Vacancies in warehouse and industrial real estate in metropolitan Baltimore dropped sharply in the first half of this year, as strong demand from consumer products and health care companies translated a broader economic recovery into help for the beleaguered commercial real estate business.
The local vacancy rate for industrial space fell to 17.9 percent at June 30, from 26.2 percent at this time last year and 19.7 percent at 1993's end, the Baltimore brokerage and management firm rTC Colliers Pinkard said. Buildings that combine office and warehouse space were 17.5 percent empty at the end of June, down from 20.5 percent a year ago and 18.8 percent in December.
A report from competitor Casey & Associates put the combined vacancy rate for the two categories at 17.6 percent, down from 19.1 percent at year-end.
"In my opinion, the recession as it relates to the industrial market is close to being over," said Michael A. Elardo, a Colliers Pinkard broker in Columbia who helped to prepare his firm's study.
The first half of the year saw big new leases from consumer products companies such as Fila USA, which distributes athletic shoes and apparel, electronics retailer Circuit City and Hecht's.
Mr. Elardo said at least a dozen tenants are in the market for 100,000 or more square feet of warehouse or industrial space, raising the hope that vacancies may fall much more by year-end. Some of the big names looking for space are the electronics chain Best Buy, the Seattle coffee shop chain Starbucks and Office Depot.
"I think if you look at the activity in the market today, the numbers should improve significantly at year-end as well," he said. "Not all these deals are going to happen, but if half of them happen it takes a tremendous bite out of the buildings that have 100,000 square feet available.
"We're going to see [vacancy in] our quality distribution space under 10 percent for the first time in four years," said Timothy Cahill, a broker for Casey. Overall vacancy rates are expected to be higher because the market includes a large number of older buildings, especially in Baltimore, that are functionally obsolete.
Mr. Elardo said developers in the corridor, including Winchester Commercial and Constellation Real Estate Inc., are gearing up to custom-build new warehouses for tenants.
"Build-to-suits become an item people look for because the inventory isn't around," said Constellation senior vice president J. Richard Uhlig. "The larger the use, the more likely they're not going to find what they want. When you get to 100,000 square feet or higher, there are very few alternatives for them."
Existing inventory is so thin because the recession brought development to a virtual halt after 1989 or 1990, he said.