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    Office Market Snapshot: Suburban Maryland

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    Washington DC metro region still boasts one of the lowest unemployment rates in the nation. However, job losses in the Federal Government sector offset gains in private sector employment. Federal Government and government contractor tenants shed more than a million square feet of space during the first three months of 2014.

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    Office Market Snapshot: Suburban Maryland

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    Washington DC metro region still boasts one of the lowest unemployment rates in the nation. However, job losses in the Federal Government sector offset gains in private sector employment. Federal Government and government contractor tenants shed more than a million square feet of space during the first three months of 2014.

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    Washington DC metro region still boasts one of the lowest unemployment rates in the nation. However, job losses in the Federal Government sector offset gains in private sector employment. Federal Government and government contractor tenants shed more than a million square feet of space during the first three months of 2014.

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    136 views2 pages

    Office Market Snapshot: Suburban Maryland

    Uploaded by

    Anonymous Feglbx5
    Washington DC metro region still boasts one of the lowest unemployment rates in the nation. However, job losses in the Federal Government sector offset gains in private sector employment. Federal Government and government contractor tenants shed more than a million square feet of space during the first three months of 2014.

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    SUBURBAN MARYLAND

    Ofce Market Snapshot


    First Quarter 2014

    SUBURBAN MARYLAND OFFICE

    Economy
    Regarded as one of the strongest employment areas in the country, the
    Q1 14 2.52M 4.8% 6.7% 12-Month Forecast

    Economic Indicators
    Q1 13 DC Metro Employment DC Metro Unemployment U.S. Unemployment 2.50M 5.4% 7.7%

    Washington DC metro region still boasts one of the lowest unemployment rates in the nation among large metropolitan markets. The region posted an average unemployment rate of 4.8% for the three months ending January 2014. Specically, in Bethesda, Marylands portion of the statistical region, total nonfarm employment grew by 0.9% during the 12 months ending December 2013 over the same period in 2012. Thats a gain of nearly 5,300 jobs, and an increase over the 3,375 jobs added in 2012. As was the case elsewhere in the region, job losses in the Federal Government sector offset gains in private sector employment. Still, during the rst quarter of 2014 the Suburban Maryland ofce data make clear that the market is currently on standby.

    Market Indicators
    Q1 13 Overall Vacancy Net Absorption Under Construction Average Asking Rent 15.7% 459K 418K $26.38 Q1 14 17.4% (968K) 980K $26.11

    12-Month Forecast

    Market Overview
    Net Absorption/Asking Rent
    4Q TRAILING AVERAGE 1
    0.5 0 -0.5 -1 -1.5 2010 2011 2012 2013 Asking Rent, $ PSF Q1 14 Net Absorption, MSF $27 $27 $27 $26 $26 $26 $26

    An anticipated increase in large blocks of vacant space hit the Suburban Maryland ofce market hard in the rst quarter of 2014, and resulted in a new record-high vacancy rate of 17.4%. The market also registered a new record-low quarterly net absorption total of negative 968,000 square feet (sf), a consequence of the effort to freeze the federal real estate footprint and consolidate locations amid the spending cuts that went into effect early in 2013. Federal government and government contractor tenants, which occupy 36% of the ofce inventory (the largest share in the entire Washington region), shed more than a million square feet (msf) of space during the rst three months of 2014. In Montgomery County, Lockheed Martin gave back 290,000 sf in North Rockville, while in North Bethesda NCI consolidated its footprint leaving 154,000 sf vacant, and the NIH shed 150,000 sf. Other tenants vacating space included DRS Technologies (60,000 sf) and ASRC Aerospace Corporation (84,000 sf). Meanwhile in Prince Georges County, Computer Sciences Corporation (CSC) returned 325,000 sf. The delta between total available space and total vacant space fell for the rst time in four quarters, suggesting a more accurate depiction of market conditions.

    Overall Vacancy
    18.0% 17.5% 17.0% 16.5% 16.0% 15.5% 15.0% 14.5% 14.0% 13.5% 2010 2011 2012 2013 Q1 14 Historical Average = 15.6%

    Aside from a couple of notable-size renewals, the only bright spots in the Suburban Maryland market were new leases in Bethesda/Chevy Chase, and in Silver Spring where Holy Cross Health signed for 55,000 sf, taking some of Choice Hotels space that was vacated in the second quarter of 2013. An additional 1 msf of vacancies are expected to come online by year-end 2014, accompanied by declining rents.

    SUBURBAN MARYLAND

    Ofce Market Snapshot


    First Quarter 2014
    TOTAL BLDGS INVENTORY SUBLET VACANT TOTAL VACANT VACANCY RATE AVAILABILITY RATE CURRENT YTD UNDER AVERAGE ABSORPTION ABSORPTION CONSTRUCTION ASKING RENT

    Submarket
    Bethesda/Chevy Chase North Bethesda Rockville North Rockville Gaithersburg/Germantown Silver Spring Montgomery County Northern Central Southern Prince George's County 101 75 93 110 97 102 578 134 85 51 270 848 11,007,410 9,822,127 8,333,113 11,264,826 6,528,643 7,835,746 54,791,865 10,177,584 5,064,619 2,367,057 17,609,260 72,401,125 86,425 91,125 99,004 207,766 108,664 61,140 654,124 48,437 20,132 16,126 84,695 738,819 1,084,776 1,937,213 1,232,087 1,900,687 1,250,499 1,030,067 8,435,329 2,516,272 1,310,535 338,183 4,164,990 12,600,319 9.9% 19.7% 14.8% 16.9% 19.2% 13.1% 15.4% 24.7% 25.9% 14.3% 23.7% 17.4% 13.7% 24.5% 19.0% 22.2% 31.4% 17.2% 20.9% 29.1% 33.1% 21.5% 29.2% 22.9% (45,393) (283,647) 15,931 (302,819) (56,255) 58,586 (613,597) (72,630) (300,761) 18,963 (354,428) (968,025) (45,393) (283,647) 15,931 (302,819) (56,255) 58,586 (613,597) (72,630) (300,761) 18,963 (354,428) (968,025) 226,566 80,000 502,681 101,181 70,000 980,428 980,428 $36.60 $30.29 $29.24 $25.81 $23.79 $26.51 $28.57 $20.58 $21.01 $24.09 $21.15 $26.11

    TOTAL
    preliminary

    Key Lease Transactions 1Q 14


    PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET

    5404 Wisconsin Avenue 3311 Toledo Road 10720 Columbia Pike 20250 Century Boulevard 7701 Greenbelt Road

    134,000 104,000 54,000 45,000 39,000

    Microsoft GSA - Centers for Disease Control and Prevention (CDC) Holy Cross Health JDS Uniphase Corporation (JDSU) SGT

    Renewal Renewal Relet Relet Renewal

    Bethesda/Chevy Chase Northern PG County Silver Spring Germantown Northern PG County

    Key Sales Transactions 1Q 14


    PROPERTY SF SELLER/BUYER PRICE SUBMARKET

    11601 Landsdown Street 811 & 831 Russell Avenue/504,602, 620, 630 & 640 E Diamond Avenue/200 & 220 Giard Street 12420 Parklawn Drive 5630 Fishers Lane 18310 Montgomery Village Avenue

    358,440 391,255 93,014 55,728 123,689

    LCOR/USAA Real Estate Company/USA First Potomac Realty Trust/Finmarc Management, Inc. The JBG Companies/NGP V Management, LLC The JBG Companies/NGP V Management, LLC CWCapital Asset Management LLC/Bernstein Management

    $196,000,000 $33,000,000 $30,055,000 $18,550,000 $15,233,073

    North Bethesda Gaithersburg Rockville Rockville Gaithersburg

    About Cassidy Turley


    Cassidy Turley is a leading commercial real estate services provider with more than 4,000 professionals in more than 60 ofces nationwide. With headquarters in Washington, DC, the company represents a wide range of clientsfrom small businesses to Fortune 500 companies, from local non-prots to major institutions. The rm completed transactions valued at $25.8 billion in 2013, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 24,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate servicesincluding capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.

    Urmi Joshi
    Senior Research Analyst 2101 L Street, NW, Suite 700 Washington, DC 20037 Tel: 202.463.2100 Fax: 202.223.2989 Email: urmi.joshi@cassidyturley.com
    The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright 2014 Cassidy Turley. All rights reserved.

    www.cassidyturley.com | 2

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