To most people, the word Baltimore conjures up images of the city’s vibrant downtown and historic areas, including Fells Point, the Inner Harbor, Federal Hill and Canton. In recent years, a number of significant multifamily developments have contributed to the rejuvenation of these trademark neighborhoods, bringing new households to areas previously dominated by daytime office workers and tourists. Recently completed multifamily projects in Baltimore include The Eden, Elm Street Development’s 270-unit project in Fells Point and The Zenith, Legacy Harrison’s 191-unit tower near Camden Yards. These properties have all leased briskly since opening in mid-2007. Across the Inner Harbor, Mark Sapperstein’s 250-unit project at the McHenry Row mixed-use development promises to be a major catalyst for the Locust Point neighborhood.
Baltimore has experienced an unprecedented amount of development activity during the last 5 years, as nearly 3,000 new multifamily units were recently delivered inside the city’s boundaries. The Baltimore region is also home to the Baltimore-Washington Corridor, which runs along Interstate 95 in Howard and Anne Arundel counties, another hot spot that stands to see an even greater volume of construction and investment during the next 20 years.
Among the major catalysts for the Baltimore-Washington Corridor’s rapid growth during the last decade were the expansion of Baltimore/Washington International Airport (BWI) and the opening of the Arundel Mills Mall. The area’s development and investment activity hit the accelerator following the U.S. Department of Defense’s Base Realignment and Closure (BRAC) orders in 2005. The BRAC process, which must be completed by 2011, will relocate 10,000 to 15,000 defense-oriented workers to Fort Meade, located in Anne Arundel County just south of BWI Airport. To accommodate these employees, 1.5 million square feet of government-owned facilities are currently being constructed at the base. Meanwhile retail, office and residential developers and investors have flocked to the area; local governments estimate the annual economic impact generated by BRAC will reach $5 billion.
In anticipation of a BRAC-related surge in demand, multifamily development in the corridor has intensified. During the last 36 months, a total of nine market-rate garden apartment communities, comprising 2,700 units, have delivered near Fort Meade. Several of the larger projects include the 496-unit Arbors at Arundel Preserve in Hanover, built by Bozzuto Development; the 445-unit Westchester at Cherry Lane in Laurel, developed by Archstone-Smith; and the 396-unit Lodge at Seven Oaks by Hanover Development. Despite the current turbulence in the capital markets, another 1,300 units near the base currently are under construction or are planned to start within 12 months.
Multifamily investment sales activity in submarkets near Fort Meade has also surged relative to other markets in the Baltimore region. In the 3 years since BRAC was announced, three dozen multifamily properties, totaling $1.5 billion, were traded in the corridor. Most recently, a $75 million portfolio transaction of three Columbia properties — Island Club, King’s Crossing and Beech’s Farm — was arranged by Transwestern on behalf of the seller, AIMCO. Other notable deals include the sale of the brand new Lodge at Seven Oaks in Odenton to TA Associates for $242,000 per unit in late 2007.
While recent troubles in the capital markets may decelerate building and sales activity region-wide during the coming months, BRAC’s enormous impact on the Baltimore-Washington Corridor will be difficult to impede. The corridor offers an excellent quality of life and relatively low housing prices to arriving households and businesses. An election referendum that passed on November 4 will allow slot machines at Laurel Racetrack — a development that could spur even more economic opportunities in the area. As 2008 draws to a close, interest in investment opportunities around Fort Meade and BWI Airport continues to be robust. The real estate community appears almost unanimously optimistic about the Baltimore-Washington Corridor’s future.
Robin Williams is a senior vice president with Transwestern’s Baltimore office.