Around the Region, Ups and Downs in Office Vacancy Rates

The confidence is tied to the Pentagon's military base consolidation plan, which directs more than 5,000 high-tech jobs to Fort Meade in neighboring Anne Arundel County in early 2011, Briskman said. Defense contractors are expected to flock to the area.

The asking rent remained essentially flat in the quarter at $22.54, compared with $22 a year earlier. But that, too, will change, said Owen J. Rouse Jr., a senior vice president at Manekin LLC in Columbia.

"When a couple of deals get inked in the new buildings, you're going to see rents go up" to reflect increased building material costs, Rouse said.

Larry Thau, managing director of C.B. Richard Ellis Group Inc. in Bethesda, said building material costs increased about 25 percent in the past two years, which is why tenants in new buildings will probably be paying $3 to $4 more per square foot than tenants in older buildings.

-- Dina ElBoghdady

Montgomery County

The Montgomery County market continues to sizzle.

Vacancy dropped to 8.1 percent in the second quarter from 10.4 percent a year earlier. Average asking rates per square foot jumped more than a dollar, from $25.66 to $26.96, the highest it has been since the first quarter of 2003.

"The market is really healthy and it's going to stay healthy for the rest of year," said Larry Thau of CB Richard Ellis Group Inc.

The increase in rates is primarily due to a lot of movement within the county, Thau said. Many tenants in top-quality "Class A" buildings are looking to move up to newer, more pristine space in buildings that have recently been completed.

Then tenants who were in Class B buildings are looking to move into the vacated Class A space. The focus is on improving access, amenities and parking to help maintain and recruit top-quality talent.

Premium space with more than 10,000 square feet in the Chevy Chase area is almost impossible to find, Thau said. Many tenants looking for quick access to key highways and public transportation are finding it in North Bethesda and Rockville.

Also, the transformation of Silver Spring continues. Five years ago, Silver Spring had the highest vacancy rate in the county. Today, it has the lowest vacancy rate, about 4 percent, Thau said.