For the second quarter in a row, there were very few deals of substantial size signed in Bethesda. The largest deal in the Suburban Maryland market was a renewal by Social and Scientific Systems for 57,934 square feet at 8757 Georgia Avenue in Silver Spring.
In contrast to the start of the year, few deals occurred in trophy buildings this quarter. Most developments currently under construction are set to deliver in 2020, with the largest concentration of construction in Bethesda and Northern Bethesda.
The office landscape shifted during 2019 in the Suburban Maryland market as 36 percent of the office properties under construction are suited for medical office.
Demand & Supply
For the first time since Q1 2019, the Suburban Maryland market registered positive net absorption. While all three classes saw positive demand, Class A was the most affected with 268,935 square feet being absorbed.
The positive absorption seen this quarter could help propel the Suburban Maryland market forward as growth has been stalled in previous quarters due to negative absorption.
Vacancy & Rental Rates
Rental rates have continued to rise in the market, increasing by $0.04 per square foot. If rental rates increase in the coming year, we could see the gap narrowing between the market favoring tenants over landlords in areas like Bethesda and parts of Rockville.
As the year ends, the vacancy rate for all office building types rose 9 basis points. The largest change in vacancy was seen in Class A office buildings, which increased by 55 basis points during the quarter to end at 15.9 percent. Despite several significant deliveries to the market, vacancy is expected to decrease due to multiple sizable move-ins expected in 2020.