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Suburban Maryland Office Report Q3 2022

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The Suburban Maryland office market registered negative absorption during the third quarter. Leasing activity picked up from previous quarters, with 35 deals over 10,000 square feet completed. Notable leases were signed by The General Services Administration at 6707 Democracy Boulevard who renewed for 226,091 square feet, Total Wine & More who renewed for 113,436 square feet at 6600 Rockledge Drive, and Arcellx who signed for 57,902 square feet at 800 King Farm Boulevard.

Supply & Demand

In Bethesda, Marriott’s new 734,000 square foot headquarters at 7750 Wisconsin Avenue delivered fully occupied this quarter. This removed almost half of the construction underway, resulting in just under 800,000 square feet under construction at the end of the quarter and is down from 1.4 million square feet a year ago. At the Pike & Rose development, 915 Meeting Street, a 276,000 square foot building and Twinbrook Quarter a 240,000 square foot building at 1600 Rockville Pike are two highly anticipated projects coming down the pipeline, expected to deliver in 2024.
Negative demand in Suburban Maryland ended the four-quarter trend of positive absorption, with over 300,000 square feet added back to the market. Class A product had the biggest impact on absorption this quarter, ending with just under 400,000 square feet of negative demand, compared to negative 93,432 the previous quarter. The combined Class B/C product marked four quarters of consecutive positive demand, removing 41,441 square feet from the market  

Rental Rate

The overall direct average asking rate increased during the quarter ending at $29.64 per square foot, up $0.14 from the previous quarter. The Class A rental rate increased $0.13 to end at $30.45, down $0.44 from this time last year. The combined Class B/C asking rent increased by $0.16 to end the quarter at 
$28.59 per square foot.

Vacancy

There was a 30-basis point increase in the overall vacancy rate during the quarter, ending at a record high 17.0 percent, up 
40 basis-points from this time last year. The Class A vacancy rate ended the quarter at 20.2 percent, an 80 basis-point increase from the previous quarter. The combined Class B/C product ended the quarter at 13.9 percent, a 20-basis point decrease from the previous quarter. As life science continues to be a prominent sector in suburban Maryland, office-to-lab conversions are an ongoing trend with many older, vacant buildings being bought and converted which could eventually help bring vacancy down in the market.


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Suburban Maryland Office Report Q3 2022

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