The Prince George’s County office market includes 21.9 million square feet of space. The amount of leased space grew by 34,000 square feet in 2012, after falling by 109,000 square feet during 2011. This compares to the 15-year annual average net absorption of 124,000 square feet. The direct office vacancy rate rose to 19.2 percent during 2012, from 18.3 percent a year earlier. The overall vacancy rate (with sublet space included) was 19.5 percent at year-end 2012, up from 18.7 percent a year earlier. Of note, a 269,000 square foot building that the University of Maryland constructed, and which is fully leased to the National Oceanic and Atmospheric Administration, was completed in July 2012. Average effective office rents (after concessions) in Prince George’s County decreased to $16.50 per square foot at the end of 2012, from $17.11 per square foot at year-end 2011. During 2012, the average effective rent decreased 3.6 percent, after declining 2.0 percent during 2011.
Effective rents in Prince George’s County are likely to continue their modest decline in 2013, as demand is lackluster and vacancy is high. Although demand is projected to pick up, it will likely remain restrained due to limited government leasing and a tentative private sector. These conditions likely will continue to give tenants the upper hand and cause downward pressure on rental rates.
Apartment market: Becoming more competitive
The high-end (Class A) apartment market in Prince George’s experienced a 2.9 percent increase in average effective rent during 2012, while the stabilized vacancy rate declined to 4.7 percent from 5.8 percent one year earlier. The overall vacancy rate for the county (including properties in initial lease-up) declined very slightly from 8.6 percent at year-end 2011 to 8.5 percent at year-end 2012. Effective rents for Class A low-rise units averaged $1,626 per month at year-end 2012, compared to $1,580 at December 2011. Concessions represented about 1.9 percent of face rent in this segment of the market at year-end 2012.
At year-end 2012, the 36-month pipeline of new apartment supply totaled 1,486 available units that were under construction or being marketed and 2,739 units that were still in the planning stage.
With more than 4,200 new units in the 36-month development pipeline it is likely that the Prince George’s apartment market will become increasingly competitive in 2013 and beyond. This will be true for both the Class A and Class B (lower-end) markets, because a growing Class A apartment inventory will likely push rents down, which will attract tenants from Class B properties who could not afford Class A rents previously.
Condominium market: Prices ticking higher
There have been 2,414 new condominium units built in Prince George’s since 2003. There are five projects currently selling new units in the county, with three of those projects located in National Harbor. These five projects have a total of 605 units of which 571 have been sold. The average price per square foot for a new condominium is $300; this is an increase of 1.6 percent over the past year. There are currently no condominium projects planned to begin marketing over the next three years, but the longer-term pipeline is extensive. There are 16 condominium projects on the drawing boards with almost 3,900 units, plus another 17 projects with more than 13,000 units that may be developed as condominiums or apartments. However, it is likely many of these projects will not materialize.
Michael Donnelly is a senior associate at Delta Associates. Staff at Delta Associates contributed to this article.