The following summaries are regarding the first quarter 2011 office, apartment and retail real estate markets in the Suburban Maryland area, as reported by REIS.
Office
The office market this year was braced in large part by the significant federal sector leasing activity in 2010. Studley Inc. reported that Suburban Maryland “saw a steady increase in leasing as firms continued to make opportunistic deals, taking advantage of favorable conditions.” Furthermore, the 2010 88,000-square-foot occupancy loss paled in comparison to the 2.3 million square feet of negative net absorption charged against the market over the previous two years.
Despite net absorption at positive 18,000 square feet for the first two months of 2011, the vacancy rate edged up to 15.6% according to preliminary first quarter data. The average asking rent slipped 0.1% to $27.90 psf. Reis reports two projects with a combined total of approximately 1 million square feet currently under construction metro-wide for delivery in 2012. Fourth quarter’s negative absorption setbacks will be followed by substantial positive activity in 2011 as absorption takes the lead over same-year new supply.
Apartment
Strong demand for Suburban Maryland apartment real estate in 2010, combined with reduced construction completion, has helped break the trend of rising vacancy rates which had been increasing in the apartment market since 2007. Rent growth reflects this favorable turn. Running essentially flat in 2009 (a strong performance relative to the national trend), asking and effective averages posted respective increases of 3.1% and 3.6% in 2010 to close the year at $1,303 and $1,241 per month (each average increased by 0.5% during fourth quarter).
While still positive, net absorption for this year is dependent more directly on job growth and expected to be slower. Preliminary data for first quarter 2011, in fact, shows a 10-basis-point vacancy rate decline and a 0.5% increase in the average asking rent to $1,309 per month.
Retail
Retail vacancies in the Suburban Maryland community and neighborhood center market increased 540 basis points from the 3.5% low recorded for year-end 2007, but the 8.9% rate that ended 2010 remained 200 basis points below the national rate for this product category. According to preliminary data, the rate closed first quarter 2011 down 10 additional points, but a firm downward trend is not yet in place.
Rents will remain weak in 2011, albeit with smaller losses. Preliminary first quarter data puts the asking average down another 0.6% for $25.11 psf. Another round of loss in average rents—1.3% and 1.9%, asking and effective—is projected for the year. Rents should flatten in 2012 amid a slow descent in the vacancy rate.
The article above is from a report released by REIS.com last month. Read the complete Suburban Maryland April 2011 Report.