Key Takeaways from MacKenzie Companies-Sponsored “State of the Market” Event

Following a sluggish beginning, 2025 emerged as an extremely robust year in the greater Baltimore-area commercial real estate industry, and activity has remained equally as vibrant as the calendar turned to 2026. At the recent MacKenzie Companies-sponsored “State of the Market” event, held at the The Elkridge Club, more than 70 financial, development, legal, appraisal and assorted real estate professionals listened to current trends in the asset management, brokerage, capital markets, construction, and industrial, commercial office, and retail sectors. The discussion was led by Brendan Gill, President & COO, MacKenzie Ventures and Owen Rouse, Senior Vice President, Investment Sales, MacKenzie Commercial Real Estate Services.

“Intentional decision-making has taken increased importance when investing in commercial real estate, given the enhanced scrutiny from the financial world, and the long-term impact of leasing, acquiring and disposing of properties in all asset classes,” Rouse explained. “Investing in real estate takes discipline, thoughtful execution and proper planning to position portfolios for long-term success. Surrounding yourself with partners that can offer premium asset management services and guidance is extremely critical.”

“Landlords and owners are facing intense scrutiny from tenants before signing long-term leases because they want assurances that the building owner can perform throughout the term of the entire lease,” Gill said. “Location and the presence of amenities have taken secondary importance during negotiations. A commonly asked question is whether the building owner can fund the tenant improvements.”

“Leasing transactions are taking a lot longer these days,” said Matt Mueller, Senior Vice President, MacKenzie Commercial Real Estate Services. “Tenants are asking questions about the liquidity of landlords and the flight-to-quality effect that has benefitted Class A buildings is now being filtered down to Class B product, as premium buildings become filled. Permitting is taking as long as 14 weeks, which has significantly elongated the tenant build-out process, and the rising cost of construction and scarcity of construction workers are adding pressure and creating challenges. All of these factors have extended the actual construction time. Most importantly, tenants are making certain that their landlords have the experience and capabilities to properly manage the asset. We are just getting a lot more questions about everything.”

Jack Ward, Vice President of MacKenzie Capital explained that “there is a tremendous amount of capital available from different sources circulating in the market with appetites in multiple asset classes. “Industrial and multifamily are the preferred choices with retail ranking a close third,” he said. “Lenders are scrutinizing borrowers’ liquidity more closely, tightening their requirements and holding properties to a tighter standard with respect to debt service constraints. Spreads are tightening across the board and the competition among lender groups is increasing,” Ward added.

Patrick Smith, Vice President of MacKenzie Commercial Real Estate Services sees some softening in the warehouse/industrial asset class although he terms activity in the Hunt Valley area “extremely strong.”  Rent growth has also slowed to its lowest level since 2012 – about 2 percent last year – and building prices have also taken a hit with an approximate 5 percent drop. In the “more bad news department,” activity in the Industrial Outdoor Storage category – for several years the rising star asset category – has also dropped off. Smith counters with some good news. “The relative lack of new construction starts makes existing buildings increasingly attractive, but the existing solid fundamentals and the overall strength of the Baltimore-area economy will soon translate to an uptick in activity,” Smith said.

Tenants are increasingly choosing landlords/owners that consistently demonstrate the ability to deliver best-in-class asset and property management services, said Jill Harmon, President, MacKenzie Management Company. She refers to the “three-legged stool” of service offerings including (1) overseeing all financial management of properties, (2) addressing and maintaining the physical plant, and (3) unwavering tenant relations and support. Harmon stresses that adhering to a strict preventive maintenance policy is key. “Detecting minor system issues before they transform into significant problems is the surest method to save time and money and protect against complete HVAC failures,” she said.

“Consumers are showing remarkable resilience,” said Mike Ruocco, Vice President, MacKenzie Retail, “and if you do not believe me, look at the difficulty of finding a seat at Tark’s Grill just about any day of the week, and consider that nearly every Southwest Airlines flight leaving BWI Airport is completely full. Consumers continue to dine out, travel, and participate in entertainment activities.” Pointing to an approximate 4 percent national vacancy level, Ruocco explains that “retail continues to thrive with restaurant and food uses remaining king.”  He added, “when restaurants close or move, there are two to three new operators waiting in the wings vying for the space. Landlords that communicate and are nimble and responsible will continue to win deals.”

“There is a lot of chatter about the rising cost of construction materials,” said Scott Albright, Senior Vice President, Director of Operations, MacKenzie Contracting, “but the more pressing hurdle is the serious shortage of skilled labor, which is a major cause of delays and higher pricing.” Albright explains that “imagine if eight bricklayers were needed for a particular project to complete the time on-time and on-budget, but only four are available. You can easily see why this would double the time and cost needed to complete the job. Trades are a dying breed. Tell your children to become a tradesman because they will have a long and profitable career. “

Other takeaways:

• 2025 headwinds were led by tariff and tax policies, labor challenges, decreased property valuations and rising construction costs
• Multiple national companies have implemented five-day-per week return to work schedules including AT&T, Barclays, Dell, Goldman Sachs, Google, M&T Bank, and Tesla
• When providing capital, lenders are placing an emphasis on the Debt Service Coverage Ratio (DSCR), borrower liquidity has taken on extreme importance, and rollover and credit are weighted heavily
• 2026 is off to a roaring start and optimism with optimism and opportunities buoyed by less uncertainty in the economy and real estate sector, lower interest rates, increased capital availability, and more alignment between buyers and sellers

Headquartered in Lutherville, The MacKenzie Companies operates five full-service divisions addressing all real estate asset classes including: MacKenzie Commercial Real Estate Services, 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