The Baltimore office market closed out 2024 on a cautiously optimistic note, posting 145,000 square feet of positive absorption during the fourth quarter. This improvement helped drive vacancy rates down by 20 basis points (bps) to 19.7%. While the year-end figures still reflect the lingering impact of market challenges, the fourth quarter’s gains suggest the market may be turning a corner. Notably, all major tenant industries, except for the technology sector, contributed to positive absorption during the quarter, indicating a broad-based recovery across key segments.
Mixed Absorption Trends and Industry Dynamics
Despite the positive momentum in Q4, the year-end absorption figures reveal a net loss of 418,000 square feet for 2024. The bulk of this loss was driven by tenants in the technology and business services sectors, underscoring the ongoing struggles within these industries. While other sectors demonstrated resilience and contributed to occupancy gains in the final quarter, the technology sector’s negative performance continues to weigh heavily on overall market dynamics.
One bright spot in the leasing landscape was the robust activity witnessed during the third quarter, which recorded the second-highest quarterly leasing volume since the pandemic began. However, fourth-quarter leasing activity normalized, totaling 843,000 square feet—still surpassing the post-pandemic quarterly average of 722,000 square feet. This consistent leasing activity throughout the year signals a steady demand for office space, despite broader economic uncertainties.
Construction and Development Update
While leasing activity remained stable, new office development in Baltimore has slowed considerably. No new office properties were delivered or broke ground during the fourth quarter, reflecting a cautious approach by developers amid shifting market conditions.
Currently, only two office projects remain under construction. The highly anticipated global headquarters of T. Rowe Price, located at 1307 Point Street, is set to deliver 450,000 square feet across two buildings in the first quarter of 2025. Additionally, COPT’s 138,000-square-foot office project at 400 National Business Parkway in Annapolis Junction is scheduled for completion in January 2025. These projects are expected to enhance the supply of premium office space in the region, potentially attracting high-profile tenants seeking modern, high-quality environments.
Rising Asking Rates and Market Shifts
As the availability of high-quality space continues to increase, particularly in new developments, asking rates across Baltimore have experienced upward pressure. Currently, overall asking rates average $26.72 per square foot per annum on a full-service basis. However, rents for space in existing buildings have remained relatively unchanged, highlighting a growing divide between new, premium office space and older properties.
This trend reflects the growing importance of high-quality amenities and modern design in attracting tenants. Companies are increasingly prioritizing spaces that offer not only functional work environments but also features that promote employee well-being and productivity. Landlords of older properties may face mounting pressure to invest in upgrades to remain competitive in an evolving market.
Looking Ahead: A Balanced Outlook for 2025
As Baltimore enters 2025, the office market faces a mixed outlook. On one hand, the positive absorption in the fourth quarter and consistent leasing activity throughout 2024 are encouraging signs of recovery. On the other hand, the net absorption loss for the year and the ongoing challenges in the technology and business services sectors underscore the need for caution.
The completion of major projects like the T. Rowe Price headquarters and COPT’s office development will be closely watched, as their successful leasing could set the tone for further recovery. Additionally, the continued rise in asking rates for new construction suggests that demand for high-quality space remains strong, offering opportunities for developers and landlords who can meet this demand.
For businesses seeking to capitalize on the evolving market dynamics in Baltimore, it is crucial to stay informed about key trends and developments. Understanding where demand is headed and how the market is likely to shift can provide a competitive edge in securing the best office space at the right price.
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