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Maryland Governor Hogan’s Good News for Baltimore’s CBD, Demand Rises for Mental Health Space

Among Maryland’s hardest hit submarkets the past 12 months is the Baltimore Central Business District (CBD), where the vacancy rate has risen to 16 percent, according to CoStar Group. Notable departures from companies such as T. Rowe Price and Legg Mason have accelerated during the pandemic due to aging infrastructure and rising crime, coupled with the expansion of sexy nearby submarkets, Inner Harbor East and Harbor Point.

Combined these factors have stressed property owners and businesses trying to survive. Downtown restaurants in particular have suffered even more from the double whammy of the area’s rising pre-pandemic vacancies followed by the crushing hit from the spread of COVID-19 and government shutdowns.

State government swoops in
But Baltimoreans just received some good news from Maryland Gov. Larry Hogan that is sure to spur economic and social revitalization of its CBD. Over time the State of Maryland will be relocating 12 agencies and approximately 3,300 employees to available properties throughout the CBD from an aging Midtown office complex known as State Center. The first agency on the move will be the Department of Human Services (DHS), which has an RFP out for approximately 105,000 square feet of office space. The Department of Health is up next seeking a new home for its more than 700 people.

Steven Cornblatt, Trout Daniel & Associates

With the end of the pandemic on the horizon, remote working is expected to decline with more people wanting to get back to their physical offices where they can interact and collaborate more effectively with coworkers. Teams, Zoom and other online meeting options will continue to have a permanent place in our work world, but as someone once said, “There’s no place like the office.”

“Baltimore’s historic CBD faces a chicken-and-egg problem, one rendered more challenging by the pandemic and the emergence of remote work and hybrid staffing models,” remarked economist Anirban Basu, chairman and CEO of Sage Policy Group. “For top-tier tenants to locate in Downtown Baltimore, they require an amenity-rich environment, including clusters of restaurants, specialty retailers and service providers. In general, there is a dearth of such amenities.”

Basu noted that without sufficient tenancy, there is little reason for restaurateurs and other entrepreneurs to maintain a presence in the CBD. But, he pointed out that the State’s investment in the CBD has brightened the submarket’s outlook and should drive private investment in the office sector.

A healthy return
Beyond the great news for City of Baltimore, the entire greater Baltimore area has seen a recent spike in demand for mental health office and clinical space. Given the psychological struggles people are experiencing associated with pandemic seclusion, dealing with social injustice and unrest, daily news of violence all around us and widespread unemployment, state governments and the federal government are providing funding both for people in need of mental health services and for organizations seeking to provide the support needed.

So, in addition to the robust access to mental health services along with the State’s relocation activity as an economic driver for Baltimore’s CBD, allowing for businesses providing dining and other amenities to foster our return to socialization will not only be good for business but for the people who own, operate, support and patronize them.

— By Steven Cornblatt, Principal, Trout Daniel & Associates. This article originally appeared in the April 2021 issue of Southeast Real Estate Business.

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