After Historic Industrial Leasing Year in Baltimore Region, What Comes Next?

by Alex Tostado

Industrial leasing activity in the greater Baltimore metropolitan region last year began with a whimper thanks to the federal government shutdown in January and February, but quickly gathered steam and never looked back, even in the final days to close out the year. In fact, the pace was record-breaking and historic by any measurement, with more than 9.5 million square feet of space absorbed. This figure was approximately 40 percent higher than 2018, which was also a tremendous year.

There is more good news locally for companies that make their living developing warehouse and industrial space, brokers who match end-users for the available spaces and related professionals.

Central to this activity is that fact that lots of people live in the Combined Statistic Area of Baltimore-Washington, D.C. region, which is the fourth largest MSA in the country and is still growing. A certain Seattle-based online retail company is establishing its second headquarters just down the road in Northern Virginia and its positive impact is being felt throughout the region.

Kate Jordan, Vice President of NAIOP Maryland

The central Maryland marketplace boasts an enviable transportation network led by major north-south axis Interstate 95, is within close proximity to several major seaports (Baltimore, Wilmington and Philadelphia) and one-third of all consumers residing in the United States can be accessed within a one-day truck drive.

Developers led by Chesapeake Real Estate Group (CREG), Duke Realty, MRP Industrial, Prologis, Redwood Capital Investments and Stewart Properties have been extremely responsible with their construction activity. Since product has not been overbuilt, the leasing pace we are presently encountering is red hot.

One hint of pessimism that has creeped into the real estate vernacular of late is the predicted “lack” of product that exists in the pipeline. Zoned land is becoming increasingly hard to come by, but various factors have conspired to elongate the development cycle. Sometimes us brokers wonder if we have over time successfully leased ourselves out of a job. But we are confident that the product will continue to be available and the great times will continue so long as the economy continues to expand.

Another looming black cloud seems to be an excess of capital needing to be placed and a frenzied pace of investment in our market. Fortunately, rents continue to support these seemingly impossible sale prices as the fundamentals of our market remain strong and the scarcity of land only increases.

A look around the market

In Cecil County (touching Delaware), Stonewall Capital and Trammell Crow Co. are co-developing the new Southfields project, which will span approximately 3 million square feet of warehouse and industrial space within the business community portion of the Planned Unit Development. Also in Cecil County, Stewart Properties has attracted major tenants at Principio Business Park, including Smithfield Foods and Amazon. Activity in Harford County is among the fiercest in the region with Eastgate, MRP Industrial’s more than 2 million-square-foot industrial park, and CREG’s Trimble Road Business Park leading the charge.

All discussions about the Baltimore County industrial marketplace start with TradePoint Atlantic, which, at 3,300 acres hugging the waterfront with ample water, rail and highway access, is among the most significant logistics development throughout the East Coast, if not the entire country. Tenants continue to roll in, led by an 855,000-square-foot Amazon fulfillment center and a 1.3 million-square-foot Under Armour distribution center. Significant in its own right is Nottingham Ridge Logistics Center, the former outlets center site that quickly rose overlooking I-95 in eastern Baltimore County with the CREG project gobbling up tenants to fill its two speculative warehouse buildings totaling 750,000 square feet.

In Baltimore City, Duke’s Chesapeake Commerce Center, a 177-acre industrial campus built on the former General Motors plant, has also attracted Amazon, among others. CREG’s Port 95 Industrial Park, an adaptive reuse of a former cosmetic company’s manufacturing facility spanning 1 million square feet, is located directly across the street. Johns Hopkins Health Systems is among its notable tenants.

Activity in Howard County centers around the Maryland Food Center near the intersection of Md. Route 175 and U.S. Route 1. That corridor features MRP’s 175,200-square-foot warehouse building and Manekin’s Baltimore-Washington Logistics Center. The 60-acre project has attracted Domino Sugar, Pepsi and wholesale produce company G. Cefalu & Bro. Additionally, a newly constructed Terrapin Commerce Center, developed by Prologis, is now fully leased and by all accounts has proved to be a high water mark for Class A rental rates in the Baltimore-Washington Corridor.

Thinking small

Searching for an up-and-coming trend? Look no further than the mini-warehouses being developed by Merritt Properties and BECO (does business as Roll Up Easy). In response to the need for last-mile logistic operations and entrepreneurial-driven companies, the small bay buildings feature more flexible leases starting at $12 per square foot and average 1,000 square feet in size. The smaller facilities allow companies to be more flexible as needs rapidly change.

The mini-warehouse trend is a counter to the unrelenting pace within Baltimore’s industrial market, which continues to attract large-scale users with no immediate end on the horizon. Both Merritt and BECO have additional sites planned in the near future.

— By Kate Jordan, Principal at Lee & Associates, as well as Vice President of NAIOP Maryland and Chapter Vice President of SIOR Maryland/District of Columbia/Northern Virginia. This article originally appeared in the March 2020 issue of Southeast Real Estate Business, prior to the worldwide outbreak of COVID-19.

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