Suburban Maryland Office Market Figures Q2 2022

01 Jul 2022

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Following four consecutive quarters of occupancy loss, the Suburban Maryland office market recorded 21,000 sq. ft. of positive net absorption in Q2 2022, partially offsetting the 233,000 sq. ft. of occupancy loss from Q1 2022. Vacancy held steady over the prior quarter at 17.7%, still up 210 basis points (bps) from pre-pandemic levels.

Gross leasing activity during the first quarter was propped up by the sale-leaseback of FINRA’s (Financial Industry Regulatory Authority) 394,000 sq. ft. Rockville portfolio. Q2 leasing activity declined from Q1 levels but held consistent with Q4 2021 activity. More than 60 leases totaling 683,000 sq. ft. were signed in Suburban Maryland during the second quarter.

Looking ahead, a slowdown in new office construction paired with an increase in office-to-life sciences conversions could help stabilize elevated office vacancy rates in Suburban Maryland. There is currently 2.15 million sq. ft. of office product in varying stages of life sciences conversions, while only three office buildings are under construction. Of note, the 240,000 sq. ft. office portion of B.F. Saul’s Twinbrook Quarter mixed-use development in Rockville remains in a “wait-and-see” mode for preleasing, while the multifamily and Wegman’s grocery store portions of the development are both currently under construction and scheduled for a June 2024 completion.