CBRE

Baltimore Industrial
www.cbre.com/research First Quarter 2012

Market fundamentals remain relatively flat in the Baltimore market due to the continued uncertainty surrounding the 2012 federal budget and financial markets. However, the Baltimore industrial market has seen leasing activity remain

There were positive signs in development as construction continued on 521-A Chelsea Boulevard in Harford County. The project will deliver in the first quarter of 2012 and bring 692,000 square feet of new product to the market. This represents the first speculative development in the region since 2009. to reenter the market. The Baltimore market saw an increase in sales activity, as the key trend for the quarter was capital focused on high quality industrial investment opportunities. There were 11 industrial sales this quarter compared to five this time last year. Investors are seeking to obtain high quality assets as industrial leasing activity improves in the region. Midsized, core product is very competitive due to trough rents signed before the recession. Financing is readily available from a number of sources, while cap rates are at 2006-2007 levels. The success of this project will impact developers willingness

Quick Stats
Change from last

steady and supply remain limited with fewer large blocks of vacant space. As a
Current Yr. Qtr.

result, landlords are seeing stabilization in asking rates, abatement and concession packages, while also seeking renewals to minimize vacancy increases. Significant move-ins by bulk users and bigbox tenants in the Baltimore/Washington Corridor and Harford/Cecil County submarkets resulted in positive absorption for the quarter. Leases signed late last year by tenants such as Bizerba and Elite Spice all commenced in the first quarter, which helped the market experience positive net absorption. Users are seeking to lease space at lower costs before the recovery pushes rents higher.

Vacancy Lease Rates** YTD Net Absorption* YTD Completions

10.9% $4.79 NNN 896,372 SF 0 SF

* The arrows are trend indicators over the specified time period and do not represent a positive or negative value (e.g., absorption could be negative, but still represent a positive trend over a specified period). **Reflects warehouse asking rates only

Hot Topics
The largest deal signed this quarter was a 227,000-square-foot lease by Henry Bath at 1200 S Newkirk Street in Baltimore. Demand remained weak in the Annapolis, Hunt Valley and Reisterstown Road submarkets. The overall vacancy rate decreased this quarter from 11.5% to 10.9 % due to significant move-ins such as Bizerba and Elite Spice.

Net Absorption/Vacancy Rate

2,000 1,500

Vacancy Rate YTD Net Absorption

10.9% 896,372 SF

14% 12% 10%

Square Feet (000)

1,000 500 0 (500) (1,000) (1,500) 2007 2008 2009 2010 2011 1Q2012

Vacancy Rate

Leasing activity remained steady as supply was limited due to developers concerns about building on a speculative basis.

8% 6% 4% 2% 0%

2012, CBRE

Market Statistics
Inventory SF 1,739,789 29,499,533 15,321,277 11,194,809 60,445,465 23,171,564 7,439,537 4,277,502 153,089,476 Overall Vacancy Rate % 6.5% 10.9% 13.1% 10.5% 11.4% 10.2% 7.3% 8.6% 10.9% Overall Availability Rate % 10.3% 18.5% 16.7% 15.3% 17.4% 13.1% 12.4% 13.7% 16.3% Average YTD 2012 Net Under Asking Lease Absorption SF Construction SF Rate ($ SF/YR)* (40,607) 20,115 (146,922) (79,064) 404,394 834,228 (59,988) (35,784) 896,372 1,292,000 1,292,000 $9.84 $4.02 $4.15 $3.72 $4.45
$4.71 $7.22 $8.06 Baltimore Industrial

Jurisdiction Annapolis Baltimore City Baltimore County East Baltimore Southwest Balt/Wash Corridor Harford/Cecil County Hunt Valley/Towson Owings Mills/Reist. Rd Baltimore Total

$4.79

*Average asking rents reflect those of the warehouse market

Economic Growth
5 0 (5)

Employment Growth

300 jobs

(10) (15) (20) (25) (30) Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

The Baltimore economy is still recovering from the national and local economic crisis. The Baltimore Metropolitan Areas unemployment rate decreased to 7.3% as of January 2012 compared to 7.9% as of January 2011; however this was predominately due to the strength in office-using jobs, specifically the Professional and Business Services and Other Service industries. Over 300 industrial-using jobs entered the market area year-over-year, according to preliminary numbers released by the U.S. Bureau of Labor Statistics. These job gains were driven by increased employment in the Manufacturing and Mining, Lodging, and Construction industries, which experienced net gains of 1,700 and 1,300 jobs, respectively. Baltimores unemployment rate remained significantly lower than the national average of 8.9%. No buildings delivered to the Baltimore industrial market for the fourth consecutive quarter. As bulk users in the Baltimore/Washington Corridor and Harford/Cecil County submarkets have taken most of the newer inventory, there is very little high quality, high cube space remaining. The 692,000-square-foot speculative warehouse building at 521 A Chelsea Boulevard in Harford County is currently 0% preleased; its delivery is scheduled for the fourth quarter of this year. The 600,000-square-foot home furnishings retailers build-to-suit broke ground this quarter at 4000 Principio Parkway E, Phase II in Cecil County. The retailer will take occupancy in September of this year. There continues to be a number of projects along the Harford/Cecil County submarket totaling approximately 1.4 million square feet that are pad ready if a build-to-suit opportunity or a lead tenant is identified.

Job Growth (000s)

New Construction
3,500 3,000 2,500

Deliveries Under Construction

0 SF 1,292K SF

Square Feet (000)

2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 1Q2012

First Quarter 2012

Page 2
2012, CBRE

Vacancy

Combined Flex Warehouse

10.9% 10.6% 11.0%

14% 12% 10%

Vacancy Rate

8% 6% 4% 2% 0% 2007 2008 2009 2010 2011 1Q2012

The overall vacancy rate in the Baltimore industrial market decreased from 11.5% to 10.9% as tenants renewed and expanded around the area. The warehouse sector is driving the activity in the market, with the vacancy rate decreasing from 11.9% to 11.0%. Meanwhile the vacancy in the flex market increased from 10.3% to 10.6%. Down from 13.0% to 12.1% in the Baltimore/Washington Corridor, the lower vacancy rate was driven by the 158,000-square-foot move-in by Elite Spice at 7751 Waterloo Drive and the 53,185-square-foot move-in by Valley Relocation at 8155 Stayton Drive. The overall market fundamentals will continue to improve as vacancy rates have decreased for both sectors since first quarter 2011.

Baltimore Industrial

Rental Rate
$12 $10 $8

Combined Flex Warehouse

$5.07 NNN $9.17 NNN $4.79 NNN

$6 $4 $2 $0 2007 2008 2009 2010 2011 1Q2012

The overall asking rental rate for warehouse space in the Baltimore market decreased to $4.79 NNN per square foot since the end of 2011. The overall asking rental rate for flex space increased from the previous quarter to $9.15 NNN per square foot. Concessions and abatements are decreasing slightly in the Baltimore industrial market, with tenants receiving an average of three months of free rent for tenyear dealscompared to six months free rent this time last year. The steadying of rates is positive news for the health of the market. However the creditworthiness of the tenant is critical. Without high confidence, landlords are forced to sit on empty space. Rental rates are expected to stay stagnant or rise slightly with major concession packages still found in most deals.

$/Square Foot

Net Absorption
1,500,000 1,000,000 500,000 0 (500,000) (1,000,000) (1,500,000) 2007 2008 2009

YTD Flex YTD Warehouse

(122,125) SF 1,018,497 SF

2010

2011

1Q2012

The Baltimore industrial market saw positive overall net absorption for the first quarter of 2012 as a result of growth in the warehouse product. The overall net absorption for the market was 896,372 square feet, mostly due to the strength in the Harford/Cecil County and the Baltimore/Washington Corridor. Harford/Cecil County experienced significant growth, due to a home furnishings retailer and Bizerba entering 758,200 square feet. The first phase of the home furnishings retailers transaction commenced this quarter; the second phase will commence fourth quarter 2012, bringing an additional 600,000 square feet of new growth to the Harford/Cecil County submarket. The outlook is optimistic for the industrial market as a whole as there are more large warehouse users in the market than there were a couple of years ago in the retail and manufacturing industries.

Square Feet

First Quarter 2012

Page 3
2012, CBRE

Baltimore Industrial

Top 1Q 2012 Lease Transactions

Size (SF)
227,000 226,475 124,000 101,817 98,900
* New ** Renewal *** User Sale

Tenant
Henry Bath* M&D Logisitics* Infra-Metals** Microflex** MD Film Commission/HBO**

Address
1200 S Newkirk Street 8901 Snowden River Parkway 4501 Curis Avenue 6940 San Tomas Road 1804 Fashion Court

Average Asking Lease Rate Rate determined by multiplying the asking net lease rate for each building by its available space, summing the products, then dividing by the sum of the available space with net leases for all buildings in the summary. Net Leases Includes all lease types whereby the tenant pays an agreed rent plus most, or all, of the operating expenses and taxes for the property, including utilities, insurance and/or maintenance expenses. Market Coverage Includes all competitive office buildings 10,000 square feet and greater in size. Net Absorption The change in occupied square feet from one period to the next. Net Rentable Area The gross building square footage minus the elevator core, flues, pipe shafts, vertical ducts, balconies, and stairwell areas. Occupied Area (Square Feet) Building area not considered vacant. Under Construction Buildings which have begun construction as evidenced by site excavation or foundation work. Available Area (Square Feet) Available Building Area which is either physically vacant or occupied. Availability Rate Available Square Feet divided by the Net Rentable Area. Vacant Area (Square Feet) Existing Building Area which is physically vacant or immediately available. Vacancy Rate Vacant Building Feet divided by the Net Rentable Area. Normalization Due to a reclassification of the market, the base, number and square footage of buildings of previous quarters have been adjusted to match the current base. Availability and Vacancy figures for those buildings have been adjusted in previous quarters.
For more information regarding the MarketView, please contact: Marianne Swearingen, Research Manager CBRE 750 9th Street, NW, Suite 900, Washington, DC 20001-4516 T. 202.585.5642 F. 202.783.1723 marianne.swearingen@cbre.com

Submarket Map

Copyright 2012 CBRE Statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CBREs Corporate Communications Department or CBREs research and Econometric Forecasting unit, CBRE Econometric Advisors. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CBRE clients, and cannot be reproduced without prior written permission of CBRE.