With federal leasing stalled by gridlock in Congress, the regional office market is listing and analysts don’t expect any short-term swell in demand as the threat of huge budget cuts looms in January, according to the latest quarterly reports.
“Because of the threat of federal budget cuts and larger economic challenges, the office market throughout the greater D.C. region remains flat,” John Germano, executive managing director of CBRE’s Washington-Baltimore region, said in a news release. “Defense contractors in particular are postponing signing leases until the election is over and defense budget decisions affecting employment and space requirements are made.”
Although the Maryland suburbs showed growth in office jobs during the quarter, CBRE reported “that has yet to translate into the office real estate market.” The vacancy rate held at 15 percent for the third straight quarter.
In one hopeful sign, CBRE noted that 12409 Milestone Center Drive in Germantown was delivered, with 88 percent of the 162,000-square-foot building preleased to DRT/Boeing.
But the company reported that the suburban Maryland office market experienced low levels of overall leasing activity in the third quarter, with nine renewals in the Top 16 leases in excess of 10,000 square feet. Little of the action is coming from the private sector, with the top four deals all signed by federal tenants.
Jones Lang Lasalle painted an overall dismal picture, as net absorption for the suburban Maryland market for the quarter was negative 214,105 square feet, dragging the year further into the red to date at negative 241,188 square feet. There likely is more than that to come with more than 2 million square feet either under construction or renovation.
“Do not expect the usual suspects — the federal government, contractors and law firms — to get the Washington region market out of this slump. Organic growth is going to have to come from another source,” JLL managing director Creighton Armstrong warned. “This is, and will remain, a tenant’s market for the time being — particularly for tenants seeking under 25,000 square feet. The lack of a long-term federal budget, combined with approaching sequestration and ‘fiscal-cliff,’ will perpetuate the current malaise, no matter who is in the White House or Congress come November.”
Beltsville industrial complex sells for $27M
Industrial property giant Prologis bought a two-building distribution complex in Beltsville for $27 million, according to NAI KLNB, which was the sole broker in the deal.
Beltsville Express sold 11730 and 11750 Baltimore Avenue, a 235,000-square-foot facility to Prologis Targeted U.S. Logistics Fund. The property is 100 percent leased to Federal Express.
Completed in 1999, the buildings provide immediate access to the Capital Beltway by way of the Md. 212/Ammendale Road exit. The complex covers about 20 percent of the 42-acre site, which offers the opportunity to construct additional development for outside storage or warehouse space.
“The buyer was attracted by the building’s occupancy by a strong creditworthy tenant, combined with its functionality and excellent location and highway access,” Chris Kubler, NAI’s director of investment sales, said in a news release. “These factors positioned 11730 and 11750 Baltimore Avenue as, arguably, the most desirable industrial building in the Capital Beltway marketplace.”
Owings Mills Hyatt sold in $87.4 portfolio deal
Summit Hotel Properties of Sioux Falls, S.D., announced that it will buy the Hyatt Place in Owings Mills as part of its acquisition of an eight-hotel portfolio totaling 1,043 guestrooms.
The 123-room property north of Baltimore was completed in 2000 and traded for $11.1 million in 2001. The hotel, at 4730 Painters Mill Road, was sold by a group of Hyatt affiliates, along with three properties in Colorado, two in Arizona and one each in Illinois and Texas.
Abrams to break ground at Columbia Gateway
Abrams Development Group will break ground on the final two office buildings in Eastridge Corporate Center in Columbia Gateway, according to Cassidy Turley, the broker on the project.
The Columbia developer will deliver a pair of 57,000-square-foot class A buildings at 6821 and 6831 Benjamin Franklin Drive. Together with 6811 Benjamin Franklin Drive, completed in 2008, the project totals 170,000 square feet.
The first building is 90 percent leased, while the second building is fully leased to Rohde & Swartz, a German maker of wireless communications and broadcast test and measurement equipment. The company is relocating its North American headquarters from another Columbia site.
The third building will be available for lease next summer.
“We have completed 200,000 square feet of leases in Columbia Gateway during the past 12 months,” Andy Andrews, Cassidy managing director and principal, said in a news release. “We are very encouraged with the opportunity to deliver 57,000 square feet of new, class A office space in 2013.”
Lab equipment firm moves to Frederick
Lab Recyclers, which refurbishes and sells used laboratory equipment, has moved to Frederick from Gaithersburg.
The company, founded in 1997, moved to gain more space in a better location, according to Heather Gramm of the Frederick Department of Economic Development. Its new headquarters, at 801 N. East St., has about 16,000 square feet, versus 10,000 square in its former location.
The company has six employees, and will add to its workforce if business grows, Gramm said.
Lab Recyclers plans a grand opening Friday from 3 to 5 p.m., with an open house and tours.
KBE Building awarded area construction projects
KBE Building of Columbia announced that it was awarded four construction projects in Beltsville, Rockville and Washington.
The $3.5 million St. Mary’s Place project in Beltsville will include construction of a main 7,500-square-foot retail shell and additional space for two smaller tenants. Construction is to begin this month, with completion slated for February.
In Rockville, KBE will build a new TD Bank branch for $1 million as part of the redevelopment of the Montrose Crossing shopping center. Construction of the 2,700-square-foot bank also is slated for completion in February. KBE recently completed the overall renovation of the 130,000-square-foot Montrose Crossing retail center at the intersection of Rockville Pike and Randolph Road in Rockville.
The project included renovating the former Levitz building for a 60,441-square-foot Bob's Discount Furniture store and 24,890 square feet of retail space for A.C. Moore, the crafts retailer. KBE also managed construction of the Nebel Street Extension, a new roadway along the existing railroad.
St. John starts last two flex buildings at Maple Lawn
St. John Properties of Baltimore broke ground last week on a 42,620-square-foot building in the Maple Lawn Corporate Center, its final flex property in the Howard County office park.
The start of work on the single-story building, at 11850 W. Market Place, follows the groundbreaking last month on 8135 Maple Lawn Blvd., a four-story, 138,000-square-foot class A office building. Sitting off Md. 29 in Fulton, Maple Lawn is a 600-acre mixed-use business community with 388,000 square feet of existing office space. St. John’s joint venture with Greenebaum Enterprises has development rights for an additional 800,000 square feet of office space.
“We continue to experience an extremely high demand for flexible office space among users looking for a strategic position within the Baltimore-Washington, D.C., corridor region,” Jerry Wit, St. John’s senior vice president for marketing, said in a news release. “The leasing pace for each of our Maple Lawn R&D/flex buildings has exceeded our expectations.”
Manekin chosen to lease properties in Frederick, Baltimore
Manekin announced that it received the leasing assignment for Gold Mile Plaza, a 13,500-square-foot retail center in Frederick.
Owned by LBCMT 2007-C# Patrick Street, the property is at 1046 W. Patrick St. There is 4,000 square feet available in the strip mall, where tenants include Starbucks, Sprint, FedEx Office and Subway.
Manekin’s brokerage team also was selected for office leasing at a three-building complex in the Village of Cross Keys, an 18-acre, 293,000-square-foot mixed-use development off Falls Road in Baltimore’s Roland Park neighborhood.
General Growth Properties announced in June that it sold the office and retail center for $25 million to Ashkenazy Acquisition of New York.
The nearly 200,000-square-foot office space includes Village Square I and Village Square II at 5100 Falls Road, and Quadrangle at 2 Hamill Road. About 42,000 square feet of space is available to lease.
The complex is served by a Radisson Hotel, a 30,000-square-foot tennis club and more than 74,000 square feet of retail space, with a mix of national and local tenants such as Ann Taylor and Donna’s Coffee Bar.
Ashkenazy is considering potential redevelopment plans for the office and retail components.
COPT records $46M loss as it pulls out of Philadelphia
Corporate Office Properties Trust announced that it will write off a non-cash loss of $46 million as it pulls out of properties it owns in the greater Philadelphia region.
The Columbia company said the three buildings and land no longer meet its strategic investment criteria. The properties in Blue Bell include a fully occupied building of 219,065 square feet, a 218,653-square-foot building that is 99.4 percent occupied and a 113,291-square-foot building undergoing redevelopment that is 39 percent occupied, according to the company’s most recent annual report. The holdings also include eight acres in Blue Bell with an estimated 722,000 developable square feet.
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