(left to right) moderator Allan Riorda, Lee & Associates Maryland; Matt Holbrook, St. John Properties; Ryan Goeller, NAI KLNB; Lance Schwarz, NAI Michael and Gerald Castellanos, Prologis
Participants and speakers participating in the Society of Industrial & Office Realtors (SIOR) MD/DC/Northern Virginia Chapter’s recent Spring Event expressed optimistic views about the industrial/warehouse asset class both nationally and in the DMV area. Approximately 100 commercial real estate development and brokerage professionals gathered at The City Club of Washington for an afternoon of networking and information sharing regarding the industry’s robustness and generally excellent health, despite some lingering challenges and potholes to watch out for.
The event was organized by Chapter leaders Faraz Cheema, SIOR; Adam Collins, SIOR, Transwestern; and Jonathan Reneau, SIOR, NAI Michael.
SIOR Global President David Lockwood set the stage for positivity by reporting that SIOR membership is approaching the 4,000 mark, with nearly 350 members added last year and a 21 percent increase in female membership. The 80-year-old organization, which now features chapters in 50 countries and 725 cities, is focused on “attracting the next generation of leadership, increasing advocacy efforts, becoming more diverse and inclusionary and implementing a forward-thinking approach to future missions.”
David Fritz, NAI KLNB; Matt Holbrook, St. John Properties; Ryan Goeller, NAI KLNB
Nick Luettke, an economist with Moody’s Analytics explained the complicated balancing act the Federal Reserve is navigating when it comes to setting interest rates. “There are many issues in play, most significantly the upcoming presidential election,” Luettke explained. “Lowering rates now or just before the election may be perceived as an advantage for one political party, and waiting too long could result in leverage for the other side of the table. There is also the danger of jumping the gun with reduced rates because that might spell the return of heightened inflation. On the flip side, the economy could slip into recession if action is not taken at the appropriate time.” Luettke said that, although the national vacancy rate for office space (which does not take sublet space into account) is approaching 20 percent, the suburban Maryland, DC, and Northern Virginia market is performing considerably better.
Allan Riorda, President, Lee & Associates|Maryland moderated the industrial/warehouse discussion and indicated “the Maryland, Washington, D.C., Northern Virginia region remains stable with no signs in the market of landlord concessions or rent lowering, although very little product is being developed when compared to recent years.” Riorda added that “Hagerstown has experienced a flurry of leases recently, resulting in the absorption of more than two million square feet of space. The pandemic-induced leasing activity responding to e-commerce requirements has now flattened out, but we are still experiencing healthy activity across numerous business sectors.”
David Fritz, NAI KLNB; John Rosso, Rosso Commercial Real Estate Services; Faraz Cheema and Allan Riorda, Lee & Associates Maryland
Matt Holbrook, Regional Partner for St. John Properties agrees and points to the company’s nearly 99 percent occupancy level in the greater Frederick and Northern Virginia markets as proof. “Leasing activity remains super robust in the flex/R&D asset class, as end-users continue to praise the Frederick region for its quality-of-life advantages, and our Northern Virginia business communities for their proximity to the nation’s capital, the data center sector, and the availability of highly-skilled talent. One challenge we are working to overcome is finding the next parcel of suitable land to develop, with extreme competition for land coming from data centers. Construction pricing and the availability of materials has stabilized in some respects, but costs are considerably higher across the board, which places pressure on rental rates and build-out costs.”
KLNB’s Ryan Goeller echoed challenges with the staggering increase in land prices. He cited a recent sale in Prince William County, Virginia that brought $3.7 million per acre and told the SIOR audience that pricing in the $4 million per acre range is imminent.
NAI Michael’s Lance Schwarz stated “The MD suburbs including Prince George’s County have seen significant industrial demand and growth as existing supply stock in Northern Virginia and Washington, D.C. is shrinking due to re-development in the data center and mixed use sectors.”
Prologis’ Gerald Castellanos joined the chorus by addressing the “unprecedented rental growth” experienced in the Maryland, Washington, D.C., and Northern Virginia region, which achieved a 25 percent rental increase in the past year.
“Tenants are thriving in the DMV area and that translates to competition for available space, new development and a healthy market,” Holbrook concluded. “Not every section of the United States can sing this tune, so everyone has a lot to be grateful for.”
