Baltimore IND 2Q2011
4
BALTIMORE 2Q11 Overview Consumers remained wary in the quarter as consumer confidence dropped in June 2011 due to weak employment growth numbers and job security. In May 2011, Maryland posted a preliminary unemployment rate of 6.8%, according to the Bureau of Labor Statistics. Job creation was limited in the state as approximately 13,000 jobs were lost. Declining gasoline prices are anticipated to increase consumer spending, however, employment and budgetary concerns continue to slow down the economic recovery. Uptick in Sales Activity Sales activity in the Baltimore industrial market, at 2.6 million square feet (msf), increased 35.8% from mid-year 2010 to mid-year 2011. Investors executed 1.7 msf of sales transactions by the second quarter of 2011 and accounted for 65.4% of sales activity. A total of 1.4 msf of sales transactions closed in the I-95 North Corridor as the year-to-date market saw both the largest investor and user sales transactions: Kohl’s purchase of 1701 Trimble Road and Bentall Kennedy’s purchase of 1900 Clark Road. Although the largest volume of sales transactions occurred in the I-95 North Corridor, the Baltimore-Washington Corridor remained a prime investment sales market due to location, high quality product and stable leasing activity. At mid-year 2011, the highest price per square foot (psf) warehouse/distribution sales transactions in the Baltimore-Washington Corridor were: American Realty Capital Trust’s $39.0 million or $312.00 psf purchase of 4835 Hollins Ferry Road, LaSalle Investment Management Inc’s $50.2 million or $81.99 psf purchase of 7605 Dorsey Run Road and Terreno Realty Corporation’s $7.5 million or $75.76 psf of 8730 Bollman Place*. 4835 Hollins Ferry Road and 8730 Bollman Place sold with a 100.0% occupancy rate as Federal Express Corporation occupies 4835 Hollins Ferry Road and Maines Paper & Food Service occupies 8730 Bollman Place. 7605 Dorsey Run Road held an availability rate of 18.6% as only 114,000 sf was available for rent following move-ins by Victory Packaging and Dade Paper. Positive Absorption in the Market From year-end 2010 to mid-year 2011, the overall vacancy rate, at 10.7%, decreased 0.6 percentage points. Year-to-date overall net absorption was 793,831 square feet (sf) in the second quarter of 2011. The only market to show negative absorption was the Beltway Submarkets which posted negative overall net absorption of 24,525 sf at mid-year 2011 due to a lack of market activity. Tenant move-ins were strong in the first quarter of 2011 as Victory Packaging moved into 193,800 sf at 7605 Dorsey Run Road and Delsey Luggage moved into 186,093 sf at 6090 Dorsey Road. Other notable tenant movements included: the 87,000-sf TKO Installations move-in at 10001 Franklin Square Drive, the 76,800-sf GSA move-in at 4 Center Drive and the 67,620-sf Bell Nurseries move-in at 7111 Troy Hill Drive. Tenant move-ins remained steady in the second quarter of 2011 as Dade Paper relocated from Capitol Heights and moved into 127,000 sf at 7605 Dorsey Run Road and Northeastern Supply moved into 172,00 sf at 504 Advantage Way. Tenants opting for expansion space in the second quarter of 2011 included Herrs Chips’s 57,600-sf expansion at 4 Center Drive and Barton Cotton‘s 40,000-sf expansion at 3000 Waterview Avenue. Aside from the movement in warehouse/distribution product, the flex market was active as well as Dunn Flooring moved into 34,448 sf at 8260 Preston Court. Outlook Further declines in vacancy rates and positive absorption are expected for the Baltimore industrial market by year-end 2011. Tenants move-ins anticipated in the third quarter of 2011 include: the 153,000-sf DoD contractor move-in at 7463 New Ridge Road*, the 67,000-sf Oceaneering expansion at 6090 Dorsey Road* and the 64,233-sf Thrift Books move-in at 4734-4756 Trident Court. The Baltimore-Washington Corridor will continue to perform strongly in investment sales and leasing activity. Bulk warehouse/distribution space availability at a direct asking rental rate of $4.37 psf is expected to keep the I- 95 North Corridor an ideal location for large block lease executions and user sales, in particular. *Closed post-production of statistics User Sales vs. Investor Sales W/D Direct Rental vs. W/D Direct Vacancy Rate Stats on the Go 0.0 1.0 2.0 3.0 4.0 5.0 6.0 2007 2008 2009 2010 2Q11 m s f User Sales Investor Sales 0.0% 4.0% 8.0% 12.0% 16.0% $0.00 $2.00 $4.00 $6.00 $8.00 2007 2008 2009 2010 2Q11 p s f / y r Rental Rate Vacancy Rate 2Q10 2Q11 Y-o-Y Change 12 month Forecast Overall Vacancy 10.9% 10.7% -0.2 pp W/D Direct Asking Rents $5.00 $4.97 -0.6% YTD Leasing Activity (msf) 2.9 2.3 -19.3%
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BALTIMORE
2Q11
OverviewConsumers remained wary in the quarter as consumer confidence dropped in
June 2011 due to weak employment growth numbers and job security. In May
2011, Maryland posted a preliminary unemployment rate of 6.8%, according
to the Bureau of Labor Statistics. Job creation was limited in the state as
approximately 13,000 jobs were lost. Declining gasoline prices are anticipated
to increase consumer spending, however, employment and budgetary concerns
continue to slow down the economic recovery.
Uptick in Sales ActivitySales activity in the Baltimore industrial market, at 2.6 million square feet
(msf), increased 35.8% from mid-year 2010 to mid-year 2011. Investors
executed 1.7 msf of sales transactions by the second quarter of 2011 and
accounted for 65.4% of sales activity. A total of 1.4 msf of sales transactions
closed in the I-95 North Corridor as the year-to-date market saw both the
largest investor and user sales transactions: Kohl’s purchase of 1701 Trimble
Road and Bentall Kennedy’s purchase of 1900 Clark Road.
Although the largest volume of sales transactions occurred in the I-95 North
Corridor, the Baltimore-Washington Corridor remained a prime investment
sales market due to location, high quality product and stable leasing activity.
At mid-year 2011, the highest price per square foot (psf)
warehouse/distribution sales transactions in the Baltimore-Washington
Corridor were: American Realty Capital Trust’s $39.0 million or $312.00 psf
purchase of 4835 Hollins Ferry Road, LaSalle Investment Management Inc’s
$50.2 million or $81.99 psf purchase of 7605 Dorsey Run Road and Terreno
Realty Corporation’s $7.5 million or $75.76 psf of 8730 Bollman Place*. 4835
Hollins Ferry Road and 8730 Bollman Place sold with a 100.0% occupancy
rate as Federal Express Corporation occupies 4835 Hollins Ferry Road and
Maines Paper & Food Service occupies 8730 Bollman Place. 7605 Dorsey
Run Road held an availability rate of 18.6% as only 114,000 sf was available
for rent following move-ins by Victory Packaging and Dade Paper.
Positive Absorption in the MarketFrom year-end 2010 to mid-year 2011, the overall vacancy rate, at 10.7%,
decreased 0.6 percentage points. Year-to-date overall net absorption was
793,831 square feet (sf) in the second quarter of 2011. The only market to
show negative absorption was the Beltway Submarkets which posted negative
overall net absorption of 24,525 sf at mid-year 2011 due to a lack of market
activity. Tenant move-ins were strong in the first quarter of 2011 as Victory
Packaging moved into 193,800 sf at 7605 Dorsey Run Road and Delsey
Luggage moved into 186,093 sf at 6090 Dorsey Road. Other notable tenant
movements included: the 87,000-sf TKO Installations move-in at 10001
Franklin Square Drive, the 76,800-sf GSA move-in at 4 Center Drive and the
67,620-sf Bell Nurseries move-in at 7111 Troy Hill Drive.
Tenant move-ins remained steady in the second quarter of 2011 as Dade Paper
relocated from Capitol Heights and moved into 127,000 sf at 7605 Dorsey Run
Road and Northeastern Supply moved into 172,00 sf at 504 Advantage Way.
Tenants opting for expansion space in the second quarter of 2011 included
Herrs Chips’s 57,600-sf expansion at 4 Center Drive and Barton Cotton‘s
40,000-sf expansion at 3000 Waterview Avenue. Aside from the movement in
warehouse/distribution product, the flex market was active as well as Dunn
Flooring moved into 34,448 sf at 8260 Preston Court.
Outlook Further declines in vacancy rates and positive absorption are expected for the
Baltimore industrial market by year-end 2011. Tenants move-ins anticipated in
the third quarter of 2011 include: the 153,000-sf DoD contractor move-in at
7463 New Ridge Road*, the 67,000-sf Oceaneering expansion at 6090 Dorsey
Road* and the 64,233-sf Thrift Books move-in at 4734-4756 Trident Court.
The Baltimore-Washington Corridor will continue to perform strongly in
investment sales and leasing activity. Bulk warehouse/distribution space
availability at a direct asking rental rate of $4.37 psf is expected to keep the I-
95 North Corridor an ideal location for large block lease executions and user
sales, in particular.
*Closed post-production of statistics
User Sales vs.Investor Sales
W/D Direct Rental vs.W/D Direct Vacancy RateStats on the Go
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2007 2008 2009 2010 2Q11
m s f
User Sales Investor Sales
0.0%
4.0%
8.0%
12.0%
16.0%
$0.00
$2.00
$4.00
$6.00
$8.00
2007 2008 2009 2010 2Q11
p s f / y r
Rental Rate Vacancy Rate
2Q10 2Q11 Y-o-Y
Change12 monthForecast
OverallVacancy
10.9% 10.7% -0.2 pp
W/D DirectAsking Rents
$5.00 $4.97 -0.6%
YTD LeasingActivity (msf)
2.9 2.3 -19.3%
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BALTIMOREINDUSTRIAL REPORT
2Q11
* 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 subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listingconditions imposed by our principals. © 2011 Cushman & Wakefield, Inc. All rights reserved.
Cushman & Wakefield of Maryland, Inc.
500 E. Pratt Street, Suite 500, Baltimore, MD 21202 (410) 685-9595 www.cushmanwakefield.com
BALTIMORE-WASHINGTONCORRIDOR
• Year-to-date leasing activity was the strongest in the Baltimore-Washington
Corridor as a total of 1.6 msf in new lease transactions were closed by mid-
year 2011. Flex and warehouse/distribution year-to-date leasing activity
figures stood at 0.4 msf and 1.2 msf, respectively. Howard County, at 0.8
msf, outperformed both Anne Arundel and Baltimore City/County –
Southwest as BDR Express leased 113,000 sf at 7079 Oakland Mill Road
and Von Paris leased 72,000 sf at 8750 Larkin Road.
BELTWAY SUBMARKETS
• The direct asking rental rates for flex and warehouse/distribution product in
the Beltway submarkets stood at $8.26 psf and $4.98 psf, respectively. The
Baltimore County – Northwest submarket, at $6.14 psf, held the highest
warehouse/distribution direct asking rental rate for the market in the second
quarter of 2011. Asking rental rates for the market are expected to remain
flat for the remainder of 2011 as the market posted a negative overall net
absorption rate of 24,525 sf.
0.0
0.2
0.4
0.6
0.8
Howard County Anne Arundel County Baltimore City/County -Southwest
m s f
I-95 NORTHCORRIDOR
• A total of 1.5 msf in sales transactions closed in the I-95 North Corridor by
the second quarter of 2011. The first quarter, at 1.4 msf, saw the largest
volume of transactions especially in Harford County. The largest user and
investor sale at mid-year 2011 were: the 602,250-sf Kohl’s purchase of 1701
Trimble Road for $20.5 million or $34.04 psf and the 612,768-sf Bentall
Kennedy’s purchase of 1900 Clark Road for $26.4 million or $43.08 psf.
BALTIMORE MARKET
• From year-end 2010 to mid-year 2011, the warehouse/distribution overallvacancy rate, at 10.4%, dropped 1.2 percentage points. Vacancy rates for
warehouse/distribution product continued to decline as it peaked in the
fourth quarter of 2008 at 12.6%. Although recovery has been slow in the
market, reductions in vacancy rates show signs of improvement and growth.
Flex product struggled more than warehouse/distribution product as its
overall vacancy rate, at 11.9%, increased 1.9 percentage points from year-
end 2010 to mid-year 2011. However, its current overall vacancy rate stood
1.3 percentage points lower than its peak of 13.2% at year-end 2009.
2011 YTD SALES ACTIVITY BY
TRANSACTION TYPE
YTD LEASING ACTIVITY BY
PROPERTY TYPE
Flex W/D
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
Baltimore County -North/West
Baltimore City Carroll County
p s f / y r
DIRECT WTD AVERAGE
ASKING RENTAL RATE (PSF)
Flex W/D
N / A
User Inves tor
7.0%
9.0%
11.0%
13.0%
15.0%
2007 2008 2009 2010 2011 YTD
OVERALL VACANCY RATES
Flex W/D
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BALTIMOREINDUSTRIAL REPORT
2Q11
Market/Submarket Statistics
Ho ward Co unty F lex 5,079,035 10.7% 195,751 0 0 0 18,827 26,779 $ 8.61
W/D 28,760,992 14.9% 667,177 42,155 0 0 467,239 482,865 $ 4.68
Anne Arunde l Co unty F lex 9,188,198 10.8% 101,211 23,867 0 0 4,613 4,613 $ 10.87
W/D 21,336,702 11.4% 303,183 0 0 0 (138,396) (138,396) $ 5.27
Baltimo re City/Co unty - S o uthwes t F lex 3,080,135 17.2% 85,873 0 0 0 (45,365) (45,365) $ 5.97
W/D 20,553,028 10.9% 230,056 55,000 0 0 104,174 104,174 $ 3.89
B a lt im o re - Wa s hin g t o n C o rrido r F le x 17 ,3 4 7 ,3 6 8 11.9 % 4 3 2 ,6 2 6 2 3 ,8 6 7 0 0 ( 2 1,9 2 5 ) ( 13 ,9 7 3 ) $ 8 .8 4
W/ D 7 0 ,6 5 0 ,7 2 2 12 .7 % 1,2 0 0 ,4 16 9 7 ,15 5 0 0 4 3 3 ,0 17 4 4 8 ,6 4 3 $ 4 .6 6
To t a l 8 7 ,9 9 8 ,0 9 0 12 .5 % 1,6 3 3 ,0 4 2 12 1,0 2 2 0 0 4 11,0 9 2 4 3 4 ,6 7 0 $ 5 .0 5
Harfo rd Co unty F lex 1,896,080 10.7% 32,670 0 0 0 16,537 14,037 $ 7.79
W/D 17,919,001 12.3% 71,300 602,250 0 0 162,462 162,462 $ 4.73
Cecil Co unty F lex N/A N/A N/A N/A N/A N/A N/A N/A N/A
W/D 8,442,466 14.0% 134,400 64,695 0 0 134,300 134,300 $ 3.94
Ba ltimo re Co unty Eas t F lex 4,952,409 14.8% 24,927 0 0 0 (18,715) (18,715) $ 7.59
W/D 41,850,290 7.0% 186,788 15,467 0 0 118,402 91,602 $ 4.25
I-9 5 N o rth C o rrido r F le x 6 ,8 4 8 ,4 8 9 13 .7 % 5 7 ,5 9 7 0 0 0 (2 ,17 8 ) (4 ,6 7 8 ) $ 7 .6 4W/ D 6 8 ,2 11,7 5 7 9 .3 % 3 9 2 ,4 8 8 6 8 2 ,4 12 0 0 4 15 ,16 4 3 8 8 ,3 6 4 $ 4 .3 7
T o t a l 7 5 ,0 6 0 ,2 4 6 9 .7 % 4 5 0 ,0 8 5 6 8 2 ,4 12 0 0 4 12 ,9 8 6 3 8 3 ,6 8 6 $ 4 .5 0
Baltimo re Co unty - No rth/Wes t F lex 9,802,701 10.7% 167,184 25,940 0 0 (48,980) (43,880) $ 8.36
W/D 8,521,747 3.7% 38,627 0 0 0 (34,877) (34,877) $ 6.14
Ba ltimo re City F lex 1,520,889 12.0% 10,614 0 0 0 10,562 10,562 $ 7.96
W/D 6,054,579 9.9% 51,000 82,000 0 0 (2,420) (2,420) $ 4.39
Carro ll Co unty F lex N/A N/A N/A N/A N/A N/A N/A N/A N/A
W/D 7,249,210 7.0% 26,610 0 0 0 46,090 46,090 $ 4.54
B e ltwa y S ubm a rke ts F le x 11,3 2 3 ,5 9 0 10 .9 % 14 0 ,2 4 7 2 5 ,9 4 0 0 0 ( 3 8 ,4 18 ) (3 3 ,3 18 ) $ 8 .2 6
W/ D 2 1,8 2 5 ,5 3 6 6.5 % 116 ,2 3 7 8 2 ,0 0 0 0 0 8 ,7 9 3 8 ,7 9 3 $ 4 .9 8
T o t a l 3 3 ,14 9 ,12 6 8 .0 % 2 5 6 ,4 8 4 10 7 ,9 4 0 0 0 ( 2 9 ,6 2 5 ) ( 2 4 ,5 2 5 ) $ 6 .0 1
0 0
To ta l F le x F le x 3 5 ,5 19 ,4 4 7 11.9 % 6 3 0 ,4 7 0 4 9 ,8 0 7 0 0 ( 6 2 ,5 2 1) ( 5 1,9 6 9 ) $ 8 .4 8
To ta l Wa re ho us e a nd D is tributio n W/ D 16 0 ,6 8 8 ,0 15 10 .4 % 1,7 0 9 ,14 1 8 6 1,5 6 7 0 0 8 56 ,9 7 4 8 4 5 ,8 0 0 $ 4 .5 9
B a lt im o re To ta l To t a l 19 6 ,2 0 7 ,4 6 2 10 .7 % 2 ,3 3 9 ,6 11 9 11,3 7 4 0 0 7 9 4 ,4 5 3 7 9 3 ,8 3 1 $ 4 .9 7
W/D = Warehous e/Distribution
D ire c t
We ighte d
Av e rage Ne t
Re nta l Ra te ***
YT D
Dire c t N e t
Ab s o rptio n
YT D
Ove rall Ne t
Ab s o rptio n*
*
S ubma rke tB uilding
Type
YT D
Le as ing
A c tivit y****
Inv e nto ry
Ove rall
Vac anc y
Ra te **
YT D
Us e r
S ale s
Ac t ivity
Unde r
Co n s truc tio n
YT D
Co ns truc tio n
Co m ple tio ns
**Overall rates include s ublease spa ce in sta tistical calculations ***Rent al Rates reflect a sking $ psf/year ****Rene wals - no t included in YTD Leasing Activity
Market HighlightsSIGNIFICANT 2Q11 LEASE TRANSACTIONSBUILDING SUBMARKET TENANT SQUARE FEET PROPERTY TYPE
7463 New Ridge Road Anne Arundel County Undisclosed Tenant (Government Contractor)* 153,000 Warehouse/Distribution
4734-4756 Trident Court Baltimore City/County - Southwest Thrift Books 64,233 Warehouse/Distribution
6090 Dorsey Road Anne Arundel County Oceaneering* 67,000 Warehouse/Distribution
1353 Charwood Road Anne Arundel County Cory Home Delivery 60,000 Warehouse/Distribution
4 Center Drive Cecil County Herr's Chips 57,600 Warehouse/Distribution
SIGNIFICANT 2Q11 SALE TRANSACTIONSBUILDING SUBMARKET BUYER SQUARE FEET PURCHASE PRICE
7605 Dorsey Run Rd Howard County LaSalle Investment Management Inc 612,900 $50,250,000
4835 Hollins Ferry Rd Baltimore City/County - Southwest American Realty Capital Trust, Inc 125,000 $39,000,000
8730 Bollman Place Howard County Terreno Realty Corporation* 88,135 $7,500,000
SIGNIFICANT 2Q11 CONSTRUCTION COMPLETIONSBUILDING SUBMARKET MAJOR TENANT SQUARE FEET COMPLETION DATE
N/A
SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATIONBUILDING SUBMARKET MAJOR TENANT SQUARE FEET COMPLETION DATE
N/A
*Closed Post Production of Statistics
* 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 subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listingconditions imposed by our principals. © 2011 Cushman & Wakefield, Inc. All rights reserved.
Cushman & Wakefield of Maryland, Inc.
500 E. Pratt Street, Suite 500, Baltimore, MD 21202 (410) 685-9595 www.cushmanwakefield.com
