Suburban Maryland Office Market Figures Q4 2022

The Suburban Maryland office market recorded 257,000 sq. ft. of occupancy loss during the fourth quarter, bringing the year-end totals to 670,000 sq. ft of negative absorption. This marks the first year since 2014 that the market recorded negative net absorption. Consequently, vacancy increased 50 basis points (bps) to 19.4%, a record high for the market and a 380-bps increase from pre-pandemic levels.

The main driver of occupancy loss during the third quarter was tenants vacating space across various office buildings that will eventually be converted to life science lab space. An additional 155,000 sq. ft. of sublease space also had a significant impact on Q3 market fundamentals. On the year, the biggest cause for occupancy loss came from Marriott’s move to 7750 Wisconsin Avenue. The new trophy asset delivered during the third quarter, bringing 734,000 sq. ft. of fully leased office space to the Bethesda/Chevy Chase submarket. Marriott—which has been located in Montgomery County for more than 60 years—signed a prelease for the entire building in 2017 to serve as its new headquarters. This change in address resulted in a 775,000-sq.-ft., full-building vacancy at 10400 Fernwood Road in the North Bethesda submarket. The Fernwood Road property was purchased by Erickson Senior Living in 2018 with plans to convert the property into senior housing, which will help balance market fundamentals upon construction commencement. If Marriott’s old headquarters were removed from the North Bethesda inventory, vacancy in the submarket would stabilize at 22.7% this quarter.