Recession hurts suburban office leasing


October 14, 1991|By Adriane Miller | Adriane Miller,Special to The Sun

In other times, commercial real estate boosters in suburban west Baltimore County would have reason to celebrate.

Blue Cross and Blue Shield, the nation's largest private health in surance agency, moved about 2,550 employees to new corporate offices in Owings Mills in March. And the federal government is considering Owings Mills to build a 660,000-square-foot headquarters for the Health Care Financing Administration, possibly bringing with it 3,000 jobs.

But in this recession year, some commercial real estate brokers are calling the deals "robbing Peter to pay Paul," and few seem cheerful about the state of the Baltimore County market overall.

"When Blue Cross-Blue Shield moved to Owings Mills, you have to understand they moved out of somewhere else: Towson and Timonium," says Joe Cronyn, a senior associate with Legg Mason Realty Group Inc. in Baltimore.

And the HCFA must vacate some of its Baltimore County property, whether the government decides to relocate it in Owings Mills, the Inner Harbor or new facilities on Security Boulevard. The General Services Administration is planning to consolidate HCFA buildings and employees now spread between Washington and the Woodlawn complex by 1994.

"HCFA will leave a lot of vacant space," Mr. Cronyn says. "And in terms of the metro area, it will mean shifting jobs from one area to another, stealing tenants from one building and putting them in another. The net effect is no new economic growth. Nobody really wins with this deal."

Jeffrey Samet of W. C. Pinkard & Co. says the HCFA is a major anchor in a distressed market where lenders have already taken control of 16 percent of the total office property. "Were the GSA to select a site outside of this vicinity for the new HCFA headquarters, it could precipitate additional problems here," Mr. Samet says.

Mr. Cronyn says Baltimore County has seen its office vacancy rate double since the recession began. As negative as that might seem, the county has a lower vacancy rate than Baltimore City and Howard County, Mr. Samet says.

The north part of Baltimore County had the lowest vacancy rate as of mid-1991, with 13.5 percent. The western market had a 14.5 percent vacancy rate. Both vacancy rates were below the Baltimore metropolitan average of 18.3 percent.

"The suburban north is the healthiest of the submarkets in the Baltimore area," Mr. Samet says. "Clearly the Owings Mills segment of the suburban west is a strong market because it has been a build-to-suit market."

Most real estate brokerage firms say that essentially no speculative building is going on anywhere in the county.

Bob Levin, a partner with Kayne-Levin-Neilson-Bavar of Towson, says most new developments are specifically planned for companies that will occupy the sites themselves.

Developers who hope to lease existing space have to sweeten deals to entice tenants to their Baltimore County projects -- offering free rent, free interior customization and other concessions -- but prospective tenants are not now demanding as much as they are elsewhere, brokers say.

"In the western end, there haven't been the kind of concessions there are on, say, south Ritchie Highway," Mr. Levin says.

"We've made some concessions on occasion for a particularly large user," says Gary Attman, vice president of Attman Properties Co., a development, leasing and management firm. "But for the most part, our rents have met our expectations."

Mr. Attman says his firm is writing many leases in the suburban xTC west area, "typically five-year leases at around $18 to $20 [per square foot] for the first year, with a full build-out."

He is upbeat about the Baltimore County market, even with its problems.

Suburban west is "surprisingly strong," he says. "We have been able to lease up almost all of our space there."

One Attman property known as the Executive Center -- five buildings totaling 98,000 square feet at the northernmost boundary of Pikesville -- has an absorption rate of about 94 percent. He says other properties are doing just as well.

Mr. Samet believes that if the market hasn't hit bottom, "we're very close to it now. But I'm not sure anybody really knows."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.