In real estate, 1992 was Year of Living CheaplyThe Year...

COMMERCIAL REAL ESTATE

December 30, 1992|By Timothy J. Mullaney

In real estate, 1992 was Year of Living Cheaply

The Year That Was:

In 1992, the real estate market learned to love being poor. At least that's the conclusion you could draw from trends spotted by CB Commercial Real Estate Group.

* In Baltimore County, several big companies shifted from sleek, pricey Class A buildings to cheaper space -- and less of it. One example: Black & Decker Corp., which moved some operations to a Towson research and development building from a bigger, newer Hunt Valley building.

Other Hunt Valley tenants either reduced the amount of space they use or opted for cheaper digs. The most notable was Westinghouse Electric Co., which moved out of a 225,000-square-foot building on McCormick Road.

"When the opportunity presents itself, people who have the option are opting to save money," said Gary Dewey, senior vice )) president and head of CB's Baltimore office. "I think the recession taught us some lessons about overspending. I think it's going to stay with us awhile."

* Downtown, CB Commercial says daring investors can make a killing by buying office properties now, while vacancy rates are high and prices are depressed.

"Investment activity will pick up, and smart investors will make purchases based on very low [current] income streams and ignoring the value of vacant space," the report said.

* Defections to the suburbs from the city was not a major trend in 1992, the study said.

It cited only three companies that moved out of Baltimore for its suburbs -- though it didn't include AT&T Corp., which moved an office to Anne Arundel County. Maryland National Mortgage Corp., meanwhile, consolidated a split city-suburban operation downtown, and 100 E. Pratt St. lured some small suburban companies to the Inner Harbor.

"There's a very small price difference between going to the suburbs and staying in the downtown district right now," said Mr. Dewey. The reason: price-cutting and other concessions by downtown landlords. "And there are advantages [to staying downtown]. That's why I'm here."

Despite that shrinking rent differential, the national trend is very bad for cities, Salomon Brothers Inc. analysts say in a recent report.

"Suburban markets are continuing to strengthen relative to downtowns," Salomon's seers wrote, adding that in two years, suburban markets will have lower vacancy rates than central business districts will.

Modest recovery predicted for 1993

And the Year That Will Be:

A few blocks from CB Commercial's office, competitor W.C. Pinkard & Co. has cooked up a year-end market survey that focuses almost as much on 1993. Pinkard's outlook isn't great -- but after the last two years, even that looks pretty good.

Nineteen ninety-three will likely continue to see sluggish growth," Pinkard market maven Jeffrey B. Samet writes. "The outlook seems to be for a gradual, long-term recovery."

Pinkard expects the shrinking of the defense sector to continue, notes a published report that more layoffs are likely at USF&G Corp. and says there are few sizable tenants who will be expanding.

"Nevertheless, there is a sense that a Clinton administration will enact some sort of economic stimulus package and that Baltimore is well-connected to take advantage of new urban initiatives," the report said.

CB Commercial's boldest 1993 prediction is that rent concessions in the downtown market -- recently a staple for attracting tenants -- will begin to dry up.

"It won't be drastic and all of a sudden, but I don't think we'll see it go any lower either," Mr. Dewey said. "There were rental concessions even in 1986, 1987 and 1988, even when the market was at its peak."

Salomon is more bearish on the national market than Pinkard and CB Commercial are locally. "We expect the U.S. office building market to remain anemic through 1993," its report says. "More than one-half of all the new office jobs created in the country during 1992 was in the temporary help services field, which typically does not require a company to lease additional space."

Owners/managers name female president

The Building Owners and Managers Association of Metropolitan Baltimore has elected its first female president.

Jody Clark, a senior group manager for the Rouse Co., has been elected as volunteer chief of the trade group for the commercial real estate industry.

Ms. Clark doesn't talk much about her historic status, says Thomas Shaner, executive director of the local BOMA chapter. "Jody does not really harp on that factor," he said, noting that chapters in other cities have had female leaders.

Ms. Clark wasn't available for comment.

Comics distributor to move to Timonium

It isn't the biggest deal of the year, but it's one of the most fun: Diamond Comic Distributors Inc. is moving its headquarters from Woodlawn to Timonium. It will lease 28,000 square feet at the Timonium One building on Greenspring Drive.

"I've been working with them for 10 years, watching them grow," said Rosellen Fleishman, a Casey & Associates broker who worked on the transaction.

She said Diamond, the nation's largest comic book distributor, plans to move in March to a building that was hit hard when Blue Cross and Blue Shield of Maryland moved to Owings Mills.

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