Lockheed Martin re-ups for Rockville office space

Rendering courtesy of Forrester Construction Forrester Construction Co. of Rockville was awarded the contract to build this $8 million, 35,000-square-foot middle school in Washington, D.C., for KIPP DC, a network of college preparatory charter schools. Construction is to begin this month and the project is to be completed by March.

‘‘The office market in Montgomery County has historically been a stable market which is taking on greater importance today, and will provide us with opportunities going forward,” Ken Mulrane, Piedmont vice president, said in a statement.

Piedmont was represented by Keith Foery and Jovi McAndrew of Transwestern; Lockheed Martin was represented by Holly Kinkeade and Bernie McCarthy of Jones Lang LaSalle.

Piedmont is bullish on Montgomery County, where it acquired the recently constructed 186,000-square-foot Piedmont Pointe building in Bethesda last year for $69.8 million, according to a Securities and Exchange Commission filing. The building, previously called Opus Center at Rock Spring Park I, sits next to Opus Center at Rock Spring Park II, which is under construction. When completed, the two eight-story buildings will be connected and total about 407,000 square feet.

The property is on Rockledge Drive, next to an Interstate 270 interchange east of Montgomery mall. Both buildings are now available for leasing through Jones Lang LaSalle.

Suburban Marylandto see slow growth

The suburban Maryland office market will experience slow growth through the end of the year as the Washington region works through a correction phase, according to the first-quarter office report from Delta Associates of Alexandria, Va., and the Bethesda office of Transwestern.

Net absorption was slightly positive at 160,000 square feet during the first three months of 2008, compared with negative 180,000 square feet during the fourth quarter of 2007. The 2008 annualized total is only 640,000 square feet, which is less than half of the long-term average of 1.6 million square feet.

The report noted that Montgomery County was the absorption leader with 421,000 square feet during the first quarter of 2008, driven by pre-leased deliveries. Absorption in Prince George’s County was soft during the past three months due to major tenants giving up space, including Raytheon, which vacated 232,000 square feet in Upper Marlboro, and Hewlett Packard, which vacated 167,000 square feet in Greenbelt.

Suburban Maryland rents were up slightly by 1.6 percent on an annualized basis during the first quarter, compared with a 1.4 percent increase in 2007. But most other indicators are negative, with the overall vacancy rate for Maryland climbing to 11 percent, up from 10.2 percent in the first quarter of 2007.

At the same time, 3.2 million square feet of office space are in the pipeline, up from 2.9 million square feet one year ago. The pipeline pre-lease rate has tumbled to 23 percent, down from 41 percent last year.

The report warned against further speculative building, noting that projects set to deliver during the remainder of 2008 and 2009 are currently 14 percent and 30 percent pre-leased, respectively. That’s a bad sign, given that the 10-year average pre-lease rate is 53 percent.

‘‘With numerous projects currently in the pipeline and modest demand, for the next 24 months new spec development would appear warranted only for very special projects at superior locations,” the report said.

Baltimore outlookeven slower

Short-term office market conditions are even bleaker in the Baltimore region, with soft demand and steam building in the development pipeline, the Delta-Transwestern report said.

Net absorption was barely positive for the quarter at 133,000 square feet, falling from 1.7 million square feet in 2007. Rents were flat after increasing 0.8 percent in the first three months of 2007.

The overall vacancy rate reached 12 percent, up from 10.9 percent last year. But the new office space keeps coming, with 4 million square feet in the pipeline, up from 2.5 million square feet one year ago.

The pipeline pre-lease rate fell to 29 percent, down from 51 percent last year. The pre-lease rate for projects set to deliver in 2008 and 2009 are 18 percent and 48 percent, a troubling sign when compared with the 10-year average pre-lease rate of 33 percent.

Commercial real estate news items may be mailed to: Steve Monroe, The Business Gazette, 9030 Comprint Court, Gaithersburg, MD 20877; e-mailed to smonroe@gazette.net; or faxed to 301-670-7183.