Photo: David Davies
Although Baltimore’s Inner Harbor once hosted the bulk of the city’s commercial redevelopment efforts, there are now large-scale plans to rebuild
troubled neighborhoods throughout the city.
A $1.8 billion revitalization effort
of the New East Side, an 88-acre
slice of the city’s eastern half, is
under way. Johns Hopkins Hospital’s new science and technology
park will anchor the district, where
new housing units, green space
and retail services are replacing
What the Locals Say
“There are a lot of big things happening. The [Inner
Harbor] was redone years ago. Developers are spreading
that out. The city has also seen an increase in the
expansion of biotechnology companies. What was once
an industry that populated the Baltimore-Washington
[D.C.] corridor has begun construction of new facilities in
and around the city limits.”
— Christopher W. Miller, president, Evergreen Equity Partners LLC
Other plans call for $1 billion in
gentrification north of Penn Station, $200 million to redevelop a boarded-up section of southwest Baltimore and $75 million for a mixed-use
project under construction near the University of Baltimore.
As the city’s fortunes begin to turn, retail developers are cashing in. Retail vacancy dropped dramatically
inside the central business district — from 10.1 percent in the third quarter of 2007 to 3. 9 percent in the
third quarter of 2008, according to CB Richard Ellis. Retail construction doubled in the same period.
Population in 2000: 651,154
Rank (U.S.): 20th
Metropolitan-area population: 2.67 million
Metropolitan-area rank: 23rd
Average commute: 28. 8 minutes
Average commute in 2000: 28.2 minutes
U.S: 25 minutes
Median household income: $36,949
Median household income in 2000: $30,078
Median age: 35. 4 years
Median age in 2000: 35 years
U.S.: 36. 4 years
Inflation (Consumer Price Index): 5. 5 percent
Inflation in September 2007: 3. 4 percent
U.S.: 3. 7 percent
Unemployment: 7.1 percent
Unemployment in September 2007: 5. 6 percent
U.S.: 6. 7 percent
Office: 14.2 percent
Retail (central business district): 3. 9 percent
Apartment (metropolitan statistical area): 4. 9 percent
Industrial: 8. 4 percent
Net office: -85,989 square feet
Net retail (central business district): 10,233 square feet
Apartment (metropolitan statistical area): 636 units
Net industrial: -130,826 square feet
Asking: $23.35 per square foot
Retail (central business district):
Asking: $24.25 per square foot
Apartment (metropolitan statistical area):
Asking: $984 per unit
Effective: $949 per unit
Industrial: $4.68 per square foot
Office: 929,642 square feet
Retail (central business district): 254,921 square feet
Apartment (metropolitan statistical area): 0 units
Industrial: 0 square feet
64. 4 percent black, 32. 5 percent white,
2 percent Asian and 1.1 percent other; 2.5 percent identify
as Hispanic or Latino
Top employers: City government, Baltimore City Public
Schools, Johns Hopkins University, Johns Hopkins Hospital, University of Maryland Medical System
2nd-most reported murders among U.S. cities with more
than 250,000 residents in 2007 (FBI).
Sources: The Associated Press, Baltimore Business
Journal, Baltimore City Paper, Baltimore Sun, The Boz-zuto Group, CB Richard Ellis, Downtown Partnership of
Baltimore Inc., East Baltimore Development Inc., The
Examiner, Johns Hopkins Gazette, Reis Inc., U.S. Census
Bureau, U.S. Department of Labor
Darrick Meneken is an associate editor at Scotsman Guide. Reach him at (800) 297-6061 or email@example.com.
Watching multifamily cautiously
By Victor Calanog,
director of empirical research, Reis Inc.
With negative growth in job creation and consumer spending, brokers must consider how renters will behave and
how the multifamily sector will fare in what appears to be
the beginning of a protracted economic slowdown.
Apartment Supply and Demand
Completions NetAbsorption Vacancy
- 10 3%
- 20 2%
Demand for rental apartments remained relatively strong
in early 2008, even as the housing market went into steep
decline. Some argued that the increase in foreclosures
propped up demand for rental units because some households turned from owners to renters.
Occupancy levels were relatively stable through the summer months, but mounting job losses and a pullback in
consumer expenditures likely will undercut demand.
Overall vacancy may stay stable as households remain in
their rented units or substitute cheaper apartments. But
rent patterns already reflect the increased pressure on leasing managers to offer more concessions.
Nationally, asking rents grew by 2.54 percent from the end of
2007 to the third quarter of 2008, while effective rents grew
by 2.5 percent. In contrast, from the end of 2006 to the third
quarter of 2007, asking rents grew by 3. 36 percent and effective rents by 3. 63 percent, an indication of relative market
tightness as concessions were not as readily distributed.
Units ( Thousands)
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
’06 ’06 ’07 ’07 ’07 ’07 ’08 ’08 ’08
Source: Reis Inc.
Transaction activity has fallen significantly relative to recent years. In the third quarter of ’08, there was a decline
of about 40 percent in year-to-date transaction volume for
multifamily properties relative to the same period the previous year. Although this may reflect lower expectations about
future returns from a buy-and-hold strategy, the steep decline largely is a function of low availability of financing and
a dim outlook for profits from a quick flip. Until credit flows
are restored, however, transaction volume is not expected to
pick up significantly in the next 12 months.
Relative to the office sector, multifamily properties will not
be as affected by job losses on the downside. But they will
not be spared from losses in value and income appreciation
if the economy turns around later rather than sooner.
Brokers and investors are well-advised to be more thoughtful and realistic about price and income appreciation in
the multifamily sector. But with price declines imminent,
opportunities for buying properties cheaply may emerge.
In addition, with net operating incomes projected to be relatively flat or declining, forecasted cap-rate increases imply
a decline in overall sales prices. Brokers must address each
investor’s time horizon because purchasing multifamily
properties in the next 12 to 18 months may not yield immediate benefits until the economy rebounds.
Victor Calanog, director of empirical research
at Reis Inc., writes a monthly column on property
types for Scotsman Guide. As head of Reis’ core
economics team, he is responsible for data models,
forecasting, valuation and portfolio services for
clients in commercial real estate. Reach him at
firstname.lastname@example.org. Chris Borowsky, direc-
tor of operations at Reis, contributed to this article.