JLL - After Bottoming Out in 2015 - 2016, Class A Office Vacancy Rising Consistently Across Metro Area

10/12/17

Class A office vacancy from Baltimore City to the suburban markets has consistently been on the rise over the past 12 months. After reaching a low of 8.3%, Baltimore City began trending upwards in early 2015, while the suburbs bottomed out at 10.1% in mid-2016.

The cause behind the shift in the long-standing trend of a tightening Class A market, however, differs from the city to the suburbs. In Baltimore City, the base of Class A tenants has shrunk, posting nearly 125,000 s.f. of negative net absorption in 2017. Flight-to-quality by Class B tenants has not been enough to offset move-outs, such as Laureate downsizing by nearly 40,000 s.f. in Harbor East. In the suburbs, though, new supply exceeding modest occupancy growth has caused the uptick in vacancy. Since 2016, the suburban Class A market has posted over 700,000 s.f. of positive absorption, but supply has grown by 1.4 m.s.f. at the same time.

The influx of new Class A product has pushed average asking rental rates upwards in the short-term, but market dynamics may shift towards the favor of tenants in submarkets as supply exceeds demand.

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