Office vacancy rate stays nearly unchanged in area

June 23, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,Sun Staff Writer

The vacancy rate for the Baltimore area's office buildings barely budged in the first half of this year, as a weakening downtown market offset moderate improvement in the suburbs, a leading commercial real estate firm reports in a new survey.

The Colliers Pinkard report also anticipates that modest local economic growth, further corporate downsizing by the likes of Blue Cross and Blue Shield of Maryland and further mergers in banking will keep the vacancy rate at about 15 percent for the balance of the year.

Overall, the area's office vacancy rate stayed constant compared with year-end 1994 because only 287,000 square feet was absorbed -- or removed through leasing activity -- from the area's 36 million-square-foot inventory through this month.

Colliers Pinkard and other industry analysts had previously predicted that leasing activity and a lack of office construction would steadily chip away at the area's vacancy level.

But that hasn't happened this year, largely because downtown Baltimore continues to perform poorly.

The vacancy rate there increased nearly 2 percentage points, to 20 percent, as First Fidelity Bancorp, AAA Mid-Atlantic Inc. and law firm Semmes, Bowen & Semmes scaled back space requirements or relocated.

"The downtown market is the most problematic, and prospects for the balance of the year remain soft," said Jeffrey B. Samet, a Colliers Pinkard vice president.

The city's older buildings also continued to generate losses, as the vacancy level in so-called Class B buildings jumped from 19 percent to 24.2 percent, according to the Colliers Pinkard report.

The higher rate is primarily the result of tenant relocations into newer buildings.

In all, downtown accounts for 50.4 percent of all the vacant office space in the metropolitan area, although it makes up just 38 percent of the market.

Colliers Pinkard's statistics do not take into account USF&G Corp.'s decision to abandon its 35-story downtown tower in favor of its Mount Washington campus, because that shift has not yet occurred.

Likewise, the report does not factor in Alex. Brown Inc.'s planned relocation to the 30-story Commerce Place.

The surrounding suburban markets performed better, lowering their collective vacancy rate by 1.3 percent from year-end 1994, to 12 percent.

The vacancy rate decreased slightly in each of the four suburban markets Colliers Pinkard tracks.

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