com and follow us on Twitter (@DeltaAssociates) for additional market insight and information about our services.