2019-07-02_DTZ戴德梁行_Office_Q1_2019_Suburban_Maryland_2页_609kb

Suburban Maryland Office Market Summary Q1 2019

Core Content Overview

The Suburban Maryland office market in Q1 2019 showed signs of resilience and growth, with improvements in leasing activity and a decline in vacancy rates. Despite some challenges, the market remained attractive for tenants and investors, driven by new developments and strong demand in certain submarkets.

Economic Indicators

• D.C. Metro Employment: Increased slightly from 3.3M in Q1 18 to 3.32M in Q1 19.
• D.C. Metro Unemployment: Continued to decline, reaching a low of 3.3% in Q1 19, the lowest since 2008.
• U.S. Unemployment: Decreased from 4.1% in Q1 18 to 3.8% in Q1 19.

Market Indicators

• Vacancy Rate: Declined by 80 basis points (bps) YOY to 18.6%.
• YTD Net Absorption: Registered a positive 108,005 sf.
• Under Construction: Increased to 2.0M sf in Q1 19 from 1.5M sf in Q1 18.
• Average Asking Rent: Rose to $27.81 psf in Q1 19, up 3.3% YOY.
• Class A Asking Rents: Declined by 3.1% YOY to $31.29 psf.

Key Market Trends

• Bethesda/Chevy Chase Submarket: Experienced the highest net absorption at 15,957 sf and had the highest average asking rent at $39.29 psf (Class A: $43.67 psf).
• Montgomery County: Vacancy rate dropped to 16.6%, a 130-bps decline YOY, remaining 200 bps below the Suburban Maryland average.
• Prince George's County: Vacancy rate increased to 24.3%, 570 bps above the average.
• GSA/Veterans Administration: Moved into 18,000 sf at 5202 Presidents Court in Frederick, helping to reduce vacancy rates.
• Discovery Vacancy: Expected to significantly impact absorption in Q2 2019 with a 500,000 sf vacancy, but activity rumors suggest the space may be quickly reabsorbed.

Key Lease Transactions

Key Sales Transactions

Outlook

• The Suburban Maryland market has not yet reached its peak, with trophy developments in Bethesda commanding record-breaking rental rates in the high 60s to low 70s.
• The market is expected to experience a significant swing in absorption due to Discovery's planned vacating of its Silver Spring headquarters.
• The trend of suburban/urban infill locations continues to attract demand, leading to tighter vacancy rates and potential increases in gross asking rents.

Conclusion

The Q1 2019 Suburban Maryland office market demonstrated a mixed but overall positive performance, with strong absorption, declining vacancy, and rising rents. Key submarkets like Bethesda and Montgomery County showed particular strength, while Prince George's County lagged. The market remains competitive, with new developments and strategic tenant moves shaping the landscape.