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The Suburban Maryland market has slowed throughout 2007 due to almost no new demand from one of the market’s staple tenants, Health & Human Services, and slower demand from the private sector. The slowdown in demand, coupled with a frenzied pace of new development along the I-270 Corridor, has led to increased vacancies and slower rent growth across the majority of the market. The two exceptions to the slowdown remain Downtown Bethesda and Silver Spring. Both of these submarkets continue to display strong demand from their professional services tenant base, but development has not yet ramped up in either submarket. Looking ahead to 2008, we can expect further slowing in the overall market as vacant new developments will continue to deliver to the market. Demand will remain crippled from both the government, because of the lame duck status of the Administration, and the private sector, because of the uncertainty of the national economy.
Leasing Activity
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1301 McCormick Drive (182,000 s.f., Class A), in Prince George’s County, signed two new leases this quarter:
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Comcast is relocating into 92,108 s.f. for ten years.
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EDS, changing from a subtenant to direct tenant, will take up 12,000 s.f.
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Vacating 8630 Fenton Street in Silver Spring, government contractor, JBS International, is relocating to 50,799 s.f. at 5515 Security Lane, also known as Rockwall II for ten years. JBS will be joining other tenants such as the Food and Drug Administration, and the Department of Health and Human Services.
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Government contractor, SGT, subleased 41,580 s.f. at 7515 Mission Drive in Greenbelt. The sublease spans four years and six months at the 114,700 s.f., Class B building.
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Booz Allen Hamilton has pre-leased 30,804 s.f. at Boston Properties’ One Preserve Parkway in Tower Oaks. The building, which totals 183,788 s.f. will deliver in the second quarter of 2008. The lease spans ten years.
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Scheduled to move in January 2008, the Travel Channel signed an 11-year deal for 30,612 s.f. at 5425 Wisconsin Avenue, also known as the Chevy Chase Center (234,000 s.f., Class A). The building is currently 98 percent leased. Other tenants in the building include Choice Hotels, Giant Food, NEA and Columbia Partners.
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The Reznick Group is expanding by 23,797 s.f. at 7700 Old Georgetown Road (185,470 s.f., Class B) in Bethesda for four years.
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The Prince George’s County Board of Education signed a deal at 1801 McCormick Drive for 23,613 s.f., backfilling the former Verizon space, for three years.
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Leasing 15,700 s.f., Ameriprise Financial will move into 6400 Goldsboro Road in Bethesda for four years. The Class B building was renovated in 1996 and is currently 79 percent leased.
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US Pharmacopeia signed a renewal for 13,742 s.f. at 1801 Rockville Pike (175,817 s.f., Class A). The building is currently 97 percent leased, with other tenants including, H&R Block, Clear Channel and Learning Tree International.
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The Center for Organizational Excellence, a government contractor, is relocating from a 5,000 s.f. lease at 15200 Shady Grove Road and expanding to a 13,000 s.f. lease at 15204 Omega Drive.
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Non-profit organization, Montgomery Collaboration, will move into 11,000 s.f. at 7361 Calhoun Place in North Rockville. The fifth phase in Metro Park North, 7361 Calhoun Place is a 221,588 s.f., Class A building.
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Vanda Pharmaceuticals expanded by 10,225 s.f. at 9605 Medical Center Drive in Rockville. The eight-year lease runs through 2016 and shifts the occupancy of the company to nearly 30,000 s.f.
Building Sales
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7200 Wisconsin Avenue, Artery Plaza, (276,191 s.f., Class A) in Bethesda is currently under contract to JBG for approximately $140 million ($506/s.f.). The Artery Group is the seller of the 95 percent leased building.
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6720 Rock Spring Park Drive was recently purchased by Piedmont from Opus. The Class A building delivered in the second quarter of 2007 and totals 187,000 s.f., all of which remains available. Piedmont, which will rename the building Piedmont Pointe, has a contract to buy the second building currently under construction from Opus upon its delivery. The building totals 222,000 s.f. and will deliver in the third quarter of 2009.
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30 West Watkins (90,000 s.f., Class A) in Gaithersburg was purchased by Boland Real Estate for approximately $21.4 million ($238/s.f.). The building was built in 2002 and will have 53,071 s.f. available at the end of December 2007. Boland will also occupy a portion of the building.
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The Maryland Trade Center I & II sold for approximately $58 million ($170/s.f.). Cambridge Property Group purchased the buildings from Washington Real Estate Investment Trust. Located at 7500-7474 Greenway Center Drive in Greenbelt, the Class B buildings total 342,000 s.f. At the time of sale, both buildings were 78 percent leased to major tenants including Lockheed Martin, State Farm Insurance, Bank of America and Orbital Sciences.
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Montgomery Village Executive Plaza (45,000 s.f., Class B) in Gaithersburg was purchased by the Scott Group from Richard Ho, a private local seller located in North Potomac, for $5.2 million ($116/s.f.).
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