The Baltimore region saw significant increases in industrial space absorption in 2007, but the outlook for the local market in 2008 remains uncertain during shaky economic times, analysts say.
The region absorbed about 2.4 million square feet of industrial space in 2007, an increase of more than 650,000 square feet in 2006, according to a report by CB Richard Ellis, a commercial real estate services firm with offices in Baltimore.
Baltimore?s industrial market succeeds because it?s centrally located along the eastern seaboard, it?s close to major highways and it?s home to more than 4,000 manufacturing businesses, said John Wilhide, senior vice president of CB Richard Ellis.
“There?s been a lot of retail growth in the area, and with retail growth, you?ll see the need for retail support, meaning warehouses and distribution centers,” Wilhidesaid. “Even in this downtime, we?re seeing a lot of building and growth.”
Lease rates in the area are considered very competitive, according to the report. The average asking rate for warehouse space in the fourth quarter of 2007 was $5.43 per square foot. Rates for Class A space in the Baltimore-Washington corridor ranged from $5.75 to $5.95 per square foot, while rates in Washington, D.C., ranged from $7.15 to $7.25.
The outlook for 2008 remains unclear with the economy?s instability and the timetable for Base Realignment and Closure. There are 20 industrial buildings ? totaling about 2.2 million square feet ? under construction on a speculative basis in the Baltimore region. How the market performs in 2008 will depend on the absorption of those buildings.
“Corporate America is making decisions, but it?s just taking a little longer than usual,” Wilhide said. “I do think 2008 will be a good year.”
M. Kent Thomas, a construction industry financial professional with KAWG&F, an accounting and consulting firm with five offices in Maryland, said many of the contractors that build commercial properties were successful in 2007 because they had many projects held over from 2006. Those contractors have said they don?t have the same backlog this year.
“A lot of them had a great 2007,” Thomas said. “I think there are a lot of economic factors, and there?s definitely some uncertainty out there.”
