Warehouse/industrial vacancy rate declinesTo borrow a...

COMMERCIAL REALTY

February 03, 1993|By Timothy J. Mullaney

Warehouse/industrial vacancy rate declines

To borrow a phrase from the late Sen. Everett Dirksen, a million square feet here, a million square feet there, pretty soon it begins to add up to real money.

That's the conclusion you could draw from a new study of the local warehouse market by Baltimore-based Casey & Associates. The study, one of the first broad surveys of the industrial real estate market, said tenants moved into about 3 million more square feet of warehouse/industrial space last year than they moved out of -- enough to drop the vacancy rate below 20 percent.

FOR THE RECORD - The spelling of C. William Struever has been corrected for the archive database. See microfilm for original story.

"We're by no means out of the woods. But as long as we keep not building, we're certainly on the right track," said Casey market research director Thomas C. "Tim" Jackson. "No notable new construction has taken place, and nothing new is really slated for the next year. In terms of [speculative] building, it'll be at least two years -- probably three -- before you see too much."

The vacancy rate for the region's 107 million square feet of warehouse/industrial space was at 19 percent at year's end, slightly better than the rate among office buildings, the Casey report said.

"Howard County was the primary benefactor . . . in 1992," wrote Mr. Jackson. The biggest deal, making up about three-fourths of the county market's gains, was Sears Logistics Services Inc.'s December decision to lease 945,000 square feet of space at the old General Electric Co. complex in Columbia.

The highest industrial vacancy rate was Baltimore City's 23.3 percent, which Casey blamed on the advanced age of much of the city's inventory. Two recent sales of city warehouses were made at sharply discounted prices, he wrote.

Harford County had the lowest vacancy rate, at 11.7 percent.

"You don't ever really get down to a zero vacancy," Mr. Jackson said. "Somewhere around 7 percent, that amount of space almost has to be vacant for any movement to take place. That might be a point of market equilibrium."

Late catch saves project for Baltimore

The city's most recent economic development catch was a last-minute save of a project originally aimed at Prince George's County.

Baxter International last week leased 40,300 square feet of space at 1104 Russell St., not far from Oriole Park at Camden Yards, to open a high-tech sterilization facility for surgical garments and instruments. The plant, which is scheduled to open around April 1, will serve an area from Delaware to Virginia. But until the last minute, the facility was ticketed for Beltsville.

Mark Shapiro, a broker at Struever Bros. Eccles & Rouse Brokerage Services, credited officials from the city and state with saving the deal.

But officials from both Baxter and the state Department of Economic and Employment Development say the University of Maryland Medical System, a big customer of Baxter's, played the crucial role in bringing the 140-employee facility to Baltimore.

"The University of Maryland Hospital really stepped in first," DEED spokeswoman Mary Lou Baker said.

City razing buildings at site hit by blaze

The city is demolishing some buildings it owns at the corner of 21st Street and Maryland Avenue, but officials say that doesn't mean redevelopment is coming very soon.

Development rights to much of the city-owned land are still up in the air, where they have been since a July fire damaged six rowhouses at the site.

Shortly before the fire, a group that had been awarded development rights had withdrawn from the deal, citing difficulty in lining up financing.

"We've had inquiries and are evaluating them," said David K. Elam, development director for the city Department of Housing and Community Development. He said one positive sign was the state moving into the old Baltimore Design Center:

"We think that's a plus for the area in terms of marketing the site."

He said the demolition is for health and safety reasons.

Commercial outlook 'cautious,' survey says

A new industry survey shows that local real estate professionals are taking a wary view of what's to come in the new year.

The survey by NAIOP -- The Association for Commercial Real Estate says 69 percent of respondents -- all NAIOP members -- say the 1993 outlook is "cautious." Their top concerns: financing, the economy and the glut of commercial real estate.

The basic finding of the survey: 1993 will be better, but not in the ways that matter most.

Respondents expect faster leasing of office space, but not enough to significantly ease the downward pressure on office rents in most cities.

By contrast, a report on the Baltimore market by CB Commercial Real Estate Services Inc. late last year expected local rent concessions to bottom out early this year.

Gary Dewey, head of CB Commercial's local office, said he doesn't see any reason to back off that prediction.

"Every single market is different," Mr. Dewey said. "We're seeing good activity.

"I have a good friend who runs the Boston office, and they're still in the skids. There's no way you can compare Boston and Baltimore."

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