The Northeast Corridor Express: Part 1
Robert Sammons Aug. 7, 2013, 6 a.m.
Well, not “express,” exactly, as this “train” will be making several stops as it heads north from Washington, D.C., to Boston. For the most part, we’ll stick with the major central business districts, but we’ll also slow down in Wilmington and Stamford, since these are also important office hubs. For those of you who are prone to being New York-centric (and I know you are), it always helps to see what the competition is up to along this bustling corridor to the north and south of NYC. (This is a two-parter, so you’ll need to return next week to finish the ride.)
Looking back at D.C. as we walk into Union Station to catch our train, we see the second-largest office market along the corridor, with the second-highest asking rent ($49.32 per square foot), in transition. Government tenants are in flux (“Freeze the Footprint,” as the Office of Management and Budget calls it), though, like a few other areas along the corridor, tech tenants are popping up. The 11.5 percent vacancy rate may rise further, helped by about two million square feet now under construction. Look—a gaggle of congressmen headed for summer vacation—a word, please?!
A quick stop in Baltimore, a bit north of the glistening harbor, and we’re told that the market has stabilized with vacancy at 13.6 percent and asking rents flat (about $20 per square foot in the CBD). At this point there is more action occurring away from the core. Was that John Waters who just hopped on our train?!
As we slow through Wilmington, we see a compact skyline with about 7.5 million square feet of inventory and a vacancy rate of just under 20 percent. Absorption is only slightly negative year-to-date, but demand by the primary tenant, financial services, remains muted. Now which way is that bar car?
Finally we’re seeing some real skyscrapers (though it took a while to build them—thanks a lot, William Penn) as we pull into Philadelphia. The city’s 43.7 million square feet of office inventory is doing just fine, with a vacancy rate of 13.9 percent and minimal negative net absorption this year (and at half the price of D.C. or NYC to boot). Office-to-residential conversions, combined with only minor new construction, could tighten the market further. Should we grab a cheesesteak, or do we have time to hit one of the fab restaurants in Center City?!
We cross into New Jersey and look out to see the many low and midrise buildings in the numerous office parks that dot the landscape. While we slow to a crawl and face the taller buildings of Jersey City while awaiting our turn to enter the tunnel to Manhattan, we contemplate the temptation of cheaper rents (currently $27.51 per square foot, compared with $53.76 per square foot just across the river). And there are all of those incentives Gov. Christie keeps throwing at tenants, too …
Ahhh, back in Manhattan at “glamorous” Penn Station (okay, give it 10 years). Making our way through the windowless corridors and finding ourselves temporarily directionally challenged, I will be happy to see my apartment building as I make it to street level (you’re on your own) just north of this soon-to-be booming neighborhood and get some rest before starting the journey north—next week!