Baltimore AMERICAS Market Beat Industrial Q42011

8/3/2019 Baltimore AMERICAS Market Beat Industrial Q42011

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ECONOMIC OVERVIEW

The national unemployment rate, according to

the Bureau of Labor Statistics, was 8.5% in

December of 2011. Despite the almost one

percentage point decrease in the national

unemployment rate from last year and growth

in the manufacturing sector, employment stability and the general

health of the economy remained concerning for consumers.

Marylands preliminary unemployment rate stood at 6.9% in

November 2011, 1.6 percentage points below the national rate.

CONSTRUCTION PROJECTS UNDERWAY IN 2011At year-end 2011, the Baltimore industrial market held a total of 1.3

million square feet (msf) of warehouse/distribution projects in the

construction pipeline. The two projects, 521 A Chelsea Road and

4000 Principio Parkway East (Bldg 2), located in the 1-95 North

Corridor are expected to deliver by year-end 2012. Adjacent to the

Bobs Discount Furniture space at 511 Chelsea Road in Harford

County, the 692,000-square foot (sf) 521 A Chelsea Road sat fully

available in the fourth quarter as no preleasing activity occurred. The

class A speculative project is expected to complete construction in

the second quarter of 2012. The build-to-suit project at 4000

Principio Parkway East (Bldg 2) was preleased by Restoration

Hardware, Inc. as part of its 1.2 msf 2011 lease transaction at the siteand is expected to deliver by the fourth quarter of 2012.

STRONG LEASING AND POSITIVE ABSORPTION

Year-to-date leasing activity, at 5.9 msf, decreased 10.1% from year-

end 2010 to year-end 2011 as some tenants, like Kohls Corporation

at the 602,250-sf 1701 Trimble Road, purchased product rather than

leasing it. Top new lease transactions in 2011 included: the 1.2-msf

Restoration Hardware, Inc. lease at 4000 Principio Parkway East (Bldg

1&2), the 300,000-sf Life Sciences Logistics, LLC lease at 8901

Snowden River Parkway and the 161,415-sf A&S Trucking lease at

5003 Holabird Avenue. Restoration Hardware will occupy its

600,000-sf space at Building 1 of 4000 Principio Parkway East during

the first quarter of 2012 and move into its remaining 600,000 sf upon

the completion of Building 2 in the fourth quarter.

Year-to-date overall net absorption was positive at 965,055 sf in the

fourth quarter as the overall vacancy rate decreased 0.7 percentage

points from year-end 2010 to year-end 2011. The Baltimore-

Washington Corridors overall net absorption was positive at 779,906

sf by year-end 2011 due to strong new leasing activity and significant

tenant move-ins in Howard County. Notable 2011 tenant

occupancies in the Baltimore industrial market were: Victory

Packagings 193,800-sf occupancy at 7605 Dorsey Road, Northeastern

Supply, Incs 172,000-sf occupancy at 504 Advantage Way and

General Services Administrations (GSA) 153,700-sf occupancy at 4

Center Drive.

OUTLOOK

The Baltimore industrial market is expected to improve in 2012 as

vacancy rates will steadily decline and absorption is expected to be

positive by mid-year 2012. Significant tenant movements in 2012

include: Restoration Hardwares occupancy of 600,000 sf at 4000

Principio Parkway East, Life Sciences Logistics, LLC occupancy of

300,000 sf at 8901 Snowden River Parkway and Metro Logisticss

352,850-sf move-out at 7629 Gambrills Cove Road. Metro Logistics

will downsize in the market as Life Sciences Logistics, LLC assumes its

former GSA vaccination contract and moves into 8901 Snowden

River Parkway during the first half of 2012. Asking rental rates areexpected to rise modestly in 2012 as leasing activity remains healthy

in the Baltimore-Washington and I-95 North Corridors.

STATS ON THE GO

4Q10 4Q11 Y-O-Y

CHANGE

12 MONTH

FORECAST

Overall Vacancy 11.3% 10.6% -0.7pp

Direct Asking Rents (psf/yr) $4.96 $4.93 -0.6%

YTD Leasing Activity (sf) 6,619,130 5,948,192 -10.1%

OVERALL ACTIVITY

DIRECT RENTAL VS. VACANCY RATES

10.6

5.9 5.46.6 5.9

6.8

4.02.3

3.24.8

2007 2008 2009 2010 2011 YTD

msf

LEASING ACTIVITY SALES ACTIVITY

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

2007 2008 2009 2010 4Q11

psf/yr

DIRECT NET RENTAL RATE OVERALL VACANCY RATE

Q4 2011BALTIMORE, MD

INDUSTRIAL SNAPSHOTMARKETBEAT

A Cushman & Wakefield Research Publication


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Cushman & Wakefield of Maryland, Inc.500 E Pratt Street, Suite 500Baltimore, MD 21202

www.cushmanwakefield.com/knowledge

The market terms and definitions in this report are based on NAIOP standards.

No warranty or representation, express or implied, is made to the accuracy or completeness of theinformation contained herein, and same is submitted s ubject to errors, omissions, change of price, rental orother conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.

2012 Cushman & Wakefield, Inc. All rights reserved.

BALTIMORE-WASHINGTON CORRIDOR :HOWARD COUNTY

The overall vacancy rates for flex and warehouse/distribution product

in Howard County by year-end 2011 were 8.7% and 14.7%,

respectively. The flex market saw little movement in 2011 as its

overall vacancy rate increased 0.1 percentage point from year-end

2010 to year-end 2011. Notable tenant movements included: Dunn

Floorings 34,448-sf move-in at 8260 Preston Court and Chaimson

Food Brokerages 25,000-sf move-out from 6822 Oak Hall Lane. The

warehouse/distribution market, unlike the flex market, was fairly

active in 2011 as its overall vacancy rate decreased almost twopercentage points from year-end 2010 to year-end 2011. The decline

in the overall vacancy rate was primarily due to the occupancies of

Victory Packaging and Dade Paper at 7605 Dorsey Road.

By year-end 2011, the warehouse/distribution year-to-date overall net

absorption in Howard County was positive at 453,098 sf. 7605

Dorsey Run Road accounted for the largest 2011 tenant move-ins as

Victory Packaging took occupancy of 193,800 sf and Dade Paper took

occupancy of 127,000 sf. Victory Packaging consolidated its

operations in the market as it vacated its former premises at 1349

and 1353 Charwood Road, in Anne Arundel County, in exchange for

space at 7605 Dorsey Run Road in the first quarter. Dade Papers

occupancy also resulted in positive absorption for Howard County asit relocated from Capitol Heights, MD in the second quarter. Other

notable tenant occupancies included: the 67,620-sf Bell Nurseries

move-in at 7111 Troy Hill during the first quarter, the 50,400-sf

Ciena Corp. move-in at 6650 Business Parkway during the second

quarter and the 61,530-sf Pro-Build move-in at 10650 Riggs Hill Road

during the fourth quarter.

OVERALL ABSORPTION

BALTIMORE-WASHINGTON CORRIDOR:ANNE ARUNDEL COUNTY

In the fourth quarter, direct weighted average asking rental rates for

flex and warehouse/distribution product were $10.22 per square foot

(psf) net and $5.23 psf net. The flex direct weighted average asking

rental rate increased 6.1% from year-end 2010 to year-end 2011.

Asking rental rates for warehouse/distribution product, however,

were fairly flat from the fourth quarter of 2010 to fourth quarter of

2011. Asking rental rates for blocks of warehouse/distribution space

greater than 100,000 sf typically ranged from $4.00 to $6.00 psf net.

Expected to be physically vacant in the second quarter of 2012, the352,850-sf Metro Logisticss space at 7629 Gambrills Cove Road was

available for lease at an asking rental rate of $5.70 psf net in the

fourth quarter.

DIRECT RENTAL RATES

The year-to-date leasing activity in the fourth quarter for Anne

Arundel County stood at 1.0 msf. From the fourth quarter of 2010 to

the fourth quarter of 2011, new leasing activity decreased almost

25.0%. Despite the contraction in leasing activity, the market

remained healthy as its year-to-date overall net absorption was

positive at 110,181 sf. Significant lease transactions in 2011 were:

Fabrication Designs, Inc.s (FDI) 153,000-sf lease at 7463 New Ridge

Road, Downtown Locker Rooms 140,000-sf lease at 1300 Mercedes

Drive and CEVA Freight LLCs 108,000-sf renewal at 350 WinmeyerAvenue. FDI moved into 153,000 sf at 7463 New Ridge Road in the

fourth quarter from 5622 Lafayette Place in Hyattsville, MD. In the

first quarter of 2012, Downtown Locker Room is expected to take

occupancy at 1300 Mercedes Drive when it vacates approximately

40,000-50,000 sf at 7465 Candlewood Road to support its corporate

expansion plans.

OVERALL OCCUPIER ACTIVITY LEASING ACTIVITY

-0.2 0.0 -0.3

0.0 0.1

-0.3

-1.1

-0.4

0.1

0.5

2007 2008 2009 2010 2011 YTD

m

sf

Flex W/D

$13.7

5

$13.7

0

$12.4

9

$9.6

3

$10.2

2

$6.6

5

$6.1

8

$5.4

0

$5.2

1

$5.2

3

$0.00

$3.00

$6.00

$9.00

$12.00

$15.00

2007 2008 2009 2010 4Q11

psf/yr

Flex W/D

2.4

1.3

0.6

1.41.0

2007 2008 2009 2010 2011 YTD

msf

OVERALL VACANCY RATES

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 4Q11Flex W/D


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I-95 NORTH CORRIDOR:HARFORD COUNTY

Overall vacancy rates in Harford County improved in the fourth

quarter as it continued to decline from year-end 2010 to year-end

2011. The flex and warehouse/distribution overall vacancy rates stood

at 8.7% and 12.0%, respectively, at year-end 2011. The overall

vacancy rate for warehouse/distribution product decreased 4.5

percentage points from the fourth quarter of 2010 to fourth quarter

of 2011 due to tenant occupancies such as Northeastern Supply, Inc.

at 504 Advantage Way and Sephora USA, Inc. at 4611 Mercedes

Drive. Vacancy rates are expected to increase by mid-year 2012,despite the 59,852-sf Bizerba Label Solutions, Inc. move-in at 1804

Fashion Court, due to the construction delivery of the 692,000-sf 521

A Chelsea Road.

The year-to-date overall net absorption in Harford County for

warehouse/distribution product totaled 226,450 sf by year-end 2011.

This was an improvement from year-end 2010 as the year-to-date

overall net absorption was negative at 74,971 sf. The positive overall

net absorption in 2011 was driven by Sephora USA Inc.s occupancy

at 4611 Mercedes Drive and Northeastern Supply Inc.s occupancy at

504 Advantage Way. In the second quarter, Northeastern Supply

moved into 172,000 sf at 504 Advantage Way from 2203 Lakeside

Boulevard in Harford County. Sephoras occupancy of 70,133 sf at4611 Mercedes Drive during the fourth quarter was a market

expansion for the firm and therefore, resulted in positive net

absorption for Harford County. In the first half of 2012, Bizerba Label

Solutions is expected to move into 59,852 sf at 1804 Fashion Court

from approximately 40,000 sf at 105 Industry Lane and therefore,

expected to result in little change to the markets net absorption.

OVERALL ABSORPTION

I-95 NORTH CORRIDOR:BALTIMORE COUNTY EAST

At year-end 2011, the total overall available space for flex and

warehouse/distribution product was 0.9 msf and 6.2 msf, respectively

Total overall available warehouse/distribution space increased 12.2%

from year-end 2010 to year-end 2011. Notable blocks of space which

came on the market in 2011 were: Henry Bath Inc.s former 277,822-

sf space at 1200 South Newkirk Road and Terminal Corp.s former

200,000-sf space at 2010 Reservoir Road. Direct weighted average

asking rental rates for warehouse/distribution space in the fourth

quarter stood at $4.11 psf net. Total overall available flex spaceincreased 15.0% from the fourth quarter of 2010 to the fourth

quarter of 2011. Its direct weighted average asking rental rate was

$7.15 psf net at year-end 2011.

OVERALL AVAILABLE SPACE TRENDS

A total of 600,737 sf of investor and user sales transactions were

executed by year-end 2011 in the Baltimore County East market.

User sales accounted for 52.6% of total 2011 sales transactions.

Significant user sales transactions included: PPC Lubricants purchase

of the 90,243-sf 801 North Kresson Street and Maritime Applied

Physics Corp.s purchase of the 34,832-sf 1850-1870 Frankfurst Ave.

PPC Lubricant bought 801 North Kresson Street from Southern

Supply Company, Inc. for $3.4 million, or $37.68 psf. Investor sales

comprised 47.4% of year-to-date sales activity and included thefollowing transactions: the 99,841-sf purchase of 6801 Eastern

Avenue by Crossroads Eastern Avenue LLC and the 218,215-sf

purchase of 10001 Franklin Square Drive by Industrial Income Trust.

Industrial Income Trust purchased 10001 Franklin Square Drive from

Corporate Office Properties for $16.2 million in a portfolio sale,

which included the adjacent land parcel.

2011 YTD SALES ACTIVITY BY BUYER TYPE

0.1 0.1 0.0

-0.1

0.1

0.0

0.7

0.3

-0.1

0.2

2007 2008 2009 2010 2011 YTD

msf

Flex W/D

0.7 0.6 0.8 0.8 0.9

5.4 5.4

4.1

5.56.2

2007 2008 2009 2010 2011 YTD

msf

Flex W/D

52.6%47.4% Investor

User

OVERALL VACANCY RATES

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 4Q11

Flex W/D


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BALTIMORE, MD

SUBMARKET PROPERTY

TYPE

INVENTORY OVERALL

VACANCY

RATE

YTD LEASING

ACTIVITY

YTD USER

SALES

ACTIVITY

UNDER

CONSTRUCTION

YTD

CONSTRUCTION

COMPLETIONS

YTD DIRECT

NET ABSORPTION

YTD OVERALL

NET ABSORPTION

DIRECT WEIGH

AVERAGE

RENTAL R

Howard County Flex 5,079,035 8.7% 217,383 0 0 0 79,027 86,979 $8

W/D 28,760,992 14.7% 1,348,957 42,155 0 0 405,372 453,098 $4

Anne Arundel County Flex 9,188,198 9.6% 212,420 23,876 0 0 81,378 95,506 $10

W/D 21,293,374 10.6% 825,057 65,000 0 0 14,675 14,675 $5

Baltimore City/County - Southwest Flex 3,080,135 15.5% 153,045 0 0 0 6,403 6,403 $5

W/D 20,553,028 12.3% 505,749 377,484 0 0 123,245 123,245 $3

BALTIMORE-WASHINGTON CORRIDOR Flex 17,347,368 10.4% 582,848 23,876 0 0 166,808 188,888 $8

W/D 70,607,394 12.8% 2,679,763 484,639 0 0 543,292 591,018 $4

Total 87,954,762 12.3% 3,262,611 508,515 0 0 710,100 779,906 $5

Harford County Flex 1,896,080 8.7% 64,732 0 0 0 53,282 50,782 $8

W/D 17,937,439 12.0% 222,281 638,530 692,000 0 232,950 226,450 $4

Cecil County Flex 0 0.0% 0 0 0 0 0 0 N

W/D 8,442,466 14.1% 1,411,200 64,695 600,000 0 167,200 155,200 $3

Baltimore County East Flex 4,952,409 14.6% 86,953 0 0 0 (8,330) (8,330) $7

W/D 41,779,646 7.8% 482,211 284,896 0 0 17,004 (287,618) $4

I-95 NORTH CORRIDOR Flex 6,848,489 13.0% 151,685 0 0 0 44,952 42,452 $7

W/D 68,159,551 9.7% 2,115,692 988,121 1,292,000 0 417,154 94,032 $4

Total 75,008,040 10.0% 2,267,377 988,121 1,292,000 0 462,106 136,484 $4

Baltimore CountyNorth/West Flex 9,802,701 9.0% 259,088 21,000 0 0 45,932 44,246 $9

W/D 8,481,747 4.0% 63,156 0 0 0 (57,448) (57,448) $4

Baltimore City Flex 1,520,889 12.0% 10,614 0 0 0 9,612 9,612 $8

W/D 6,054,579 8.8% 57,500 82,000 0 0 66,530 66,530 $2

Carroll County Flex 0 0.0% 0 0 0 0 0 0 N

W/D 7,249,210 7.8% 27,846 18,104 0 0 (14,275) (14,275) $4

BELTWAY SUBMARKETS Flex 11,323,590 9.4% 269,702 21,000 0 0 55,544 53,858 $8

W/D 21,785,536 6.6% 148,502 100,104 0 0 (5,193) (5,193) $4

Total 33,109,126 7.6% 418,204 121,104 0 0 50,351 48,665 $5

TOTAL FLEX FLEX 35,519,447 10.6% 1,004,235 44,876 0 0 267,304 285,198 $8.

TOTAL W/D W/D 160,552,481 10.6% 4,943,957 1,572,864 1,292,000 0 955,253 679,857 $4.

BALTIMORE TOTAL TOTAL 196,071,928 10.6% 5,948,192 1,617,740 1,292,000 0 1,222,557 965,055 $4.

* RENTAL RATES REFLECT ASKING $PSF/YEAR **OVERALL RATES INCLUDE SUBLEASE SPACE IN STATISTICAL CALCULATIONS ***RENEWALSNOT INCLUDED IN YTD LEASING ACTIVITY

MARKET HIGHLIGHTS

SIGNIFICANT 2011 LEASE TRANSACTIONS SUBMARKET TENANT/BUYER PROPERTY TYPE SQUARE F

4000 Principio Parkway East (Bldg 1 & 2) Cecil County Restoration Hardware, Inc. W/D 1,200,0

8901 Snowden River Parkway Howard County Life Science Logistics, LLC W/D 300,0

5003 Holabird Avenue Baltimore County East A&S Trucking, Inc. W/D 161,4

2000 Washington Boulevard Baltimore City/County - Southwest EMD Sales W/D 153,2

7463 New Ridge Rd Anne Arundel County Fabrication Designs, Inc. W/D 153,0

SIGNIFICANT 2011 SALE TRANSACTIONS SUBMARKET BUYER PURCHASE PRICE SQUARE F

ProLogis Portfolio Sale Harford County & Baltimore County East SK Realty Management N/A 769,4

7605 Dorsey Run Road Howard County LaSalle Investment Management, Inc. $50,250,000.00 612,9SIGNIFICANT 2011 CONSTRUCTION COMPLETIONS SUBMARKET MAJOR TENANT COMPLETION DATE SQUARE F

N/A

SIGNIFICANT PROJECTS UNDER CONSTRUCTION SUBMARKET MAJOR TENANT COMPLETION DATE SQUARE F

521 A Chelsea Road Harford County N/A 2Q12 692,0

4000 Principio Parkway East (Bldg 2) Cecil County Restoration Hardware, Inc. 4Q12 600,0

Documents

Baltimore AMERICAS Market Beat Industrial Q42011