Despite persistent slowdown in leasing activity and increasing vacancies, average market rent increases to $28.86 per square foot throughout Montgomery and Prince George’s County region
The overall vacancy rate for commercial office space in the Suburban Maryland region – defined by Montgomery and Prince George’s Counties – rose 1.7% to 14.1 % at the end of first quarter 2022, according to the Suburban Maryland Commercial Office Q1 2022 Market Brief recently released by Edge. Unlike the Northern Virginia submarket, where vacancies have stabilized, the vacancy rate continues to creep upwards, representing a continuation of the trend that started at the beginning of the healthcare crisis. Despite the persistent slowdown in leasing activity and increasing vacancies, the average market rent has increased to $28.86 per square foot, growing from $28.47 at the end of last year.
The full-service commercial real estate firm, with offices in Washington D.C., Virginia, Maryland and Pennsylvania, publishes quarterly data reporting on the commercial office and industrial/flex real estate asset classes in suburban Maryland, Washington, D.C. and Northern Virginia.
ROC Center Building, 2273 Research Boulevard in Rockville
“With many companies adopting hybrid work models and offering multi-day work-from-home options, we are seeing the rightsizing of leases upon expiration as well as a flight to quality to help attract talent during today’s tight labor market,” explained Emiliano Morales Flores, Market Research Analyst for Edge. “Some of this space reduction has been offset by organizations employing a hub-and-spoke business model, which entails opening a second satellite office in the suburbs to support a downtown headquarters office. We envision an improvement across the board as the year progresses based on the relative lack of new building starts, combined with pent-up demand.”
Report highlights:
- Among the largest leases completed in the first quarter was the expansion of Tetracore, which leased 99,202 square feet of space in 77 Upper Rock Circle in North Rockville.
- Additional significant transactions were Xometry’s 28,068 square foot lease at 6166 Executive Boulevard in North Bethesda, and the 26,177 square foot lease executed by American Kidney Fund at 11921 Rockville Pike in North Bethesda.
- Although the pipeline for new construction space has diminished greatly since mid-2020, an increasing number of development companies are converting commercial office space into life sciences product. An example is 9900 Belward Campus in Rockville, where two suites have been converted into lab space.
- Notable building sales included the purchase of Bethesda East Office Center, located at 4405 East-West Highway by Perseus TDC for $21.5 million, as well as MedCraft Healthcare’s acquisition of Westtech-Hartford at 12041 Bournefield Way in Silver Spring for $11.1 million.
- Direct vacancy rates for submarkets in Montgomery Prince George’s and Montgomery Counties include Bethesda/Chevy Chase – 19.2%; Germantown/I-270 North – 16.6%; National Harbor/Oxon Hill – 15.7%; North Bethesda/Potomac – 16.7%; North Rockville – 14.1% and Silver Spring – 17.7%.
Edge is a commercial real estate firm providing a full complement of advisory, leasing, investment sales, management, construction, property management, and engineering services to clients throughout the Washington, D.C., Maryland, Northern Virginia, and Pennsylvania marketplaces. For additional information, visit www.edgecre.com.
