3rd Quarter 2011 Market Review
Through September, Moody’s national “All Property Type Aggregate Price Index” showed that commercial property pricing was up 12.6% from its peak lows reached approximately 24 months ago. The monthly index tracks price changes from actual sales transactions for each property type (i.e. retail, office, industrial, multifamily). Over the last quarter, the majority of property sales have included non-distressed and non-trophy types of assets. These represented approximately 60% of all property sales during the quarter. Distressed sales and trophy asset sales made up 28% and 12% respectively during the quarter.
Locally, in the Washington Metropolitan Area, modest improvements were seen in the metrics of every property type. The best performing in terms of the lowest vacancy rates and increasing rents were retail and multifamily.
The vacancy rate for the retail property sector improved slightly falling from 5% to 4.8%. The average quoted rental rates for retail space stood at $23.27 per square foot. The multifamily sector maintained a vacancy rate of approximately 5% over the last quarter. There was positive net absorption of 575,179 square feet of retail space over the 1st quarter.
The industrial property sector ended the quarter with a vacancy rate of 12.2%-slightly lower than the prior quarter. There was positive net absorption of 335,344 square feet. Average quoted rental rates remained the same at $9.20 per square foot.
Office vacancy rates were also down slightly with a current vacancy rate of 13%. The vacancy rates for Class A, B and C property types were 14%, 12.5% and 8% respectively. Over the past quarter, there was positive net absorption of 691,810 square feet. SF average quoted rental rates stood at $34.05 per square foot.
While the improvements in the performance of all property sectors were modest, the positive trend is welcomed by all industry participants. The trends locally suggest that we have reached the bottom and some stability with the expectations of a slow continued improvement in property fundamentals. Not surprisingly, the keys to accelerating this trend are business expansion and job growth. Perhaps providing a sign that this may come, small business sentiment/confidence showed an improvement in September as published by the National Federation of Independent Business Owners.
(*Stated vacancy and absorption rates are courtesy of CoStar.)
Tox Path Specialists, LLC
David Kaye of TD is pleased to have represented Tox Path Specialists, LLC in leasing lab/office space for its expansion and relocation. Tox Path will be relocating to Frederick from the Technology Innovation Center at Hagerstown Community College. Tox Path Specialists, LLC is a biotechnology company specializing in veterinary pathology studies. They will be located in the Riverside Technology Park in a 4,500 sf facility after signing a 7-year lease with St. John properties.
David also represented UR Solar Power, LLC in their relocation from FITCI to 50 Citizens Way (Creekside Plaza) in downtown Frederick. UR Solar is occupying roughly 2,000 sf on the 4th floor.
As property manager & leasing agent for Hyatt Industrial Park, TD negotiated a renewal and expansion with BioAssay Works, an existing tenant within the building. BioAssay Works offers extensive experience in the development of rapid, point-of-care, lateral-flow-format diagnostic assays. They also offer an array of other biomedical products and services. While the company is relatively new, they are managed and owned by biomedical veterans who are successfully growing the company at a rapid pace.
528 North Market, Frederick, MD
Retained by the Kirby family to sell property that previously housed a variety of auto dealerships and a gas station, Brian Duncan recently sold the gas station component. Previously he secured tenants for the balance of the property. One lease Brian secured for the property included Habitat for Humanity, which located its ReStore in a 20,500 SF building on the site. Sean Kirby was appreciative of the efforts of Brian and the Tyler-Donegan team to secure top value on the recent sale, as well as being able to secure a long term income stream on the balance of the property with ReStore as the tenant.
Dorsey Road, Hanover, MD
Brian Duncan of TD structured a Lease/Purchase for commercial property across from the BWI Airport. The site included 1 acre with some existing buildings. The tenant/purchaser will operate a commercial towing business from the site. The creative structure enabled both the seller and purchaser to achieve their goals from the transaction.