The Suburban Maryland industrial market wrapped up the fourth quarter of 2024 with notable momentum, driven by increasing demand for industrial and logistics space across the region. With improving economic conditions, including a third federal interest rate cut in December, the market witnessed significant leasing and occupancy gains. This positive trend signals ongoing investor confidence and continued demand for high-quality industrial facilities.
Strong Absorption and Leasing Activity
During Q4 2024, Suburban Maryland recorded 638,000 sq. ft. of positive net absorption, indicating that move-ins far exceeded move-outs. This marked a healthy year-end total net absorption of 985,000 sq. ft., underscoring sustained tenant interest in the region’s industrial properties. Despite this positive absorption, the vacancy rate ticked up by 20 basis points (bps) quarter-over-quarter, primarily due to the delivery of a bulk vacant property in Prince George’s County.
Leasing activity during the fourth quarter remained robust, with tenants signing agreements for 825,000 sq. ft. of space. This strong leasing volume reflects growing confidence in the market, buoyed by the stabilization of economic conditions and increased industrial demand. Key industry sectors driving this demand include e-commerce, logistics, and last-mile distribution.
Rising Rental Rates
Rental rates in Suburban Maryland have remained elevated, with a slight 2% quarter-over-quarter increase to $14.01 per sq. ft. on a triple-net (NNN) basis. This uptick in rental rates is largely attributed to ongoing demand for high-quality, well-located industrial assets, as well as rising construction costs. The combination of limited available space and consistent tenant interest is expected to keep rents at elevated levels heading into 2025.
Deliveries and Development Pipeline
In 2024, the Suburban Maryland market saw 1.3 million sq. ft. of new industrial space delivered, a pace consistent with the onset of the pandemic but lower than the record-high delivery levels of 2023. While this represents a slowdown in new completions, the development pipeline remains robust, with 2.8 million sq. ft. of industrial space currently under construction. These projects are expected to deliver through the first quarter of 2026, ensuring a steady stream of new supply to meet future demand.
The bulk of the new development activity is concentrated in Prince George’s County and Montgomery County, where developers are responding to tenant demand for state-of-the-art facilities with proximity to major transportation corridors. This ongoing development underscores the market’s long-term growth potential and attractiveness to both tenants and investors.
Market Outlook
Looking ahead, Suburban Maryland’s industrial market is well-positioned for continued growth. The combination of sustained leasing activity, a healthy development pipeline, and improving economic conditions bodes well for the region. While vacancy rates may fluctuate in the short term due to new deliveries, the long-term fundamentals remain strong.
As industrial users continue to seek well-located, high-quality space, landlords and developers are likely to maintain their competitive stance by offering flexible leasing terms and modern amenities. Additionally, with rental rates expected to remain elevated, the market will continue to attract interest from institutional investors seeking stable returns.
Conclusion
Suburban Maryland ended 2024 on a high note, with positive net absorption, strong leasing activity, and a promising development pipeline. The slight increase in vacancy due to bulk deliveries is expected to be a temporary blip in an otherwise healthy market. With demand for industrial space likely to remain strong, the region is poised for further growth in 2025 and beyond.
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