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Q3 2013 | industrial USE

BALTIMORE metro area

Industrial Market Report

Rebuilding the Supply Chain

regional overview
Overall, the Baltimore Industrial market has performed, and will perform, well throughout 2013. The Port of Baltimore is reporting a record year in imports and exports, which will increase later this year as Mazda recently signed a contract that would make Baltimore the home for all vehicle imports in the Northeast. While increased import activity has certainly strengthened the local economy as it relates to warehouse/distribution space, the region continues to see diminishing manufacturing facilities; Maryland lost nearly 33% of its manufacturing jobs in the last decade. Supply chain changes are reshaping the industrial market as companies retail and industrial strategies converge. Companies spend 5% of their budget on real estate and 50% on energy. Labor, energy costs, and patent protection are driving the move to on-shore production. Inland port development is creating new industrial opportunities, which in turn are driving investment and construction. An example being the proposed one million square foot warehouse planned for the former General Motors plant site in southeast Baltimore. Though the name of the tenant has not been confirmed, all signs point to Amazon as the likely driver behind this site. Additionally, construction started at 531 Chelsea Road in Harford County, which will be a 655,000 sf warehouse rumored to be occupied by Sephora. While office sales and leasing were relatively stagnant for most of the 3rd quarter, industrial space moved quickly as evidenced by the sale of the one million square foot Solo Cup Distribution center in Hampstead for $44 million within a month of putting the property on the market. Liberty Property Trust acquired the operating partnership in Cabot Industrial Value Fund III adding several industrial properties, mostly in Howard County, expanding their presence in the region. As more stabilized Class A assets are trading at low cap rates, the voracious appetite for investment in the area has led other investors to purchase empty buildings, an example being Exeter Property Group who recently purchased 7525 Perryman Court and the Harland Clarke warehouse. Principio Business Park, listed by Colliers International, will be fully permitted by Q1 2014 and will be the only developable land site north of the tunnel capable of over 700,000 sf of space. Other sales transactions included Vironex, which purchased 403 Serendipity Drive in Millersville to occupy for $1.1 million, and A. Duie Pyle who sold 6351 S. Hanover Road to Gramercy Property Trust for $5.9 million. Larger lease transactions in the region included RPM Warehousing & Transportation taking 270,000 sf at 8411 Kelso Drive, and FedEx signing a lease at 4801 Hollins Ferry Road for 101,945 sf. Specialized freezer facilities are few and far between in the region, even more so now that Bens Beauty Supply Distribution, Inc. announced they would renew their 61,000 sf lease at the Maryland Wholesale Food Center. Mias Beauty Supply also announced they would renew for 65,000 sf at 7855 Rappahannock Avenue. Creative Recycling took all 84,000 sf at 6725 Business Parkway in Elkridge, and AES signed on for 27,000 sf at Candlewood Commerce Center in Hanover. Maryland Packaging renewed for 10 years at 7030 Troy Hill after consolidating their operations to 55,000 sf. Victory Packaging expanded at 7605 Dorsey Run Road in Jessup occupying more than 200,000 sf. Clorox plans to move into a 945,720 sf build-to-suit warehouse in Aberdeen next summer, vacating their current 644,000 sf facility at 500 Old Post Road. With larger blocks of space becoming increasingly difficult to find, there will likely be a great deal of interest from bigger users. > Vacancy rate for bulk distribution space increased slightly to 10.1% and are expected to rise with several large projects being delivered in the next 24 months > Vacancy rates for flex space continued to decrease to 10.3% from 10.7% > Strong leasing activity is expected to follow new construction for Class A product as the Flight to Quality trend continues > Average rental rates for bulk Class A & B space has changed very little, hovering around $4.50 NNN for the past two years > Average rental rates for flex Class A & B space rose to $11.12 NNN after falling slightly last quarter

Net Absorption
(all product types)

2,000 1,500 1,000 500 0 -500 -1,000 -1,500 -2,000

2009 2010 2011 2012 2013

Vacancy Rate
(all product types)
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% Q3 2009 Q3 2010 Q3 2011 Q4 2012 Q3 2013

market indicators
Q2 2013 VACANCY NET ABSORPTION construction rental rate Q3 2013

research & forecast report | Q3 2013 | INDUSTRIAL use | baltimore metro area

Distribution Warehouse Asking Rental Rates

$5.40 $5.20 $5.00 $4.80 $4.60 $4.40 $4.20 $4.00 Q3 2012 Q4 2012 Q1 2013 Q2 20113 Q3 2013

Flex Space Asking Rental Rates

$12.00 $11.50 $11.00 $10.50 $10.00 $9.50 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013

> Catalogued Inventory: > Market Area: > Vacancy Rate: > Net Absorption: > Average Asking Rent: Class A & B flex buildings over 10,000 sf and distribution warehouse buildings over 100,000 sf. This inventory includes a total of 1,349 buildings consisting of almost 139,000,000 square feet of space Baltimore City and the surrounding counties of Anne Arundel, Howard, Baltimore, Cecil, Harford and Carroll. Total vacant space divided by the total inventory. The difference in physically occupied space within a given time period. Weighted average rent per square foot, triple net


Property Address 630 Hanover Pike 1904 Park 100 Drive 1007 Edgewood Road Seller The Hampshire Companies Arundel 100, LLC 325 W. Baltimore Street, LLC buyer STAG Industrial Management Exeter Property Group Edgewood Mini Storage, LLC sale date Aug-13 Sep-13 Aug-13 sale price $44,000,000 $7,650,000 $3,200,000 Price/SF 1,035,249 sf 120,000 sf 43,480 sf SF $42.50 $63.75 $59.61 Submarket Carroll County Ind. BWI/Anne Arundel Ind. Harford County Ind.

Property Address 7855 Rappahannock Ave 8411 Kelso Drive 1467 Perryman Road 9060 Junction Drive 4801 Hollins Ferry Road Lease Date Aug-13 Aug-13 Sep-13 Sep-13 Jul-13 Lease SF 61,000 sf 270,000 sf 945,742 sf 32,935 sf 76,742 sf Lessee Bens Beauty Supply Distribution RPM Warehousing & Transportation Clorox Company Peerless Specialty Flooring Global Experience Specialists, Inc Rate $4.00 est $5.25 est n/a $4.75 est $4.75 est Type Industrial Industrial Industrial Industrial Industrial Submarket Route 1 Corridor Baltimore County East Aberdeen Route 1 Corridor Arbutus

update: market comparisons Net Absorption

Submarket/County Howard County Prince Georges County Anne Arundel County Harford/Cecil County Baltimore East Baltimore SW Total SF 30,065,494 21,056,868 23,693,214 26,137,786 24,658,259 7,239,384 Vacant SF 3,838,113 2,508,620 2,571,152 1,069,695 3,302,617 943,213 Vacancy % 12.8% 11.9% 10.9% 4.1% 13.4% 13% Current Quarter 51,153 sf 127,474 sf -360,781 sf 448,073 sf -189,169 sf 23,743 sf YTD 156,636 sf -86,617 sf -369,140 sf 1,208,428 sf -39,975 sf 51,023 sf

New Construction
Current 38,227 sf 58,994 sf 0 sf 0 sf 0 sf 0 sf Completed 0 sf 0 sf 51,120 sf 0 sf 0 sf 0 sf

Rental Rates
WH/Dist $4.57 NNN $6.42 NNN $5.18 NNN $4.67 NNN $3.94 NNN $3.59 NNN R&D/Flex $11.10 NNN $8.95 NNN $10.49 NNN $10.00 NNN $12.39 NNN $6.60 NNN

research & forecast report | Q3 2013 | INDUSTRIAL use | baltimore metro area


Quarter Total RBA Vacant SF Vacancy % Current Q Absorption Current Construction Completed Deliveries Average Rental Rates

Q3 2013 Q2 2013 Q1 2013 Q3 2012

136,653,854 136,339,330 136,296,710 135,879,590

13,891,401 13,655,001 14,410,397 15,530,611

10.2% 10% 10.6% 11.4%

1,382,217 798,016 776,890 -255,547

38,227 38,227 80,847 417,120

51,120 93,740 350,000 0

$5.80 $5.70 $5.78 $5.50

482 offices in 62 countries on 6 continents

United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85

Howard County The industrial market in Howard County straddles I-95 and Route 1. Major employers include Best Buy and Verizon. The industrial market represents over 30,000,000 square feet of space. Vacancy rates stabilized this quarter at 12.7% with no new deliveries, and will likely trend down over the next several quarters. Recent transactions included Bens Beauty, which renewed for 61,000 sf in Jessup. Peerless Specialty Flooring signed a 32,934 sf lease at 9060 Junction Drive. Mias Beauty Supply renewed their lease at 7855 Rappahannock Avenue in Jessup for 65,000 sf. Anne Arundel County The industrial and flex market in Anne Arundel County is adjacent to Howard County and consists of over 23,600,000 square feet of space. Major employers include Fort George G. Meade, Under Armour and the National Security Agency. Vacancy rates rose to 10.9% from 9.2% as net absorption fell negative this quarter due in part to new construction deliveries. Liberty Property Trust announced they would break ground on two new Class A industrial buildings in Hanover that should be delivered by the end of 2013. Harford/Cecil counties The Harford and Cecil County submarket spans the I-95 & the Rt. 40 corridor up to the Delaware line and represents over 26,000,000 square feet of space. A few major employers in this market include General Electric, Bobs Discount Furniture, Clorox Sales, Rite Aid, Proctor & Gamble, as well as Restoration Hardware. Clorox announced they signed a 10 year lease for a 945,000 sf build-to-suit warehouse in Aberdeen that will be delivered next summer. 531 Chelsea Road, a 655,000 sf warehouse, is under construction with an anticipated delivery of summer 2014. Vacancy rates continue to trend downward ending at 4.1%, dramatically lower than the 13.4% vacancy at the end of 2011. Baltimore East This submarket encompasses the northeast and southeast portions of Baltimore City, as well as the eastern portion of Baltimore County, and contains over 24,600,000 square feet of industrial and flex space. Major industrial users for this area include Middle River Aircraft Systems, General Motors Allison Transmission, DAP Products, and W.R. Grace. Vacancy rates rose to 13.4%, but will likely stabilize there for the near future. RPM Warehousing & Transportation just leased 274,841 sf at 8411 Kelso Drive, and ETC Emerging Technology Center took 17,058 sf at 101 N. Haven Street. Baltimore Southwest The Southwest Baltimore submarket includes properties within the citys Central Business District, Midtown, as well as Woodlawn and Catonsville. This smaller submarket contains approximately 7,300,000 square feet of space. The expansion of the Port of Baltimore will likely have a positive effect for this submarket in 2013 as evidenced by the declining vacancy rate ending the quarter at 13%. Major industrial users include Veolia Transportation, Price Modern, Federal Express and UPS. The former GM site is being developed into a one million square foot warehouse that will very likely be occupied by Amazon. Prince Georges County Although Prince Georges county is not included in the Baltimore regional statistics, it remains an important and strategic location for the Baltimore area. PG County consists of 228 buildings and approximately 21,100,000 square feet of space. At the end of the 3rd quarter of 2013 more than 2,900,000 square feet of that space was vacant, equivalent to a vacancy rate of 14%.

billion in annual revenue


billion square feet under management 13,500 professionals


researcher: Nadia Kahler Vice President, Research & Transaction Management | Baltimore 100 North Charles Street Suite 1710 Baltimore, MD 21201
tel +1 443 543 1222 FAX +1 443 543 0191

This document/email has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy as to the accuracy of the information. This publication is the copyrighted property of Colliers International and/or its licensor(s). 2013. All rights reserved.

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