First Quarter 2013 Market Review
On a relative basis, the Washington DC and surrounding metropolitan area remains one of the better performing real estate markets across all sectors. At the end of the First Quarter 2013, the vacancy rates for office, industrial and retail space stood at 13.8%, 11.1%, and 4.7% respectively.
While the current industry metrics are better than most major markets throughout the country, on a historical basis, they remain soft. The vacancy rate for office over the previous quarter increased by .2%; year over year the rate increased by .4%. Contributing factors to the lack of improvement in the office vacancy rate have been addressed in recent TD issues. They include Federal cutbacks in GSA leased space, meager private sector job growth and office users becoming more efficient in how they utilize space. Nevertheless, it’s expected that very little supply will be added to the market. Six of the twelve largest US Office markets showed declines in vacancy rates led by Denver and San Francisco.
Both retail and industrial space showed slight increases in vacancy rates with rental rates remaining flat. While real estate fundamentals (vacancy rates, rental rate trends, etc.) are showing negligible improvement year over year, increases in repetitive sales prices are exceeding the fundamentals. More specifically, year over year commercial real estate prices, on average, have increased approximately 6%. Despite marginal fundamentals, price increases are being realized because of historically low interest rates, reduced inventories of distressed properties, and an anticipation that fundamentals have stabilized and will improve.
The multi-family (apartments) market in the Washington, DC and surrounding metro area continues to remain strong. At the end of the first quarter 2013, the vacancy rate stood at approximately 4.6% which is an average among Class A and B properties. While the rate of absorption continues to remain strong, the annual supply of new units to the market is double the 5 year annual average. On average, the Washington Metro Area has delivered about 5,000 new units per year for the last few years. In 2013, it’s expected 11,000+ units will be delivered. Correspondingly, vacancy rates are expected to increase some, albeit remain at healthy levels.
Single family home starts (new construction) are continuing with a rebound over the recessionary lows. Single family starts for the first quarter of 2013 exceeded starts for the same period last year by 27%. The latest figures for March showed an annualized rate of 619,000 units. Factors contributing to this improvement are low interest rates/borrowing costs, historically low inventory levels of both new and resale homes, and the generally improving economy.
The Washington Metropolitan region continues to be one of the strongest housing markets in the country on a relative basis. In our region, price stability was reached in late 2011. Over the last year, many submarkets throughout the Washington Metro area recorded double digit growth. TD expects home prices to continue to rise, albeit at a more moderate pace as shadow inventory begins to hit the market.
TD Recent Transactions
Private Real Estate Developer
Tyler-Donegan has been engaged by a private real estate owner to develop a strategic real estate plan with regard to the potential development or transfer of development capacity of approximately 400,000 square feet of mixed-use density for a site located within the White Flint Sector Plan area in Montgomery County MD.
HealthMed Realty Partners
Tyler-Donegan's HealthMed Realty Partners division has been selected by the owner as the exclusive sales and leasing broker for 234 Eastern Boulevard, a 34,000 newly renovated medical office building in Hagerstown, Maryland
Rockville Fuel and Feed
Tyler-Donegan represented Rockville Fuel and Feed in a lease/purchase of 3 acres of property along Reich’s Ford Road in Frederick. The property will be used for a small batch plant for their concrete services division. Based out of Rockville, MD this new location will allow RFF to better serve their growing customer base in Frederick.
CaerVision, Inc. is located at 4539 Metropolitan Ct. (at FITCI) and needed additional storage space. David Kaye negotiated some space with the building owner and this continually growing company has, for now, adequate storage. CaerVision provides digital media network and content service to healthcare facilities to turn waiting time into educational moments. Their mission is to improve people's lives through education.
Medigen, Inc. has been a FITCI client for several years and has decided it’s time to graduate. David negotiated 3,000 sf of space for them at the Riverside Technology Complex on Monocacy Blvd.
Medigen, Inc. is a biotechnology company that specializes in biomedical research in the areas of infectious diseases, cancer, and human gene therapy. Their expertise is primarily in cancer vaccines and vaccines against emerging and biodefense diseases.