Volume of Baltimore Office Space Available for Sublease at Historic High
Nearly 1.8 million square feet of office space is currently available for sublease in the greater Baltimore region, double the available space at the start of the pandemic, according to MacKenzie Commercial Real Estate Services.
The total volume has declined slightly from a historic high of 2 million square feet last quarter, but the situation is unsettling to many brokers.
The state of the sublease market is indicative of what has occurred throughout the commercial real estate sector since the onset of COVID, and in the post-pandemic environment, said Jim Grieves, vice president of MacKenzie Commercial Real Estate Services. A tremendous number of companies have downsized due to the emergence and acceptance of remote and hybrid work situations, he said.
“Given the density of urban areas and the added hassle of commuting downtown using public transportation, cities around the country were hit particularly hard as many organizations either moved to the suburbs or established a second, satellite office away from the city,” Grieves told Commercial Observer. “In an attempt to recoup certain costs and expenses, some companies put space on the market as a sublease situation, while others simply turned it back to the landlord.”
For example, Transamerica vacated a high-profile space in Baltimore’s central business district to downsize and subsequently move to Harbor Point on the east side of the city. Jewelry company Pandora relocated completely out of the city in its move to New York City, but that provided the opportunity for law firm Semmes Bowen & Semmes to backfill the space at 250 West Pratt Street.
Still, finding appropriate takers for sublet space is tricky, he noted.
“The intended use needs to be compatible with the primary lessee, the term could be an issue if there are only a few years left, and of course the space itself needs to be a perfect fit,” Greives said. “Most companies do not want to pay for tenant improvement or buildout, so the space needs to be in near move-in quality condition. Rental rates aren’t always substantially lower than the original price so that is not a true incentive unless the tenant is willing to subsidize the rent or offer free rent.”
Currently, about 10 percent of the approximate 18.5 million square feet of available office space in the Baltimore region is sublease space, ranging from 23,000 square feet in a Columbia building to 157,000 square feet of industrial space in a suburban-area asset.
Looking ahead, Grieves believes it’s still too early to tell if there will be a leveling out of sublease space on the market because there is a prevailing sentiment that 2024 will be an extremely difficult year for commercial office leasing across the board.
Keith Loria can be reached at Kloria@commercialobserver.com.