The office market in Howard County is so bad it's depressing. Yeah, that's the word. Depression.
"If the overall national economy isn't growing and you compound that with overbuilding, we have a depression in commercial real estate," said Robert Oare, manager of Manekin Corp. commercial real estate brokerage office in Columbia.
Howard County had such shimmering promise only two years ago. No place stood to benefit more from the evolution of Baltimore and Washington into a single metropolitan area. It would attract defense-oriented companies because of its proximity to Washington, would attract regional offices of national companies because both cities could be served from centrally located Columbia, and the strong local real estate sector would thrive on still relatively abundant open land zoned for development.
But the good times stopping rolling. Instead, 27 percent of the office space in the county is now owned by its lender, whether a bank, insurance company, pension fund or other institutional investor, according to a new study by W. C. Pinkard & Co. That percentage is far and away the highest of any submarket in metropolitan Baltimore.
Vacancy rates hover above 20 percent. And it looks like the news will get worse before it gets better. Even Ed Ely, a vice president at the Rouse Co., Columbia's best-known development firm, said the space on the Howard County market now is several years' supply.
"Most demographers agree that job growth is slowing through the 1990s, and it will probably be very slow for the next year and a half," said Mr. Ely, who is director of land sales and marketing for Rouse. "As long as there's no job growth, we're going to have this problem."
So what happened? Why is the office market in Howard so much worse off than anyplace else in metropolitan Baltimore?
Developers and real estate brokers point to the county's job mix, the same factor that once looked like a growth-galvanizing charm. They say out-of-town companies have closed some of their regional offices, the defense companies have stopped growing or shrunk slightly, and the financial service and real estate sector has nearly collapsed.
"In Howard County, 20 or 25 percent of the space is occupied by someone who in some way relies on real estate," Mr. Oare said. "Developers, title companies, attorneys, engineers, mortgage companies -- every one of them had to close space."
W. C. Pinkard & Co. broker Jamie Smith can rattle off a whole list of financial service and real estate companies that have consolidated their office space. From giants like Cigna Corp. to smaller operations like Hobbs Group, financial companies are putting space on the market, not taking it off.
Defense-oriented firms like BDM Corp. and Computer Science Corp. have also either stopped growing or cut back, he said.
Mr. Ely said that some out-of-town companies closed regional offices in Howard County, or nearby in the airport corridor area of Anne Arundel County, where America West Airlines is slated to vacate a 36,000-square-foot reser
vation center early next year.
"Lots of tenants have gone bankrupt, consolidated, or through a corporate consolidation left this marketplace," he said.
Virtually no one thinks Howard County's glut of office space will be worked off soon. In fact, The Ryland Group Inc.'s scheduled move to a new custom-built Columbia office building will add much of its old 100,000-square-foot building to the market, though Mr. Ely said some of that space has already been leased to other tenants.
"I don't see any impetus for growth in office demand anywhere," Mr. Oare said. "I don't think it's going to get better any time soon."
About the only good news is that there's no speculative space being built anywhere in the county. Rouse hasn't sold any land zoned for office buildings at its big Columbia Gateway business center in about three years, Mr. Ely said.
"Nobody would buy it anyway," he said.