Baltimore-DC Area Commercial Real Estate Market Continues to Face Headwinds Influenced by Weak Job Market and Economic Uncertainties, According to MacKenzie’s Q3 Market Outlook
Despite on-going challenges, nearly 10 million square feet of industrial/warehouse, more than three million square feet of commercial office, and two million square feet of retail space leased year-to-date locally
Despite ongoing economic challenges and uncertainties occurring nationally – led by continued weakness in the labor market and stubborn inflation trends – the commercial real estate market in the greater Baltimore-Washington, D.C. area has experienced surprisingly strong leasing activity during the first three quarters of 2025, according to MacKenzie Commercial Real Estate Services’ 3rd Quarter 2025 Local Outlook, compiled with information and commentary from Anirban Basu, CEO of Sage Policy Group. Factors led by the on-again and off-again tariffs discussion, uncertainty about the prospect of lower interest rates, and shifting immigration policies have combined to dampen and slightly delay real estate decisions across all asset classes. But bright spots and optimism remain as evidenced by the nearly 10 million square feet of industrial/warehouse, more than three million square feet of commercial office, and two million square feet of retail space leased year-to-date locally. The full report can be viewed here: https://tinyurl.com/4by83utr
Rental rates for commercial office product rises slightly to $24.77 per square foot
The more than three million square feet of commercial office leasing year-to-date in the greater Baltimore region likely stems from tenant renewals rather than new tenants, resulting in an overall 15.2 percent vacancy rate. The average rental rate rose slightly to $24.77 per square foot as compared to the Q3 2024 figure of $24.56. The highest vacancy rate is in Baltimore City Center at 30.9 percent and the lowest is the 5 percent achieved in the Carroll County submarket. The largest transaction was the Board of Education’s 78,516 square foot lease at 2034 Greenspring Drive in Baltimore County, followed by New Day USA’s 30,849 square foot lease at 8115 Maple Lawn Boulevard in Howard County.
80,000 square feet of positive retail absorption belies YTD 383,000 square feet of negative absorption
National retail chain closures – led by CVS Pharmacy, Party City, Rite Aid, and Kohl’s – continue to takes its toll on the Baltimore-area market, resulting in a negative 383,000 square foot year-to-date absorption rate. Approximately 560 retail leases have been completed this year, led by the quick service restaurant, food and beverage, medical/wellness, and service sectors. The BWI Corridor currently has the lowest vacancy level at 1.86 percent, as compared to the highest in the Reisterstown Road corridor at 10.58 percent. The overall vacancy rate is 6.39 percent which is slightly higher than the Q3 2024 figure of 6.19 percent. Carroll County also achieved a favorable 2.67 percent vacancy rate. The largest retail transaction was Dick Sporting Good’s nearly 117,000 square foot lease at Annapolis Mall. The continued rise of construction costs is placing renewed pressure on landlords and retail tenants to find creative solutions to offset the expenses needed to open new locations.
Just over three million square feet of warehouse/industrial space leased in Q3
Cecil County led the way locally with more than one million square feet of warehouse/industrial space leased in Q3, representing nearly one-third of the more than three million square foot total for the previous quarter. The overall 7.76 percent vacancy rate declined from the previous year’s 8.45 percent, but remains slightly higher than the 7.51 percent achieved in Q3 2024. Baltimore County West has the highest vacancy rate at 10.2 percent, and Carroll County has the lowest at .83 percent. Ryder, a third-party logistics company, leased and took occupancy of a more than one million square foot space at Bainbridge Logistics Center. More than four million square feet of industrial/warehouse space changed hands last quarter, among 90 transactions, led by the $80 million acquisition of Elkton Commerce Center, a fully-leased 770,000 square foot distribution facility.
“The commercial real estate sector in greater Baltimore-Washington, D.C. region continues to demonstrate its remarkable resiliency amidst challenging national economic pressures and, despite numerous external forces, we are starting to see light at the end of the tunnel and expect a significantly better and more active 2026,” explained Scott Wimbrow, President and Principal, MacKenzie Commercial Real Estate Services. “MacKenzie continues to win new leasing and property management and construction management contracts, we have added several young and veteran brokers to our growing team, and we are always on the lookout for emerging talent. We believe opportunities await owners, investors, and tenants in during every market condition and this process starts with generating insights from an outside perspective to better evaluate and react to the situation.”
MacKenzie Commercial Real Estate Services is the real estate brokerage arm of The MacKenzie Companies, which operates five full-service divisions addressing all real estate asset classes including MacKenzie Management Company, MacKenzie Contracting Company, MacKenzie Capital and MacKenzie Investment Group. The company provides customized real estate solutions for institutional owners, investors, private companies and individuals. For additional information, visit www.mackenziecommercial.com
