Abby Glassberg Looks Back on 2022 Baltimore-Area Office Scene and Ahead to 2023

By Al Cunniff 

Abby Glassberg

Strength and uncertainty were competing themes in commercial real estate in 2002. Inflation, rising interest rates, COVID, hybrid work, supply chain disruptions and concerns about recession were constant challenges.

Baltimore-area commercial real estate reacted to those challenges. There were ups and downs in leasing and construction throughout 2022 and there was definite slowing into Q4, yet there were signs of resilience too. The bottom didn’t fall out, but many believe that we’ll certainly feel some effects of the above market factors in 2023.

With this in mind, veteran Baltimore-area commercial real estate broker Abby Glassberg provided her thoughts on 2022, focusing primarily on the office market, and looked ahead as we enter 2023.

What kind of year was 2022 for you? 

As you know, 2022 wasn’t all doom and gloom and it was pretty good, from an office perspective. Lease expirations are staggered, so there are always leases that need to be tended to whether it is through a renewal or new lease. One sector that was strong in 2022 and continues to be in 2023 is the Medical and the Mental Health sector.

A number of area landlords had solid, even record-breaking years. COPT broke their own 12-year leasing record with over 800,000 square feet. Half of that was in Greater Baltimore, and most of their clients are defense or government contractors.

Howard Hughes Corp. signed leases totaling almost a quarter million square feet of space in Downtown Columbia in 2022. Employers are drawn by the quality office space surrounded by numerous amenities.

But like the national market, the Baltimore market slowed in Q4 and people are cautiously waiting to see the effect that interest rates, remote work and other factors will have.

Are remote and hybrids workers returning to the office? 

That trend was a slow trickle in 2022 until August or so, when it began to increase. I’m hearing that large companies such as Disney, Goldman Sachs and Apple are calling employees back to the office. But I’m also hearing that attendance is still light at many offices on Mondays and Fridays.

Some say that remote and hybrid work are here to stay—have you heard of tenants looking to downsize because of that?

Instead of downsizing, I’m hearing from business leaders that they want to reinvest in spaces that fit their company cultures and provide the best home for their employees. Some leaders are looking for spaces located closer to where their employees live, to reduce their commute, or areas with a variety of childcare options nearby, proximity to grocery stores, and other community perks to support their employees’ personal and family needs.

Some tenants have sought flexibility through shorter-term leases, three years instead of five or ten years, and by forgoing extensive renovation in return for the shorter term.

Some pre-COVID five-years leases are coming up for renewal, so we’ll learn more when those settle out. Most of the large landlords in our market are well capitalized, so we don’t foresee a massive selloff of buildings. However, we may see some opportunities with older, smaller buildings.

What was the biggest impact on the local commercial real estate scene in 2022? 

COVID is still with us, of course, but rising interest rates have definitely had an effect too. They have resulted in increased construction prices and carrying costs. Some people are dropping deals, or are not as eager to do deals. Some might not qualify for as much money as they previously would have.

When money was cheap you could do a deal and carry it for a while before it made money. But now when people think about the costs of purchasing, permitting, construction, insurance, etc., and add the cost of their debt service to that, it changes their view of the deal.

Is office inventory adequate? 

We are not overbuilt, which is good for the market. There is plenty of space in all size ranges but there aren’t as many choices as before.

What are your predictions for 2023? 

First off, everybody I know is busy right now, though people are certainly feeling cautious and hesitant. They’re waiting to see what happens with interest rates and the possible recession that has been discussed so often. I think interest rates will go up a bit, but I’m a bit of an optimist. We’ve had higher interest rates before, and I think once things become more normalized, business will pick upsteam.

Remote and hybrid work will remain with us, but we could see a time when employers flex their muscle and start requiring more workers to return to the office, especially if the job market weakens. Once this sorts out, we’ll know if there will be office downsizing, especially for larger tenants.

High end amenities will continue to play a key role in construction and leasing decisions, as employers know that this is an appealing feature for their workforce.

There is uncertainty regarding interest rates, inflation and back to work strategies, but with uncertainty comes opportunity, and that is why tenants and landlords need now more than ever to be working with brokers who understand the nuances of the transaction to make sure they’re protected and are able to use their space to be successful in their business, regardless of outside forces. For tenants it may be an opportunity for a flight to quality by moving to a newer and more amentized building. For landlords and investors there may be opportunities to acquire assets at a more favorable price and cap rate.

The bottom line is that I’m an optimist. Companies will always need a place for their employees, and I’m excited to see the evolution of office space. For the Baltimore region I am optimistic because of exciting projects in Baltimore City, including Baltimore Peninsula (Port Covington) and MCB’s revitalization of Harborplace. For my clients, both tenants and investors, I am optimistic that I can source solutions best suited for their business needs and their budgets.

Abby Glassberg has over 30 years of commercial real estate experience in Maryland, starting as a developer representative before transitioning to brokerage and investment sales. She is a past winner of the NAIOP Broker of the Year Award and 2018 NAIOP Transaction of The Year Award, three-time Maryland Top 100 Women Designee and inductee into the Circle of Excellence, and the Service Above Self Award recipient. Abby is a principal at NAIKLNB.