Baltimore industrial market: Infrastructure and fundamentals one-year following the Key Bridge Collapse
This article was originally published in the February 2025 issue of SouthEast Real Estate Business.
By Oliver Fryer and Bryan Herr, MacKenzie Commercial Real Estate Services
A major attraction within the Baltimore industrial real estate market has historically been the Port of Baltimore, as it is the most inland port on the East Coast, ranks in the top-20 nationally for tonnage and top-10 for dry bulk, and attracts users and investors for its impressive capabilities.
Closing on the end of Q1, 2025 – here are a few noteworthy project and market updates:
March 26, 2024: The Key Bridge collapsed due to a physical collision from the container ship Dali. The bridge collapse was a tragic event with six lives lost and shipping (both in and out) being blocked for nearly three months as crews cleared the debris.
Key Bridge rebuild: Maryland Governor Wes Moore unveiled the new design for rebuilding the bridge in February. The bridge is anticipated to deliver by fall 2028 and comes with enhanced capabilities, such as a 45-foot height increase and a 300-foot shipping channel width increase when compared with the previous design. Kiewit Infrastructure estimates the overall project will cost $2 billion.
Howard Street Tunnel: As part of nearly $500 million directed towards local infrastructure projects, CSX recently kicked off the long-awaited Howard Street Tunnel project being led in a JV between Skanska and Fay S&B USA Construction. The tunnel will remain closed as construction crews dig-out and lower the floor by two feet to allow for double-stacking of containers on rail. The intent of the project is to enhance flow of containers on rail, which also connects to the Seagirt Marine Terminal Intermodal Container Transfer Facility. Overall, the project is expected to add 75,000 to 125,000 loads annually within the first three years. The 1.7-mile project is expected to complete in mid-2027.
Vacancy vs Availability Rates
The market softening has been a trend for the past few quarters with vacancy rates increasing gradually over time, however, perhaps more telling is the availability rate. Availability accounts for space that may be leased to a tenant but is on the market and available for another user to occupy. Most recently, the Baltimore market is posting an 11.8 percent availability rate and approximately 930,000 square foot negative absorption for logistics space.
Market lease asking rate growth peaked in Q2, 2023 (9.6 percent) lagging the sales volume peak in Q2, 2022 ($2.1 billion). The current vacancy rate (7.8 percent) has been steadily rising since mid-2022 and today’s total Trailing Twelve Months (TTM) sales volume of $682 million for the Baltimore market represents the lowest annual total in Baltimore since 2016. The cost of debt is serving as a primary barrier to getting deals to pencil with slowing rent growth and rising vacancy rates serving as additional thematic headwinds for buyers.
Within a smaller radius in the Baltimore metro area, there have been 36 sales transactions over the last six months, covering 1.1 million square feet and representing $93.5 million in volume at an average price of $97 per square foot. Seventy percent of these sales were buildings considered Class C industrial assets.
In the same period 12 months ago, 50 sales transactions were executed totaling 1.5 million square feet of space at an average price per square foot of $111 per square foot and in the same period, 82% of all transactions were for Class-C industrial buildings, representative of the area within Baltimore city and select surround areas.
“The biggest concern is the disconnect between buyers and sellers,” explained Bob Bergin, Principal, Feldman Bergin Properties. “Sellers still want cap rates that reflect pricing from a couple of years ago. Due to interest rates increasing to approximately 7 percent and a loan constant above 8 percent, we need to see a purchase price that reflects that to make a deal work.”
Bulk and value price-per-pound leases continue to happen north of Baltimore in Baltimore County East and Harford counties. Bob’s Discount Furniture renewed in Aberdeen (672,000 square feet), SH Bell leased 450,000 square feet, and the new 400,000 square foot University of Maryland Medical System facility is scheduled to open in Q2, 2025.
University of Maryland Medical System (UMMS) signed a lease and broke ground on a 400,000 square-foot Logistics Operations Center (LOC) which will be built at the Tradepoint Atlantic complex in the Sparrows Point area of Baltimore County.
