- The Washington Times - Thursday, January 22, 2004

Suburban Maryland’s office market lagged in the Washington region in 2003, but analysts said there is potential for a recovery this year, particularly if the construction of office buildings ceases.

While Northern Virginia still has the highest vacancy rate of any market in the area, suburban Maryland showed the least improvement, as tenants fled eastern suburbs and found equally priced space farther north in Maryland or in Northern Virginia.

Prince George’s County had perhaps the roughest year of any office market in the area, as the rate of empty office space rose from 12.1 percent to 15.8 percent, real estate broker Cushman and Wakefield said in its year-end report, released yesterday.

In Montgomery County, the news was better, as the vacancy rate fell from 14.6 percent to 14.1 percent. More than 2.1 million square feet of office space was leased in Montgomery County, compared with about 351,000 for Prince George’s County.

The office vacancy rate in Northern Virginia fell from 20.5 percent to 17.6 percent. But to some real estate brokers, office space in suburban Maryland has been a tougher sell, because it lacks the convenience of space in the District and is $2 to $3 more expensive per square foot per year than many parts of Northern Virginia.

Analysts remained optimistic that suburban Maryland’s office market would rebound this year. Though there is no indication that tenants will demand more space, Cushman and Wakefield said, a slowdown in construction of office buildings will help keep vacancy rates from dropping further.

Several of the Montgomery County projects expected to deliver in 2004 are likely to be fully leased, including the new headquarters of biotech companies MedImmune and Human Genome Sciences and hotel giant Marriott International. Analysts also were optimistic that increases in the budgets for the National Institutes of Health and other agencies would result in office expansion by the end of the year.

“The flow of office space hitting the market … has slowed, while the construction pipeline continues to be disciplined,” Cushman and Wakefield said. “This should allow market fundamentals to stabilize until tenant demand increases.”

In other news …

• Oceaneering International Inc.’s Advanced Technology Group will move its headquarters from Prince George’s County to a 145,180-square-foot building in the Hillside Business Park in Hanover, Md.

Adtech plans to move its administrative offices and manufacturing operations into its new location by summer 2005. The company has 170 employees and plans to add at least 85 more by 2010.

• Buchanan Partners contracted to build on 6 acres inside the Innovation at Prince William biotechnology park in Prince William County. Buchanan said it will build two single office buildings totaling 90,000 square feet, to be leased to biotechnology and technology companies.

• Gingery Development Group entered into a joint venture partnership with the Tower Cos. to build Collington Trade Center, a 200,000-square-foot complex with flex, office and warehouse space in Upper Marlboro.

SLIP SLIDING

Office vacancy rates in Northern Virginia dropped last year in several major submarkets, as tenants take advantage of low rent rates.

MarketDec. 2002Dec. 2003

Reston/Herndon24.1percent19.4 percent.

Tysons Corner 18.917.0

Chantilly16.916.4

Loudoun County19.115.2

Source: Delta Associates

Property Lines runs Fridays. Tim Lemke can be reached at 202/636-4836 or [email protected]

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