Q4 2014 Office Market Report Shows the Market is Poised for Significant Change
NAI Michael has just released its fourth quarter office market report for Prince George’s County, covering everything from vacancy and rental rates to absorption trends and construction in the area. Though the year end numbers indicate a lot of vacancy, market conditions continue to be favorable for both buyers and sellers.
Office vacancy in Prince George’s County was at 19.2% at the end of 2014, which was a 0.8% decrease from the beginning of the year. The Q4 vacancy is higher than the Washington, DC central business district (10.4%) and suburban Maryland/northern Virginia (16.6%) respectively. Currently, there are about 18 blocks of space available in Prince George’s County – over 50,000 square feet. Tenants looking for a larger space should be able to find attractive rates at this level of vacancy.
In the fourth quarter of 2014, the average annual rental rate for the existing office space in Prince George’s County was approximately $20.49 per square foot on a full service basis. “Full service” means that all maintenance and utilities for the leased space are included within the rate, although there are occasionally some exceptions.
A net amount of 77,471 square feet of vacant office space was added to the market in the fourth quarter of 2014. Based on statistical data, and if the current trend continues, it will take a few more years for the vacancy market to stabilize from this absorption. However, there are a few prospective tenants in the market that could totally change current trends and absorb available space very quickly, including the FBI, which is currently debating a move to a new headquarters in either Prince George’s County, Maryland or Fairfax County, Virginia.
NAI Michael has observed a moderate increase in construction costs over the past few years. The increase is in part due to the rising cost of construction material (steel, asphalt, concrete, etc.) and varying labor/work force costs. And while developers, landlords and tenants are concerned with increasing costs; NAI Michael does not believe the increases are a cause for concern. It’s a great time for office building owners to sell, but it is very challenging for developers of new buildings to fund the construction of new buildings.
The Q4 market statistics dictate it’s prudent to examine the office market sooner rather than later. Read the full report from NAI Michael to learn more about the 2014 Q4 office market in Prince George’s County, Maryland.