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First the good news: The I-270 corridor remained one of the nation's few areas of job growth in the first half of the year. The bad news: The region has such a glut of office space that landlords are forced to offer huge tenant breaks, with up to a full year's free rent.

That's the bleak story told by the latest quarterly PricewaterhouseCoopers' Korpacz Real Estate Investor Survey, which shows that buyers are still stuck sitting on their hands waiting for further devaluations of distressed commercial property across the nation.

The survey forecasts more difficult times as property owners and banks await the shakeout of the ongoing decline in commercial space value, a surge of defaults on loans already under way and the approach of $153 billion of mortgage-backed securities coming due in 2012 across the nation.

In the meantime, landlords everywhere are growing more desperate to find tenants and to hang onto those already in their buildings.

Even Maryland's commercial gold coast, stretching north from Washington to Frederick, is suffering, despite the presence of high-quality federal agency tenants and private renters in the legal, financial services and biotech sectors.

The corridor added 200 workers in its financial activities and 6,600 workers in its professional and business services sectors during the first six months of this year but direct absorption was negative by almost 700,000 square feet during the same period, the report noted.

"Companies are returning space to the market and operating in smaller spaces," said an investor quoted anonymously in the survey.

The report said that "since tenants gained control of this market, asking rental rates have declined and concessions have increased. According to our Survey participants, free rent ranges up to 12 months per lease term and averages just over six months. Tenant improvement allowances are also available to tenants. For shell space, [allowances] range from $25 to $85 per square foot and average $46.07 per square foot."

And it's going to get worse for landlords before it gets better.

As tenants shrank their space, the overall vacancy rate surged 340 basis points over the past year to reach 16.5 percent at midyear 2009, the report said. It forecast a higher vacancy rate in near term due as an additional 1.1 million square feet of new space comes on the market with "very little pre-leasing activity."

Nationwide, property sales activity will pick up only when commercial lenders and property owners finally are forced to write off bad debts and report devaluations based on rising vacancies and falling rents.

"Investors seem surprised at the lack of quality buying opportunities given the problems in the financial markets and the continued weakening of the industry's fundamentals," Susan Smith, director, real estate advisory practice, PricewaterhouseCoopers, and editor-in-chief of the survey, said in a press release. "Some investors sense that near-term defaults with commercial banks will allow them to acquire quality assets at steep discounts, as banks may no longer be able to continue to ‘pretend and extend' troubled loans and would be forced to place assets up for sale."

While some investors are looking to the mortgage security debt due in 2012 to spur buying opportunities, commercial banks account for a much greater percentage of the total looming debt and could provide distressed sales sooner, the report said.

"It appears many banks are playing a ‘timing game' attempting to replenish their capital reserves in anticipation that the economic recovery will bolster property values," Smith said. "This may be a risky proposition given that commercial real estate's performance often lags what happens in the economy and in this game, the banks can ultimately lose."

Six buildings planned near Fort Meade

A new phase of building has begun near Fort Meade, with up to six office buildings totaling up to 300,000 square feet as part of Maple Lawn, a mixed-use planned community, according to project officials.

St. John Properties formed a joint venture with Greenebaum & Rose Associates, which has Baltimore and Washington offices, and is developer of the 600-acre project in Howard County that is designed to simulate a walkable small town. Construction has already started on two, single-story, flex-office buildings with combined space of more than 80,000 square feet of space.

All marketing and leasing activities will be handled by St. John Properties. The joint venture is part of plans to develop as much as 1.8 million square feet of commercial space at Maple Lawn, east of the intersection of Routes 29 and 216.

Plans for the new town concept include 1,300 housing units in addition to retail space, offices and 180 acres of open space with parks and a community center. The project will include more than 181,000 square feet of shops, services and eateries anchored by a Harris Teeter grocery set to open next month.

"The ‘where do my employees eat' question is instantly answered by the multiple selection of eateries — at varying price points — contained within Maple Lawn Maryland," said Ed St. John, president and founder of St. John Properties, in a statement. "The supermarket is a major draw with employees interested in completing their weekly shopping activities during lunchtime or after work hours."

St. John added that the joint venture "fills a gap" in his company's corporate portfolio, positioning the company to take advantage of Fort Meade's expansion under the Pentagon's Base Realignment and Closure program.

"Our diversified retail amenities, coupled with the critical mass of office product currently in place at Maple Lawn Maryland, will create an attractive environment for potential end-users," said Stewart Greenebaum, founding partner of Greenebaum & Rose. "From its inception, Maple Lawn planned a variety of commercial product. Being able to fulfill this commitment with the ‘Gold Standard' for R&D/flex space is extremely gratifying."

Each of the six buildings will offer tenant spaces that are 30 feet wide with 16-foot ceilings, and contain dock or drive-in rear loading options. Free surface parking will be available at the buildings and the company will handle all on-site maintenance and asset management services.

Marriott bids for gold for Chevy Chase hotel

Marriott said it expects to win gold certification for its green renovation of the newly opened Courtyard by Marriott hotel in Chevy Chase.

The $35 million project will be celebrated with a grand opening Tuesday, when the U.S. Green Building Council accepts the property's candidacy for gold certification under its Leadership in Energy and Environmental Design program.

The renovation produced a hotel that uses 100 percent renewable energy and maintains high energy-efficiency and water-conservation standards, according to Marriott information. The hotel features an on-site hybrid Zipcar for guest use and a solar panel to power the property's trash compactor.

Perhaps more important to the property's environmental impact is the fact that it's only three blocks from the Friendship Heights Metro Red Line station.

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.