Suburban Maryland 3Q12 Office Snapshot

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3Q Office Market Report

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Suburban Maryland 3Q12 Office Snapshot

  1. 1. Office Market Snapshot Suburban Maryland • Third Quarter • 2012 Market Tracker Vacancy Net Absorption Deliveries Asking Rent *Arrows = Current Qtr Trend 15.5% (39,000) SF 269,000 SF $26.28 FS Stagnant Summer Results in Continued Negative Growth Following two straight quarters of negative growth, the suburban Maryland office market continued to see sluggish activity during the summer months. Net demand for office space registered a negative 39,000 square feet during the third quarter of 2012, bringing the year-to-date net absorption total to a negative 118,000 square feet. That is a drastic difference from the positive 315,000 square feet of absorption posted during the first three quarters of 2011. The negative demand did not change the vacancy rate from the previous quarter allowing it to remain at 15.5%. Asking rents in suburban Maryland averaged $26.28, down 10 cents from the previous quarter and falling 38 cents from theSUBURBAN MARYLAND OFFICE third quarter 2011 rate.Economic Indicators Despite the negative absorption experienced in the third quarter, there were some bright spots, particularly in Montgomery County. In the largest renewal of the quarter, the GSA leased more than Q3 12 Q3 11 365,000 square feet for the National Institutes of Health (NIH) at 6701 and 6707 Democracy Plaza. The GSA also accounted for two other large renewal leases during the quarter – the FDA’s 100,500DC Metro Employment 2.5M 2.4M square feet at 1401 Rockville Pike and the National Institute of Allergy and Infectious Diseases’ (NIAID) 57,600 square feet at 10401 Fernwood Road. The most notable new lease signed during the thirdDC Metro Unemployment 5.5% 6.0% quarter was that for Child Trends, which leased 28,100 square feet at 7315 Wisconsin Avenue. Indeed, this lease transaction was not only the largest new lease signed during the quarter, but itself alone wasU.S. Unemployment 8.2% 9.7% a major contributor to the continued positive absorption experienced in Bethesda. Financial service firms such as Osprey Global, United Capital and Broad Oak Capital Partners signed leases this quarterU.S. CCI 65.64 50.26 in Bethesda as well. Outside of Bethesda, notable direct leases included FTI Consulting signing for 12,900 square feet at 1375 Piccard Drive and Core Source Technologies leasing 11,400 square feet at 20410 Century Boulevard. Net Absorption In addition to the two buildings scheduled to deliver in 2012 and 2013 (the Nuclear Regulatory Commission building and the National Cancer Institute building, respectively), there are several other 1,000 800 projects to monitor. The National Oceanic and Atmospheric Administration NOAA building in College 600 Park delivered in the third quarter. Furthermore, the new Digital Receiver Technology, Inc. facility inSquare Feet (000s) 400 200 Germantown is scheduled to deliver in the first quarter of 2013. Also, 7550 Wisconsin Avenue is 0 -200 under renovation, and the new Rockville Metro Plaza II at 121 Rockville Pike – where Choice Hotels -400 pre-leased 138,000 square feet – is currently under construction and expected to deliver in the -600 -800 second quarter of 2013. Lastly, Carr Properties recently secured financing for a 220,000 square-foot -1,000 office building on East West Highway in Bethesda. 2007 2008 2009 2010 2011 YTD 2012 Forecast • Landlords have eased tenant improvement requirements in the first three quarters of 2012 Vacancy Rate compared to the same time periods in 2010 and 2011. Look for tenants to continue to benefit from above average concession packages as long as leasing activity remains stagnant. • Bethesda/Chevy Chase will see continued leasing activity during otherwise slow quarters than in17% Historical Average other parts of suburban Maryland due to its prime location and quality inventory. Look for growth15% in the submarket once tenants start looking for more space as 7550 Wisconsin Avenue and 770013% Old Georgetown Road have large blocks of new space available.11% • Tenants have been signing short-term renewals due to both political and economic uncertainty. 9% Look for tenants to sign longer-term renewals and new deals after the election and once economic 7% hurdles are cleared. 5% 2007 2008 2009 2010 2011 2012 • The large lease renewals executed by the GSA during the third quarter proves the Federal Government intends to keep occupying large blocks of space for an extended period of time. This bodes well for suburban Maryland markets that have had trouble attracting large-volume tenants. www.cassidyturley.com
  2. 2. Cassidy Turley Office Market SnapshotSuburban Maryland • Third Quarter • 2012 SUBLET TOTAL VACANCY CURRENT NET YTD NET UNDER CON- AVERAGE TOTAL BLDG INVENTORY VACANT VACANT RATE ABSORPTION ABSORPTION STRUCTION ASKING RENT Submarket Bethesda/Chevy Chase 102 10,901,129 141,500 1,086,329 10.0% 47,044 102,548 119,239 $36.25 North Bethesda 77 9,559,687 98,400 1,413,485 14.8% (15,559) (66,303) 362,000 $30.61 Rockville 99 8,446,363 45,258 1,199,289 14.2% (6,697) (26,815) 198,000 $30.51 North Rockville 108 10,638,540 167,311 1,499,640 14.1% (1,718) 28,463 575,000 $26.10 Gaithersburg/Germantown 98 6,389,608 36,566 1,008,843 15.8% (1,712) (35,922) 162,000 $23.36 Silver Spring 102 7,835,746 72,357 960,629 12.3% (6,075) (11,402) - $26.53 Montgomery County 586 53,771,073 561,392 7,168,215 13.3% 15,283 (9,431) 1,416,239 $28.68 Northern 133 9,908,822 39,726 2,163,414 21.8% 20,856 (11,249) - $20.35 Central 89 5,192,785 23,866 1,145,896 22.1% (44,900) (57,365) - $21.14 Southern 54 2,624,259 950 611,220 23.3% (30,328) (40,090) - $22.42 Prince Georges County 276 17,725,866 64,542 3,920,530 22.1% (54,372) (108,704) 0 $20.91 TOTAL 862 71,496,939 625,934 11,088,745 15.5% (39,089) (118,135) 1,416,239 $26.28p - preliminaryKey Lease Transactions 3Q 12 PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET 6701 & 6707 Democracy Drive 356,000 GSA - National Institutes of Health (NIH) Renewal North Bethesda 1401 Rockville Pike 100,500 GSA - Food and Drug Administration (FDA) Renewal Rockville 10401 Fernwood Road 57,600 GSA - National Institute of Allergy and Infectious Diseases (NIAID) Renewal North Bethesda 7315 Wisconsin Avenue 28,200 Child Trends Relet Bethesda/Chevy Chase 2 Wisconsin Circle 26,200 Wedding Wire Sublet Bethesda/Chevy Chase 10401 Fernwood Road 15,600 SAIC Renewal North Bethesda 1375 Piccard Drive 12,900 FTI Relet North Rockville 1100 Wayne Avenue 12,500 Webs.com Relet Silver Spring 20410 Century Boulevard 11,400 Core Source Technologies LLC Expansion Germantown 1375 Piccard Drive 9,600 Hanger, Inc. Relet North RockvilleKey Sales Transactions 3Q 12 PROPERTY SF SELLER/BUYER PRICE SUBMARKET 1100 Wayne Avenue, 1010 Wayne 496,967 Urdang Associates & Moore & Associates/Brandywine Realty Trust & Allstate $120,600,000 Silver Spring 9901 Belward Campus Drive 106,469 The Foulger-Pratt Companies/BioMed Realty Trust $26,170,000 North Rockville 1700 Research Boulevard 102,065 Washington Real Estate Investment Trust/Westat $14,250,000 North RockvilleAbout Cassidy Turley Philip BranniganCassidy Turley is a leading commercial real estate services provider with more than 3,600 professionals in more than Research Analyst60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2101 L Street, NW Suite 7002011, manages 455 million square feet on behalf of institutional, corporate and private clients and supports more Washington, DC 20037than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full Tel: 202.463.2100spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate Fax: 202.223.2989services, project leasing, property management, project and development services, and research and consulting. Phil.Brannigan@cassidyturley.comCassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving The information contained within this report is gathered from multiple sources considered to beclients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley. reliable. The information may contain errors orcom for more information about Cassidy Turley. omissions and is presented without any warranty or representations as to its accuracy. Copyright © 2012 Cassidy Turley. All rights reserved. www.cassidyturley.com

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