DC/Baltimore Industrial Fundamentals Uncommonly Bright

BALTMORE, MD-The Baltimore-area industrial sector continues to boom and new figures for its Q3 performance shows little sign of a serious slowdown. Jones Lang LaSalle is releasing a report on Friday to show that industrial net absorption has topped 1.5 million square feet for the year after falling short of one million square feet for the entire year last year. In addition, new construction has broken ground with several build-to-suit projects totaling nearly 2.2 million square feet under construction in Baltimore in the third quarter. There are other projects in the pipeline.

"We expect the economy will continue to improve, driving positive rental growth that will make this even more of a landlord-friendly market," said Mark Levy, Mid-Atlantic Industrial and Baltimore Market Leader for JLL. "Asking rental rates are expected to continue to grow as a flight to quality takes hold and tenants continue consolidating operations."

The Baltimore/Washington Corridor is seeing asking rates rising 4% year-over-year as concessions fall, JLL also reports. Industrial vacancy rates in Harford and Cecil Counties have also dropped, falling well below 7% at the end of the quarter.

The wealth is also spreading to DC's industrial market, especially the northern Route 28/Dulles corridor, where vacancy rates have also fallen to just 7%. Southeast Fairfax, which had struggled through the economic recession, saw pricing rebound for warehouse/distribution space by 3.1% to $8.85 per square foot.

The relative health of the DC area industrial market comes as a bit of a surprise given the federal government's scale back from all things real estate. However, according to JLL cutbacks from the GSA and the life sciences industry have been offset by food-related users and e-commerce retailers, both of which are emerging as important tenants given the central regional distribution locations.