August, 2011

2nd Quarter 2011 Market Review

Consistent with the last several quarters, the retail and warehouse property sectors continue to maintain the best fundamentals in terms of vacancy rates and stability/increases in rental rates. The blended vacancy rate for all retail building types in the Washington metro area for the 2nd quarter was 5.1%, slightly above the prior quarter which was 5%. For the retail sector the highest vacancy rate exists among general neighborhood shopping centers, which was at approximately 8%. Power and specialty retail centers are among the lowest at around 5%.

Both nationally and locally, the warehouse sector showed the most positive movement in economic/property fundamentals. On a national level, the vacancy rate fell to a two-year low finishing the 2nd quarter at 9.8%, down from 10.4% one year ago. In the Washington Metro area, the blended vacancy rate (flex and bulk warehouse) stood at 12.3%, down from 12.7% during the 1st quarter. The vacancy rate for traditional/bulk warehouse stood at 11.1% for the 2nd quarter versus 11.3% for the first quarter. The vacancy rate for flex space stood at 14.9%, down from 15.5% in the 1st quarter. Average quoted rental rates for traditional/bulk warehouse space stood at $7.83, slightly higher than the prior quarter. Flex rates stood at $12.41 per s.f., also slightly higher than the prior quarter.

The blended vacancy rate for office (class A, B&C) stood at 13.2% at the end of the 2nd quarter. Vacancy rates for each class of office were 14.8% for Class A, 12% for Class B and 7.7% for Class C. Quarter over quarter, there was virtually no change in the office vacancy rates. The blended quoted rental rate stood at $33.58 on a full service basis. The quoted rental rate per office class was $37.79 per s.f. for Class A, $28.16 for Class B and $24.17 for Class C.

The “take away” regarding the performance of the commercial real estate (CRE) sector for the second quarter is that there continues to be a “lackluster performance”. Consistent with this lackluster performance, increases in commercial construction have been nominal. Following 18 month over month declines through the 1st half of 2010, commercial construction finally began a rebound which has been maintained through 2nd quarter 2011. Year over year commercial construction has increased by an annualized rate of 3%.

Expectations for the balance of 2011:

Recent economic data undermine a stronger recovery for CRE. The Federal Reserve’s recent Beige Book report indicated that economic activity continued to grow in the last quarter, albeit the pace of growth moderated. Consumer confidence improved slightly for July over June, but still remains low by historical standards. This reflects consumer concerns over continued high unemployment, lack of clarity demonstrated by congress regarding economic policy and the Federal Budget deficit, and notable large corporate layoffs. In short, we expect very nominal improvements in vacancy rates and rental rates across all product types for the balance of the year. These nominal improvements will be primarily attributed to the fact that there is little-to-no new construction (new inventory being added to the market). Correspondingly, any increase in demand will have a more meaningful/positive impact on CRE fundamentals/metrics.

Ruppert Properties

TD Represented Ruppert Properties in acquiring an 111,000 Square Foot Complex in Westminster, Maryland (Gateway West). Gateway West is a Class A flex complex containing four buildings.

The property is being repositioned and now is called Airpark Square. It is well located just north of Westminster at the entrance to the Carroll County Airport. Current tenants include the Social Security Administration, SAIC and Sheppard Pratt Health Systems. Other prominent tenants in the area include General Dynamics Robotics Systems and Knorr Brake Corporation. “We see these institutionally owned and maintained properties as an exceptional value-added investment opportunity," said Bill Meissner, President of Ruppert Properties. Meissner said the ability to purchase the property at below market value will allow Ruppert Properties to offer competitive lease rates. Joe Donegan and Jeff Cahall of TD worked with Ruppert on the transaction.

TD Sells Cornell Place in Frederick, Maryland

Retained by Auspex Electric to market and sell this 13,500 square foot warehouse building within the Stanford Industrial Park, TD secured a buyer and closed on the sale within a few months of being engaged for the assignment. Brian Duncan was the lead agent at TD who handled the sale.

TD has Secured Several New Listings

Some of these listings include approximately 14,000 square feet of warehouse for lease within the Industry Lane Business Center in Frederick, also 9,000 square feet of warehouse space within the McKinney Industrial Park in Frederick.

TD Welcomes David Kaye to its Commercial Sales & Leasing TEAM

David has been in the facilities management and construction industry for more than 35 years including a career in the U.S. Army Corps of Engineers. Additionally, he held senior positions at two major research universities (Yale and Stanford) and more than 17 years as the senior director, facilities and research services for the American Red Cross’ Biomedical Services Division. He holds professional certifications from several organizations in addition to his Maryland Commercial Real Estate License. He is a graduate of the University of Maryland and has received advanced technical training and education from the Department of Defense, Georgia Institute of Technology, OSHA and the Association of Energy Engineers.

His move to commercial real estate just felt like a natural career progression. David specializes in working with the biotech/life sciences and health care industries and provides services beyond transactional brokerage. Services such as space planning, laboratory layout, operations and maintenance planning and budgeting are just a part of his in-depth expertise.