After two consecutive quarters of positive demand, the Suburban Maryland office market conveyed negative absorption during the first quarter. Notable leases were signed by Tetracore at 77 Upper Rock Circle, who leased 99,206 square feet, and FINRA at 15200 Omega Drive for 36,149 square feet. Overall vacancy and rental rates decreased in Suburban Maryland during the quarter. Marriott’s new headquarters at 7750 Wisconsin Avenue is expected to deliver in mid-2022. Their former location has plans of being converted into a senior living facility.
Supply & Demand
There was 1.6 million square feet under construction at the end of the first quarter, an increase from 1.4 million a year ago. 201 National Harbor Boulevard delivered in Prince George’s County, a 97,000 square foot building in the National Harbor submarket. Unlike the previous quarter, the first quarter saw negative net absorption, with over 100,000 square feet returned to the market. This was due to Class A product that registered 194,595 square feet of negative absorption, however, the combined Class B/C market conveyed 94,288 square feet of positive demand.
Rental rates decreased during the first quarter ending at $29.40 per square foot, compared to $29.75 at the start of the year. The Class A rental rates decreased by $0.45 to end the quarter at $30.43. The combined Class B/C asking rents decreased by $0.26 to end at $28.12 per square foot. Montgomery County’s overall average asking rents continued to be significantly higher than Prince George’s County’s rates at $31.99 and $24.67 per square foot, respectively. Both increased from the start of the year.
There was a 10-basis point drop in overall vacancy during the quarter, ending at 16.3 percent and up from 16.2 percent a year ago. This rate is 10-basis points higher than this time last year. The Class A vacancy rate ended the quarter at 18.3 percent, which is the highest it’s been, surpassing its former peak of 18.1 percent which occurred during the second quarter of 2021. The combined Class B/C product ended the quarter at 14.4 percent, a decrease of 50-basis points from the start of the year, and down 20-basis points from the same time last year.