Total square feet leased is up 90% over same period in 2016!
This year is showing surprising strength in filling vacancies that have lingered for years in Frederick County, Maryland.
Consider the following statistics:
- The number of transactions in the first 6 months of 2017 popped by 60% over the same six months of 2016.
- Total square feet of commercial real estate space leased increased by 90% over the same period last year.
- Average size of space leased increased by 20% over last year.
Within the four property type categories of flex space, industrial warehouse, office and retail, the former two continued to display exceptionally positive signs. In each category, it was the larger transactions that made the difference. Only ten of the 117 inked leasing deals reached or surpassed 10,000 square feet.
There was only 1 out of the 16 deals made that exceeded 10,000 square feet. For that, Ruppert Properties can thank Ashleigh Kiggans, Senior Associate at MacRo, Ltd. CIAN Technologies took 10,761 feet at 5330 Spectrum Drive in the formerly troubled 270 Technology Park, which is now in the hands of new owners who have brought new life and capital improvements to the project.
There was a total of 67,000 square feet of flex space that was leased at an average triple net rate of $7.60 per square foot for a unit size of 4,200 square feet, which dwarfed the median size of 1,675.
There were three deals that exceeded 10,000 square feet out of the 17 deals in this category. Stanford Trading Center I inked two deals: one for 15,000 and another for 10,200 square feet at an average NNN rate of around $6.75 per square foot. In addition, a 21,000 square foot deal was made at 7618 Hayward Road for about $7.50 NNN. These three transactions boosted warehouse leasing from the 59,000 square feet leased in the first half of 2016 to this year’s 79,500.
The median unit size was 2,500 square feet, but the average unit was 4,675 square feet, which was a slight dip from the first half of 2016’s 4,900 square feet. The good news was likely due to limited inventory, the average lease rate jumped from $7.28 NNN to $8.82 NNN per square foot, and the average lease term rose from 2 to 3 years.
Some of those big vacant office buildings scattered around Frederick are beginning to have some life pumped back into them this year. Three large transactions highlighted the 54 deals made in the first 180 days of 2017:
- Ever since the trade show giant Experient vacated 42,800 square feet in the Galaxy Building at 1888-1890 N Market Street a few years ago, the owners went into a mad dash to find a new tenant for a building that once boasted a B Class rating. It was the Doctor of Real Estate (aka Swami Nathan) who, after determining that their tenancy was not worth the effort, finally said farewell to the Maryland Department of Social Services last year. It was Galaxy that won the RFP bid to house the MDSS at a full-service rate of around $19.50 per square foot.
- The former Bechtel headquarters in the Westview Office Park landed a nice deal in Building #5 where it leased 14,850 square feet to Rooster Bio.
- 110 Thomas Johnson Drive inked a 33,300 square foot tenant at a stated full service rate of $23.00 per square foot.
Overall the office market leased up 195,810 square feet of space compared to the first half of last year’s 116,715 square feet.
While the average NNN lease rate dropped from last term’s $13.30 to an even $12.00 per square foot, the average unit size leased grew from 3,200 to 3,600 square feet. The impact of those large transactions pushed the median unit size down to 2,427 square feet. Lease terms increased in this category, as well, from last period’s 3.8 to 4.6 years.
The first half of the last two years have shown lackluster retail performances with 50,575 square feet leased in 2015, and a mere 20,000 in 2016. There were two buildings that captured 3 tenants in nearly 90,000 square feet of the 161,000 figure for this year’s period.
- The long-awaited Weis Market in Brunswick Crossing was finally reported to have taken 56,200 square feet.
- Local CRE broker “Tony C” earned a shout out in this post by delivering some good news to the Nathan’s with two transactions totaling over 32,000 square feet at 911-917 N East Street.
The total of 30 inked retail leasing deals averaged a NNN lease rate of $15.43 per square foot compared to a higher figure of $19.55 in the first half of last year. Another drop was seen in the lease terms for the comparative periods with 4.13 falling from 5.1 years. The average size unit leased jumped from last period’s 2,335 to 5,365 square feet. But the median unit square footage was a mere 2,509.
All in all, the leasing results from the first half of 2017 are more than encouraging. Yes, there were a handful of big deals that helped boost the 265,728 square feet for the same period last year to over one half million this time, but the plague of high vacancies in Frederick County Commercial Real Estate has put the market into what appears to be a steady period of recovery.
[Author’s note: all data used in this post was gathered from statistics provided by CoStar – www.costar.com]
Rocky Mackintosh is President of MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He has been an active member of the Frederick, Maryland community for over four decades. He has served as chairman of the board of Frederick Memorial Hospital and as a member of the Frederick County Charter Board from 2010 to 2012. He currently serves as chairman of the board of Frederick Mutual Insurance Company. Established in 1843, it is one of the longest enduring businesses in Frederick County.