A softening economy has weakened the outlook for commercial developers in industrial and office markets, with overbuilding becoming an increasing concern, according to a National Association of Industrial and Office Properties survey.
Maryland?s developers have the same concerns as developers across the country, said Catherine Ward, president of NAIOP?s Maryland chapter and senior vice president of asset management for Columbia-based Corporate Office Properties Trust.
“I would say we?re trending in a direction similar to what?s happening nationally,” Ward said.
“We?re seeing a slowdown in demand and some overbuilding in Howard County and the Baltimore-Washington corridor, which will lead to downward pressure on rental rates,” Ward said.
In the industrial market, more than half of the survey respondents said rents in their local industrial markets increased during the past year.
In the office market, 62 percent of respondents said office rents have increased during the past year, but only 42 percent expect increased rents in the coming year. In 2006, 72 percent of respondents expected increased rents.
“There?s less enthusiasm than there was a year ago, but the rents are still going up,” said Cole Schnorf, president-elect of NAIOP?s Maryland chapter and senior vice president and director of development for Columbia-based Manekin LLC.
“The outlook just isn?t as positive as it was last year,” Schnorf said. “It could be a sign we?re headed for a softer market.”
Schnorf agreed with Ward, saying there is a lot of development planned in the Baltimore-Washington corridor, but it remains to be seen how much of the development will actually occur.
“In our marketplace, overbuilding would be right there as a big concern,” Schnorf said.
Only 40 percent of the survey respondents said they thought the national economy was growing, the worst response since 2003 and a sign developers are bracing for a downturn in the real estate cycle.
The nation?s credit crunch has worried developers with financing issues. Only 27 percent of developers said they were positive about financing, down from 78 percent a year ago, according to the report.
“The thing about real estate is it generally takes a little time for the cycle to take its course,” Ward said. “That?s the nature of the beast.”
