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WASHINGTON, DC-Maryland might not be the place for an office, but research from commercial real estate company Transwestern indicates it is the place for your warehouse or other industrial space.

Among the major submarkets that make up the Washington-Baltimore corridor, Transwestern found the industrial and flex market is strongest in suburban Maryland and Baltimore. The strength is not in those submarkets as a whole, however. The continued growth is driven by the Route 1 and Interstate 95 corridor that stretches from Prince George’s County through Howard County and the Baltimore-Washington International Airport, right through to Baltimore County and City.

In its report, Transwestern says that Prince George’s County accounted for two-thirds of the net absorption in suburban Maryland through the first half of the year.

What had been a bust is now a blessing. Prince George’s and other Maryland jurisdictions failed to get as much technology leasing, unlike Northern Virginia, but in the tech slowdown, their industrial space remains strong, much in the same way the District’s office market remains strong because its major clientele is the government, associations and law firms.

Overall, suburban Maryland had a vacancy rate of 8.3%, including sublet space. And only 200,000 sf of sublet space has been returned in that market during the first six months of this year.

Transwestern foresees slow but steady growth into the middle of 2002.

And though Baltimore overall is expected to be weaker, the areas of strongest performance were those along the same corridor with Prince George’s County.

Half of the 2.8 million sf under construction in the Baltimore market is along Route 1, and it is 27% pre-leased. Of the 183,000 sf being built in the BWI/Glen Burnie area, it comes as no surprise that 89% of that space is pre-leased.

The big drag on the market was the 1.2 million sf of sublet space returned during the first six months of 2001, versus the 1.1 million sf of net absorption.

But that is still better than Northern Virginia. The vacancy rate there was 3.8% at the end of 2000. It rose to 6.1% at mid-year 2001, 7.5% including sublet space. And Transwestern doesn’t expect the bleeding to stop until the vacancy rate tops 9%, including sublet space.

The I-95/395 corridor in Northern Virginia led the way for net absorption, but has more old economy companies. Dulles/Route 28, which feeds off the tech industry, had negative 92,000 sf of net absorption, including sublet space.

The decline comes as no surprise as leases were broken and construction slowed down. One firm, DPR Construction, which has an office in Fairfax, recently reported losing nearly $50 million of planned tech construction, mainly data centers–the type of space that falls into the industrial category.

The District had the largest vacancy rate, 15.1%, but a significant portion of its space is obsolete and in need of renovation for alternative uses.

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