Tale of Two Counties
- The largest lease of the quarter was executed by RegenxBio for 100,000 square feet at 9800 Medical Center Drive in North Rockville. It was the only lease at the 100,000 square foot threshold.
- Tenants continued to be attracted to 7272 Wisconsin Avenue in Bethesda as two more leases were signed. Enviva, an alternative energy provider, signed for just under 80,000 square feet, and Fox 5 signed for just under 60,000 square feet at the trophy office building.
- The 125,905 square feet of negative absorption was offset by 90,000 square feet of demolitions. This kept the vacancy rate at 14.8 percent for the third straight quarter.
In Suburban Maryland, demand for space in Montgomery County outperformed demand for space in Prince George's County with net absorption measuring 54,385 and negative 180,189 square feet, respectively. Deal velocity, also, highlighted the difference in demand between the two counties with eight of the top ten leases signed in Montgomery County during the quarter. Vacancy across the entire market remained static, falling in Montgomery County and increasing in Prince George's County. However, with the majority of new development occurring in Bethesda, it is expected that supply will outpace new demand leading to higher vacancy in Montgomery County.
While some submarkets in Suburban Maryland are thriving with high levels of deal velocity and new construction, other markets struggled to attract new tenants. Trophy Bethesda projects offer a rental discount from similar quality product in the District. In addition, tenant confidence has grown, allowing these new high-end Bethesda projects to quickly lease up. In areas without Metro access in Montgomery County and throughout all of Prince George's County, leasing has been stagnant. Tenants are demanding well ammentized, quality buildings, and there are simply few to choose from in these submarkets. Demand is expected to grow in areas like Bethesda, while it is expected to remain sparse in areas that do not have a more urban feel.