Warehouse/Distribution Leasing Drive Volume
Leasing remained strong in Q3, with new leasing totaling 549,000 square feet (sf), led by the warehouse/distribution (W/D) sector at 477,500 sf, or 87% of activity, while office services (OS) captured the remaining 71,500 sf. Renewal activity totaled 203,400 sf, with W/D accounting for 156,300 sf and OS totaling 47,000 sf. This brought year-to-date (YTD) new leasing to 1.7 million square feet (msf), of which W/D product accounted for 75%, and YTD renewals to 605,200 sf. Notable Q3 transactions included DSV Air & Sea's 402,250-sf new lease at 9051 Gas House Pike in Frederick, Rivian's 83,950-sf renewal at 716 Ritchie Rd in Landover/Lanham, and General Insulation Company's 34,000-sf renewal at 845 Hampton Park Blvd, also in Landover/Lanham.
Prince George’s County Drives Positive Absorption
Suburban Maryland recorded 133,800 sf of positive absorption in Q3, with W/D product netting 168,000 sf and OS yielding negative 36,250 sf. Absorption totaled positive 277,000 sf YTD and remains bifurcated by product type, with W/D space recording positive 593,500 sf, while OS space posted negative 316,500 sf. Prince George's County drove absorption, posting 76,500 sf after the Department of Veterans Affairs moved into 283,000 sf in Landover while the Siemens Group left 76,000 sf and Pella vacated 41,100 sf, both in Beltsville. Montgomery County accounted for 49,000 sf of positive absorption after Lifestyle Furniture & Mattress moved into 81,500 sf and Habitat for Humanity occupied 26,000 sf, both in North Bethesda-Rockville.
Four construction projects have delivered 679,500 sf of new supply YTD, most recently the 100,900-sf facility at 15400 Calhoun Dr in North Bethesda/Rockville in Q3. An additional three buildings totaling 438,000 sf remain under construction, including two warehouse buildings at 6500 and 6600 Muirkirk Rd in Beltsville totaling 270,000 sf, and a 168,000-sf building within Frederick Logistics Center. An additional 1.7 msf of proposed developments rounds out the pipeline, pointing to continued, if measured, expansion across the market.
Vacancy Ticks Up As Rents Decline
Overall vacancy increased 90 basis points (bps) year-over-year (YOY) to 11.3% in Q3. W/D vacancy rose 40 bps YOY to 11.6%, while OS vacancy increased 200 bps YOY to 10.5%. Average asking rents declined, falling $0.13 per square foot (psf) YOY to $15.34 psf.
