Office demand in the Washington DC market picked up over the course of 2017. Lease rates increased, and recent 5-year statistics show growth and stability in the market. Suburban Maryland’s office demand is keeping pace throughout Prince George’s County, Montgomery County, and Anne Arundel County. These markets are all offering attractive lease rates and absorption. New office construction has increased in the DC market, with 2018 construction forecast to outpace other U.S. metro areas. The Prince George’s County Office Market is expected to achieve positive net absorption in 2018 after adding of several new office buildings scheduled to deliver in the fourth quarter. The Washington DC market’s office demand is supported by a vibrant economy and a labor pool of well-diversified government and non-federal employers. Office sales volumes began to rebound in 2017 and are forecast to continue in 2018. Federal government facilities and related leases have contributed to the stability of the market, which gives office investors and landlords confidence.
2017 saw a variety of industrial demand levels – investment sales reached new heights, while leasing slowed for the first time in three years.
The Prince George’s County industrial market experienced an increase in vacancy, going up to 7.6% as opposed to last year’s 6.5%. However, there were two large Class A leases signed in 2017.
Despite the slowdown in leasing activity, industrial demand from investors has been strong. Pricing has reached an all-time high, and scarcity of industrial-zoned land will keep the market tight.
In 2018, we expect to see increased industrial demand in leasing. Additionally, evidence shows sales values for industrial should reach over $150 per square foot.
Prince George’s County office vacancy reduced by over half a million square feet leased in the last six months!
Leasing of vacant space achieves over 357,000 square feet in the first quarter 2017 – the highest quarterly absorption for the last 10 years. Recently signed leases and new leasing activity indicates that Prince George’s County is poised for continued significant growth in office leasing in 2017.
The Washington DC area office market includes the District of Columbia and adjacent suburban submarkets in Maryland and Virginia. The Washington DC area office market consists of about 470 million square feet in 10,051 buildings. Net absorption for the overall Washington Area was positive 2,754,849 square feet for the first quarter 2017. The Washington Area vacancy decreased from 14.6% to 14%.
Prince George’s County office space net absorption of vacant space was positive 357,767 square feet in the first quarter 2017. Annual rental rates for Prince George’s County office space have increased steadily almost every quarter for the last five quarters with the first quarter 2017 rate per square foot of averaging in the mid-twenty dollar range on a full service basis.
Over the course of 2016, office vacancy declined in Prince George’s County and in turn, average quoted rental rates have risen steadily.
It was a year for the Prince George’s County office market. Office vacancy declined steadily every quarter, from 19.2% at the beginning of 2016 to 18.8% by year end. Based on 5-year averages and known construction activity, office vacancy is expected to drop to 17% by the end of 2017. Average full service rental rates increased in 2016, from $20.96 in Q1 to $21.43 in Q4.
A total of 114 office sale transactions were completed in 2016. These transactions totaled 2,597,862 square feet and $168,786,687 in sales volume. Many new owners plan on investing substantial capital into their assets to retain and attract tenants. For leasing, over 153 full service leases were completed, representing 530,820 square feet. One of the largest lease deals of 2016 was with the growing tech-education company, 2U Inc. They are in the process of relocating into 252,950 square feet they leased at 4900 Harkins Road in the Lanham/New Carrollton area.
Industrial vacancy rates are at an all-time low of 6.7% in Prince George’s County.
High demand has contributed to low industrial vacancy rates. Approx. 880,000 square feet of new industrial space was delivered within the county in 2016. In addition, another 500,000 square feet is in the pipeline for 2017 delivery.
These positive trends have created a competitive Class A industrial market. Due to demand, average rental rates is at a high of $7.79 per square foot on a triple net basis. We expect rental rates to push higher in 2017 as industrial-zoned ground becomes increasingly scarce and the supply of vacant space continues to diminish.
As a result of these trends, we expect nearly all of Prince George’s County’s Class A industrial space will be absorbed within the next two years.
For additional details and transaction info, click here to view the full industrial market report.
Prince George’s County has seen industrial property demand rise over the past few quarters. Our mid-year 2016 industrial market report examines this demand and shows growth for the county’s industrial market.
Prince George’s County’s location makes it ideal for serving the District of Columbia, suburban Maryland, and northern Virginia markets. This makes it highly attractive to storage and distribution businesses. There has been a significant increase in industrial property demand and we have seen ample new construction to meet this growing demand. Two new buildings totaling 275,000 square feet were delivered at Cabin Branch Distribution Center in 2015. We have already seen 225,000 square feet absorbed, primarily by the United States Government. Overall vacancy in Prince George’s County held at 8.1% during the first two quarters of 2016, even with the additional supply added of new buildings.
Also contributing to the industrial property demand in the county are attractive rental rates compared to the neighboring jurisdictions of the District of Columbia and northern Virginia. While rental rates in those neighboring markets are averaging north of $9 per square foot, tenants can still lease class A product in Prince George’s County for the mid $7’s per square foot NNN.
Lance Schwarz and Peter Burleigh of NAI Michael provide the full details and numbers behind the industrial market’s first two quarters of 2016.
Our 2016 mid-year office market report indicates that there is an office market activity boost in Prince George’s County during the first two quarters of the year.
Over the first half of the year, increased interest in Prince George’s County contributed to an office market activity boost. The County’s office market is showing signs of growth, while the Washington DC office market has been slowing down. One reason for this is the attractive rental rates in Prince George’s County. The average office rental rate is approximately $30 less in Prince George’s County than in the District of Columbia.
Additionally, there has been an increase in the number of transactions in the county – 79 full service office leases and 18 office sales over 15,000 square feet have been completed. As we’ve recently reported, this is part of the dramatic increase in office investment sales in suburban Maryland. We expect sales of multi-tenanted office buildings to ultimately benefit office tenants. There will be a push to upgrade and renovate properties to more modern standards. This means that some buildings will finally receive long-awaited upgrades, both cosmetic and in the systems that support their workplace environments.
The Prince George’s County 2015 industrial market grew, with many new facilities delivered and new tenants coming into the market. We review the 2015 industrial market and look ahead to what 2016 will hold for the county.
The 2015 industrial market was rife with new inventory in Prince George’s County. Over 900,000 SF of new, class A facilities came to the market, including Cabin Branch Industrial Park, Andrews Federal Campus and Collington Park. Tenants are starting to make the switch from class B and C space into better class A space. Also, we are seeing many northern Virginia tenants moving into Prince George’s County, which has more affordable rental rates. The increase in demand led to positive tenant absorption and a 5.5% increase in rental rates on average.
In Prince George’s County, there are seven primary class A industrial projects which could be viable for a large industrial user. These include SteepleChase 95, Cabin Branch Industrial Park, Andrews Federal Campus, the Brick Yard, and Collington Park. This class A space will be in high demand during 2016 and is expected to be fully absorbed over the next 36 months.
Interested in reading more about the 2015 industrial market in Prince George’s County? Check out the full report here.
By Lance Schwarz & Peter Burleigh
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