MARKETBEAT

OFFICE SNAPSHOT
BALTIMORE, MD
A Cushman & Wakefield Research Publication

Q1 2012

ECONOMIC OVERVIEW
Despite the recent uptick in private sector employment, the market remained cautiously optimistic due to rising gasoline costs and recent concerns over the sustainability of the improving labor market. According to the latest February 2012 ADP National Employment Report, the serviceproducing sector from January to February 2012 created a total of 170,000 jobs. The national unemployment rate in February 2012, according to the Bureau of Labor Statistics, was 8.3%. Maryland continued to experience a stronger labor market than the rest of the nation, as its preliminary January 2012 unemployment rate was 6.5%.

OUTLOOK
The Baltimore office markets vacancy rates are expected to increase in 2012 due to a lack of prelease activity in 2012 construction deliveries. Expected second quarter 2012 construction deliveries, which total 416,979 sf, include: 6514 Meadowridge Road, 8160 Maple Lawn, 650 McHenry Road, 3401 Box Hill Corporate Center Drive and 801 Long Drive. These construction deliveries will have the largest impact in Harford County as its overall vacancy rate, at 26.2%, will tick up significantly as the 120,000-sf 801 Long Drive and the 95,200-sf 650 McHenry Road and are expected to deliver fully vacant. STATS ON THE GO
1Q11 Overall Vacancy Direct Asking Rents (psf/yr) YTD Leasing Activity (sf) 13.5% $24.26 377,614 1Q12 14.3% $23.43 355,366 Y-O-Y 12 MONTH CHANGE FORECAST 0.8pp -3.4% -5.9%

LIMITED POSITIVE ABSORPTION IN THE MARKET

In the first quarter of 2012, the Baltimore office market saw little overall growth in the market as its year-to-date overall net absorption was positive at 28,668 square feet (sf). Significant tenant occupancies in the quarter were: the 53,800-sf Bill Me Later occupancy at 55 Schilling Road, the 35,000-sf Johns Hopkins University occupancy at 1300 Thames Street and the 30,784-sf Algeco Scotsman Group occupancy at 901 South Bond Street. Aegon USA, LLCs 150,000-sf move-out at 520 Park Avenue in Baltimore City was the largest tenant movement of the quarter, which resulted in Baltimore Citys year-to-date overall net absorption to stand negative at 19,720 sf. Despite fairly strong leasing activity levels in the second half of 2011, absorption is expected to remain modest in the first half of 2012 as tenant occupancies from late 2011 leases largely reflect tenants swapping space rather than expansion in the market. Examples of such movements expected in the second quarter of 2012 include: PNC Banks 134,671-sf occupancy at 1 East Pratt Street from 2 Hopkins Place and Ciena Corp.s 87,830-sf occupancy at 7035 Ridge Road from 1201 Winterson Road.

DIRECT RENTAL VS. VACANCY RATES

$25.00 $24.25 psf/yr $23.50 $22.75 $22.00 2008 2009 2010 2011 1Q12 20.0% 17.0% 14.0% 11.0% 8.0%

DIRECT GROSS RENTAL RATE

DIRECT VACANCY RATE

LEASING ACTIVITY STRONG IN CLASS A PRODUCT

From the first quarter of 2011 to the first quarter of 2012, year-todate leasing activity in the Baltimore office market, at 355,366 sf, decreased 5.9%. Leasing activity continued to be concentrated in class A office product as it accounted for 80.2% of new deals signed. Notable class A lease transactions were: Lockheed Martin Corp.s 52,692-sf lease at 410 National Business Parkway, Roadnet Technologies, Inc.s 27,892-sf lease at 849 Fairmount Avenue and University of Maryland Faculty Physicians, Inc.s 25,102-sf expansion at 250 West Pratt Street. A total of 70,374 sf of lease transactions were executed in class B product during the quarter which included the 30,023-sf Trail Blazers International Christian Center lease at 17101722 Gwynn Oak Avenue.
Cushman & Wakefield of Maryland, Inc. 500 East Pratt Street, Suite 500 Baltimore, MD 21202 www.cushmanwakefield.com/knowledge

OVERALL ACTIVITY
3.0 2.3 msf
2.4 2.4 2.9 2.4 0.5

1.5
1.7

0.8 0.0

1.6

1.7

0.4

2008

2009

2010

2011
SALES ACTIVITY

2012 YTD

LEASING ACTIVITY

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.

0.2

BALTIMORE, MD
SUBMARKET INVENTORY OVERALL VACANCY RATE 16.9% 15.3% 12.0% DIRECT VACANCY RATE 16.1% 15.2% 11.5% 61,952 0 35,070 0 0 0 YTD LEASING ACTIVITY UNDER CONSTRUCTION YTD CONSTRUCTION COMPLETIONS 0 0 0 YTD DIRECT NET ABSORPTION (23,156) (118,912) 113,922 YTD OVERALL OVERALL WTD. AVG NET ALL CLASSES GROSS ABSORPTION RENTAL RATE* (11,278) (122,364) 113,922 $ 20.99 $ 19.71 $ 29.29 DIRECT WTD. AVG. CLASS A GROSS RENTAL RATE* $ 23.42 $ 25.25 $ 35.35

Baltimore CBD Baltimore City North/West Baltimore City South

13,381,776 4,325,210 4,496,353

Baltimore City
Howard County North Howard County South Downtown Columbia

22,203,339
1,742,933 7,650,538 2,078,844

15.6%
6.0% 13.9% 17.5%

15.0%
5.4% 13.4% 17.4%

97,022
8,110 49,114 0

0
68,779 105,000 0

0
0 0 0

(28,146)
31,874 3,685 (9,703)

(19,720)
27,630 4,739 (12,015)

$ 21.83
$ 23.71 $ 27.84 $ 23.70

$ 25.60
$ 24.46 $ 29.30 $ 24.69

Howard County
Fort Meade District BWI District Anne Arundel County East Anne Arundel County South/Annapolis

11,472,315
4,598,926 3,616,543 755,512 2,308,268

13.3%
16.0% 18.2% 8.4% 6.6%

12.9%
15.5% 18.0% 8.4% 5.7%

57,224
52,692 0 0 5,750

173,779
171,300 87,830 0 0

0
0 0 0 0

25,856
(29,689) (39,158) 4,454 (1,351)

20,354
(26,689) (39,158) 4,454 (16,828)

$ 26.47
$ 25.38 $ 24.19 $ 21.21 $ 25.80

$ 27.76
$ 27.20 $ 25.85 $ 22.52 $ 30.93

Anne Arundel County

Baltimore County East Baltimore County North Owings Mills/Reisterstown Baltimore County West

11,279,249
868,351 9,390,997 4,422,650 3,055,760

14.3%
16.0% 11.5% 15.3% 10.8%

13.9%
11.9% 11.1% 15.3% 10.7%

58,442
0 74,822 2,397 60,191

259,130
0 126,460 0 0

0
0 0 0 0

(65,744)
(3,397) 67,546 35,967 11,867

(78,221)
(4,558) 70,954 35,967 11,867

$ 24.70
$ 18.97 $ 21.23 $ 21.40 $ 19.92

$ 26.80
$ 23.81 $ 22.88 $ 21.61 $ 23.08

Baltimore County
Harford

17,737,758
1,316,717

12.5%
26.2%

12.1%
25.1%

137,410
5,268

126,460
318,200

0
0

111,983
5,002

114,230
(7,975)

$ 20.87
$ 32.21

$ 22.50
$ 32.56

HARFORD COUNTY Non-CBD TOTALS*

1,316,717 50,627,602

26.2% 13.6%

25.1% 13.2%

5,268 293,414 355,366

318,200 877,569 877,569

0 0 0

5,002 72,107 48,951

(7,975) 39,946 28,668

$ 32.21 $ 24.23 $ 23.32

$ 32.56 $ 26.93 $ 26.12

64,009,378 14.3% 13.8%

* RENTAL RATES REFLECT ASKING $PSF/YEAR

MARKET HIGHLIGHTS
Significant 1Q12 Lease Transactions
410 National Business Parkway 1710-1722 Gwynn Oak Avenue 849 Fairmount Avenue SUBMARKET Fort Meade District Baltimore County West Baltimore County North SUBMARKET TENANT Lockheed Martin Corp Trail Blazers International Christian Center Roadnet Technologies, Inc BUYER BUILDING CLASS SQUARE FEET 52,692 30,023 27,892 SQUARE FEET

A
B A PURCHASE PRICE / $PSF

Significant 1Q12 Sale Transactions

3700 Koppers Street 7030 Hi Tech Drive

Baltimore City North/West St. John Properties, Inc Fort Meade District SUBMARKET TECORE MAJOR TENANT

N/A
$3,910,400/ $81.47 psf COMPLETION DATE

100,000
48,000 SQUARE FEET

Significant 1Q12 Construction Completions

N/A

Significant Projects Under Construction

225 Schilling Circle 801 Long Drive 8160 Maple Lawn Boulevard

SUBMARKET Baltimore County North Harford County Howard County South

MAJOR TENANT EA Engineering, Science & Technology Inc N/A N/A

COMPLETION DATE 3Q12 2Q12 2Q12

SQUARE FEET 126,460 120,000 105,000

* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

Cushman & Wakefield of Maryland, Inc. 500 East Pratt Street, Suite 500 Baltimore, MD 21202 www.cushmanwakefield.com/knowledge

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.