First quarter beats last 2 years' leasingThanks largely to...

COMMERCIAL REAL ESTATE

April 21, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

First quarter beats last 2 years' leasing

Thanks largely to the state of Maryland, the local office market did more business in the first quarter of 1993 than in the past two years put together, according to new figures compiled by Casey & Associates.

The market absorbed about 600,000 square feet of space in the first three months of the year. That's a net gain of about two downtown skyscrapers' worth of space, Casey research director Tim Jackson says.

Last year, the local market absorbed only about 422,000 square feet, Casey reported. In 1991, companies actually moved out of more space than they moved into.

The biggest chunk of space came from the state government's purchase of 6 St. Paul Centre, the 305,000-square-foot copper-colored colossus at Baltimore and St. Paul streets. Markets in Timonium and Hunt Valley leased an additional 150,000 square feet, and Annapolis gained about 90,000 square feet.

The losers were the Towson area, which lost about 20,000 square feet -- the equivalent of one floor of a large building -- and the Baltimore-Washington International Airport corridor, which lost 62,000 square feet of Class A office occupancy.

The region's total vacancy rate fell to 18.2 percent, from 19.4 percent at year-end, Casey said. Class A vacancy rates for the city fell to 17.8 percent, from 22.45 percent, but high vacancies in older, Class B buildings pushed overall city vacancies to 19.6 percent, the highest in the region. Baltimore County's rate was lowest, at 17.1 percent.

Doner scouts around for possible new home

It's too soon to mark this one down in the books yet, but ad agency W. B. Doner is scouting around for new digs.

"The timetable is very open," Doner Chairman Herb Fried said. "We're investigating and experimenting. . . . [A decision date] won't be tomorrow."

It doesn't need to be, because Doner's lease at 2305 N. Charles St. has about three years to run, he said. He said the firm hasn't decided whether it will leave the midtown-Lower Charles Village area early. And, for that matter, it might not leave its 33,000-square-foot home at all.

Mr. Fried said the agency is looking at downtown buildings, including Commerce Place, 100 E. Pratt St. and 400 E. Pratt St. and has also looked at One West Pennsylvania in Towson.

Provident Bank studies new operations center

Here's another big move on the horizon:

Provident Bank of Maryland is looking for a new operations center, and may move out of 84,000 square feet of space at Rutherford Business Center in Woodlawn.

Provident, which moved its back office operation to the center in 1984, has boosted the amount of space from 36,000 square feet to its present level. The bank also runs a branch office out of the building.

Provident spokesman Rob Taylor says the bank's lease expires at the end of 1994, and the bank must give a year's notice if it wants to renew.

"If we did move, we would definitely be staying in the city or county," Mr. Taylor said. "We wouldn't be moving to Harford or Carroll."

But the statement by Provident's broker, MacKenzie/O'Conor Piper & Flynn Commercial Real Estate Services, said Provident also will look closely at the cost of staying put, in a building controlled by the Rouse Co. of Columbia.

Many companies have been able to renew their leases at lower rents, taking advantage of landlord anxiety amid a glut of office space.

"They are evidently paying top dollar, and with that kind of square footage, they need to evaluate where they are," MacKenzie spokeswoman Patricia B. Farrell said.

Rising rents forecast for Md. suburbs of D.C.

Not having enough tenants during the real estate recession has been tough, but falling rents have been as big a problem -- bigger, for some projects. Now there are signs that in some parts of Maryland rents may be turning up again.

Julien J. Studley Inc., a New York-based brokerage firm that specializes in representing tenants, says rents in some Maryland suburbs of Washington will be the first to rebound.

"Tenants [looking for space in] Chevy Chase, Bethesda, North Bethesda and Greenbelt may find a tightening over the course of the year, with significantly reduced concessions and the beginning of an increase in effective rental rates for the first time in five years," the Studley report said.

The ability of developers to finance new projects will be the biggest factor affecting rents over the next few years, the report said. With banks still skittish about real estate, if no new construction gets financed, supply will remain so tight that even relatively modest demand will push rents higher.

But Baltimore City and immediate environs aren't likely to share in any short-term improvements, Studley projects.

The firm sees little private-sector demand for offices for the next two years. Government projects will continue to be the hottest game in town.

Service firms that have driven the Baltimore market are still trying to get out of existing commitments to real estate, rather than make new, expanded commitments, the report said.

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