The Baltimore region?s commercial real estate market has shown signs of resiliency in 2008, but industry professionals said 2009 could be a different story.
“Our concern is not really the rest of the year, but next year,” said T. Courtenay Jenkins, senior director in charge of office leasing and sales for Cushman & Wakefield in Baltimore. “2009 is really the year everyone in real estate could start crying the blues.”
The region?s commercial real estate market is “clearly in a transitional market” as construction is put on hold and deals take longer to finalize due to a tough credit market that affects both buyers and sellers, David Baird, senior managing director of Cushman & Wakefield?s Baltimore office, said at the company?s “Pulse of the Market” roundtable event Thursday.
The commercial real estate market usually goes through expansion periods followed by “leveling-off” periods, and this leveling-off period might last through 2009, Baird said.
The good news, though, is the Baltimore economy relies on jobs in stable sectors like defense, government, education and health care, Baird said.
“We have every reason to believe there will be a relatively soft landing for the Baltimore market,” Baird said.
Also, developers have learned from past mistakes during market downturns, Baird said. Construction on new office and industrial buildings has been slowed or delayed this year, so supply won?t dominate demand.
On the office side, rental rates have held steady at about $25 per square foot throughout the region, Jenkins said. For buildings under construction and proposed, the rates will likely be in the $35 to $45 range, because there is demand for new office space from companies looking to relocate.
On the industrial side, there are several significant buildings available in the region, in the 100,000-square-foot to 200,000-square-foot range, but the tenant pool isn?t very deep, said Matthew Laraway, senior director in charge of industrial leasing and sales for Cushman & Wakefield. Rental rates for industrial space have held at about $4.25 per square foot, while rates for flex space have held at about $10.25 per square foot.
“The story?s not bleak, but it?s slow, and people need to be smart,” Laraway said.
