MacKenzie Commercial Real Estate Services, LLC is pleased to release their Second Quarter Industrial Market Report for the Baltimore Metropolitan Statistical Area which includes the following overview from renowned economist, Anirban Basu, President of Sage Policy Group.
After several years of steady, sometimes spectacular progress, the Baltimore regional warehouse market took a step back during the second quarter. Net absorption totaled just 16,897 square feet, with the Baltimore County East warehouse market experiencing -447,166 million square feet of net absorption. That submarket is now associated with a direct vacancy rate exceeding 17.1 percent, up from 11.1 percent one year ago. The entire Baltimore area warehouse market vacancy rate stands at 9.1 percent, up from less than 8.2 percent a year ago.
Part of this is attributable to new construction. One year ago, MacKenzie Commercial Real Estate data indicated the warehouse market totaled 186 million square feet. During the second quarter of 2015, market size was measured at more than 193.7 million square feet. Despite several recent quarters during which net absorption totaled nearly 1 million square feet or better, quantity supplied has expanded faster than quantity demanded in a number of key sub-markets.
Unlike prior quarters, the industrial market star was the flex market. The Baltimore area flex market net absorbed 229,742 square feet during the second quarter, with direct vacancy falling to 8.7 percent. Regional flex market vacancy stood at 9.1 percent a year ago and 9.0 percent a quarter ago. Ironically, Baltimore County East led the way, with nearly 126,000 square feet of net absorption. The direct vacancy rate in that submarket is now below 6 percent. In the I-83 Corridor, direct vacancy remains around 4 percent.
Despite the second quarter setback in the regional warehouse market, the outlook for industrial space demand in Baltimore remains positive. Consumer spending is accelerating across the nation, online transaction volume continues to surge higher, the Port of Baltimore is well-positioned and industries that use industrial space like wholesale trade and construction are expanding more rapidly. Manufacturing employment, however, continues to slip regionally and statewide.