MARKETBEAT

Suburban Maryland
Office Q1 2017

SUBURBAN MARYLAND OFFICE Economy

The Washington, DC metropolitan region continued its robust economic
Economic Indicators expansion in the first quarter of 2017, adding a total of 26,800 net new
12-Month nonfarm jobs to payrolls in January and February. A staggering 14,900
Q1 16 Q1 17
Forecast of those jobs took place in Suburban Maryland jurisdictions. Only two
D.C. Metro Employment 3.21M 3.27M
other months on record February of 1996 and March of 2010 have
surpassed the amount of job growth created in either January or
D.C. Metro Unemployment 4.1% 3.8% February of 2017. Job growth was led by a variety of sectors, including
Retail (3,260 jobs), Professional and Business Services (2,560 jobs),
U.S. Unemployment 4.9% 4.8% Leisure and Hospitality (2,440 jobs), Construction (1,890 jobs) and
Education and Healthcare (1,860 jobs). The unemployment rate for
Montgomery and Prince Georges counties ended February, 2017 at
3.3% and 4.2%, respectively.
Market Indicators (Overall, All Classes)

Q1 16 Q1 17
12-Month Market Overview
Forecast Suburban Maryland ended the first quarter of 2017 with 75,294 square
Vacancy 20.8% 19.6% feet (SF) of positive absorption. The I-270/Rockville submarket alone
accounted for 273,224 SF of newly occupied space; Lockheed Martin
Net Absorption (sf, YTD) 267k 75k
contributed to this by taking 25,979 SF of space at 700 King Farm
Under Construction (sf) 234k 75k Boulevard. Absorption did decrease by 383,072 SF from the fourth
quarter of 2016 to the first quarter of 2017. Year-over-year overall
Average Asking Rent* $26.91 $26.04
vacancy in Suburban Maryland declined by 100 basis points (BP) closing
the first quarter 2017 at 19.6%; the markets overall vacancy rate hasnt
*Rental rates reflect gross asking $psf/year been this low since the fourth quarter of 2013 when vacancy was 18.3%.
The decline in vacancy was due primarily to two large move-ins: NIH
Overall Net Absorption/Overall Asking Rent occupying 140,852 SF at 6700 Rockledge Drive in Bethesda, and
Emmes taking 27,860 SF at 5280 Corporate Drive in Frederick. Although
4-QTR TRAILING AVERAGE NIH took occupancy at their new location this quarter, they have yet to
3 $29.00 vacate their current location at 5635 Fishers Lane and wont until the
x 100000

middle of 2018.
$28.50
2
$28.00 New leasing activity for the first quarter of the year totaled 548,109
1 square feet SF a 34.6% decline from the first quarter of 2016.
$27.50
Montgomery County accounted for 343,870 SF of the total leasing
0 $27.00
activity, with Prince Georges County capturing 167,169 SF of the total
$26.50 and Frederick County accounting for roughly 37,000 SF. Despite the
-1
$26.00 substantial decline year-over-year, leasing activity should begin to pick
-2 up, since a minimum of at least 150 leases are scheduled to expire in
$25.50 2017.
-3 $25.00
2011 2012 2013 2014 2015 2016 Q1 17 There were no new deliveries in the first quarter 2017 although 75,000
Net Absorption, MSF Asking Rent, $ PSF SF of spec, Class A, office space is under construction at 5801
University Research Court in College Park, set to deliver in the fourth
quarter of 2018. In the Bethesda/Chevy Chase submarket, a handful of
new projects will hit the market in the next few years, including 4747
Bethesda Avenue and 7272 Wisconsin Avenue. Both projects are
Overall Vacancy
scheduled to break ground this year. Construction on the new Marriott
HQ at 7750 Wisconsin Avenue in Bethesda is also set to begin in 2019,
24% and is scheduled for a 2022 delivery.
22%
Outlook
20% Suburban Maryland still drags behind the District of Columbia in terms of
market fundamentals and with the priorities of the new Trump
18% administration favoring defense-heavy Northern Virginia in lieu of the life
Historical Average = 19.5%
sciences agencies that flourish in Suburban Maryland. Leasing activity
16%
should still start to pick up speed as a wave of lease expirations are set
14% to hit the market in the coming months.

12%
2011 2012 2013 2014 2015 2016 Q1 17
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 MARKETBEAT

Suburban Maryland
Office Q1 2017

OVERALL
CURRENT QTR YTD YTD OVERALL
SUBLET DIRECT OVERALL UNDER AVERAGE
INVENTORY OVERALL NET OVERALL NET LEASING AVERAGE
SUBMARKET VACANT VACANTVACANCY RATE CONSTRUCTION ASKING RENT
(SF) ABSORPTION ABSORPTION ACTIVITY ASKING RENT
(SF) (SF) (%) (SF) (ALL
(SF) (SF) (SF) (CLASS A)*
CLASSES)*
Pike Corridor 11,079,464 133,246 1,746,623 17.00% -51,388 -51,388 87,882 0 $28.26 $31.25

Silver Spring 4,877,684 32,304 503,627 11.00% 22,772 22,772 45,994 0 $28.83 $31.19

I-270/Rockville 9,388,900 74,114 2,113,830 23.30% 273,224 273,224 74,720 0 $27.58 $30.35

Germantown 1,908,759 4,616 397,303 21.10% 6,952 6,952 1,988 0 $21.71 $26.46

Bethesda/Chevy Chase 8,641,418 129,020 690,638 9.50% -12,893 -12,893 100,116 0 $35.43 $42.06

Rock Spring Park 4,189,001 4,161 1,077,465 25.80% 151,052 151,052 22,880 0 $30.11 $31.31

Gaithersburg 2,022,113 862 306,029 15.20% 88,266 88,266 9,084 0 $24.61 $24.69

North Silver Spring 1,055,127 0 223,409 21.20% -48,993 -48,993 1,206 0 $24.04 N/A

Montgomery County 43,162,466 378,323 7,058,924 17.20% 428,992 428,992 343,870 0 $28.57 $31.23

Beltsville/College Park 4,209,640 9,892 1,117,558 26.80% -34,044 -34,044 101,673 75,000 $21.11 $20.96

Laurel 928,694 13,069 208,722 23.90% -37,460 -37,460 0 0 $18.35 $21.00

Greenbelt 2,837,971 19,818 933,500 33.60% 98,725 98,725 34,986 0 $21.30 $23.28

Landover/Lanham 2,947,320 200 834,017 28.30% 51,253 51,253 12,250 0 $21.18 $21.01

Bowie 780,082 5,789 151,370 20.10% 2,308 2,308 8,148 0 $24.57 $25.00

Oxon Hill/Suitland 1,719,938 0 359,912 22.90% 22,211 22,211 10,112 0 $25.45 $26.70

Prince Georges County 13,423,645 48,768 3,605,079 27.20% 102,993 102,993 167,169 75,000 $21.52 $22.33

Frederick County 2,745,520 1,896 526,725 19.30 -456,691 -456,691 37,070 0 $18.20 $20.61

MARKET NAME TOTALS 59,331,631 428,987 11,190,728 19.60% 75,294 75,294 548,109 75,000 $26.04 $29.30
*Rental rates reflect gross asking $psf/year

Key Lease Transactions Q1 2017

PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET

11785 Beltsville Drive 99,617 GSA FDA New Beltsville/College Park

15850 Crabbs Branch Way 15,053 Apex Companies New Pike Corridor
Department of Assessment and
30 West Gude Drive 14,207 New Beltsville/College Park
Taxation
6110 Executive Boulevard 11,460 Research Triangle Institute New Pike Corridor

11400 Rockville Pike 8,500 ASAM New Pike Corridor

Key Sales Transactions Q1 2017

PROPERTY SF SELLER/BUYER PRICE / $PSF SUBMARKET

No Notable Investment Sales For The Quarter

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