Tight space downcounty drives business upcounty
New growth rules squeeze market in Montgomery
Feeling a bit cramped downcounty, like maybe there’s no room for new office space in Silver Spring or Bethesda?
It’s only going to get worse with the new Montgomery County growth controls passed this month. So you’d better look upcounty, where developers are throwing up speculative buildings as fast as possible.
That’s the word from Pradeep Ganguly, director of Montgomery County’s Department of Economic Development, in the first edition of Montgomery’s Pulse, his agency’s quarterly economic development analysis.
‘‘The tight market conditions for Class A space in the downcounty area [are] expected to provide incentives for office expansion in the I-270 and Route 29 corridors,” according to the report.
Anticipating future space demands, developers have several Class A projects that have been completed recently or are expected to be completed in 2008. The report said that three new buildings alone will add 620,000 square feet of space along the Rockville Pike⁄I-270 corridor north of Bethesda.
It cited the completion of Monument Corporate Center I last month, with 200,000 square feet at 655 Watkins Mills Road, Gaithersburg; 4 Irvington Centre, completed in July, with 220,000 square feet at 805 King Farm Blvd., North Rockville; and 2000 Tower Oaks Blvd. in Rockville, with 200,000 square feet, where the Tower and Lerner companies are building their new headquarter suites.
Other buildings coming online in the corridor include the 350,000-square-foot, two-building complex in Rockville’s Redland Corporate Center, where Perseus Realty of Washington, D.C., broke ground this week, and Washingtonian South, where Washington Property Co. plans another two-building project with a combined 350,000 square feet, with delivery of the first in the first quarter of 2009.
There are so many new empty speculative buildings that the vacancy rate has soared upcounty, according to Cushman & Wakefield’s third-quarter analysis.
‘‘Most submarkets in Montgomery County continued to post vacancy rates close to market equilibrium (10 percent), with the exception of Gaithersburg,” where the completion of Monument center helped push the submarket’s vacancy rate 10 percentage points at mid-year to 29.5 percent in an area that has 3.7 million square foot of office space, according to the analysis.
Meanwhile, space remains very tight downcounty, with direct vacancy rates of 3.5 percent in Bethesda and Chevy Chase and 4.4 percent in Silver Spring, the report said.
At this point, the North Rockville, Gaithersburg and Germantown submarkets combined have an inventory of more than 14.7 million square feet, equaling the combined downcounty centers of Silver Spring, Chevy Chase and Bethesda. Rockville and North Bethesda have just more than 14 million square feet.
This report originally appeared in The Business Gazette.