Future Cities
2022 North America Industrial Big Box Review & Outlook: Baltimore
March 11, 2022 5 Minute Read
The explosive growth of Baltimore’s big-box sector is attributable to its deep-water port and access to strategic markets along Interstate 95, allowing occupiers to reach 34% of the U.S. population in a one-day truck trip and provide same-day service to the more than 10 million people in the Baltimore-Washington MSA. This population density—the fourth largest in the U.S.— and solid workforce fundamentals will continue to attract both e-commerce and traditional retailers.
Demographics
More than 18 million people—23% of them in the 18-to-34 age demographic—live within 100 miles of downtown Baltimore, with a 3.3% projected growth rate over the next five years. Baltimore is ranked among other major industrial markets like Inland Empire, Dallas and Chicago for reaching a high population concentration within a 100-mile radius. It also is an ideal location for distributors to conveniently serve Washington, D.C.’s large population.
Figure 1: Baltimore Population Analysis
Source: CBRE Location Intelligence.
An influx of occupiers increased the number of warehouse workers in the mid- Atlantic region. According to CBRE Labor Analytics, the local warehouse labor force of 40,041 is expected to grow by 11% by 2030. The average salary for nonsupervisory warehouse workers is $16.08 per hour, 7.8% above the national average.
Figure 2: Baltimore Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
*Median wage (1 year experience); non-supervisory warehouse material handlers.
Location Incentives
Over the past five years, there have been 96 economic incentives deals totaling more than $122 million at an average of $6,372 per new job in the Baltimore metropolitan area, according to Wavteq.
According to CBRE’s Location Incentives Group, among the top incentive programs offered in metro Baltimore is the Advantage Maryland program, which provides grants and loans to support economic development opportunities that offer significant returns to the state through job creation and capital investment. To qualify for this program, businesses must be located in a priority funding area and fall within an eligible industry sector.
Another program available in Baltimore is the Job Creation Tax Credit (JCTC), which is intended to attract new businesses to locate in Maryland and encourage existing businesses to expand. The program provides eligible companies with income tax credits in exchange for creating at least 60 new jobs for Maryland residents or 25 new jobs if located in a designated revitalization area.
Figure 3: Baltimore Top Incentive Programs
Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.
Logistics Driver
Baltimore’s strategic location on the East Coast has attracted dozens of major e-commerce and bulk goods distributors. The region has access to CSX and Norfolk Southern rail lines, and every terminal at the Port of Baltimore is within one stoplight of an interstate highway. Baltimore has one of the few East Coast ports capable of handling ships carrying 14,000 twenty-equivalent units (TEUs) or larger. Construction is underway for a second, 50-foot-deep berth at the Seagirt Marine Terminal, which will allow the port to handle two supersized ships simultaneously. Four additional neo-Panamax cranes are scheduled to be operational in 2022.
Being within the I-95 Corridor gives Baltimore direct highway access to the entire eastern U.S. BWI Airport’s freight transportation business provides an additional mode of transport easily accessible for manufacturers and distributors across the region.
Being within the I-95 Corridor gives Baltimore direct highway access to the entire eastern U.S.
Capital Markets
2021 was a record year for investment sales, up 38% from 2020. The market saw cap rate compression across the quality spectrum. Sellers benefited from the best rent growth and lowest vacancy rates the market has ever seen. Class A and Class B asset sales achieved cap rates well below 4% in 2021 as buyers expanded into the mid-Atlantic industrial market. With no slowdown in rent growth expected over the next five years, aggressive underwriting on behalf of buyers should continue.
Figure 4: Cap Rate Comparison
Source: CBRE National Partners.
Supply & Demand
Despite only 78 million sq. ft of existing inventory, Baltimore is garnering significant interest from big-box occupiers because of its central location and nearby port. Leasing activity totaling 9.9 million sq. ft. in 2021 was up by 35.6% year-over-year, leading to 2.8 million sq. ft. of positive net absorption.. The market’s relatively low vacancy rate of 3.5% helped increase the average taking rent to $5.25 per sq. ft. General retail & wholesale and e-commerce-only occupiers made up 60% of tenant demand in 2021.
Despite increased leasing activity, development remained low, with 2.4 million sq. ft. of construction completions and 4.8 million sq. ft. under construction, 52.4% of which is preleased. Occupiers will be focused on locating near points of import in 2022, including Baltimore’s growing seaport. Further expansion into this strategic location will keep demand high this year.
Figure 5: Share of 2021 Leasing Activity by Occupier Type
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 6: Leasing Activity
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 7: 2021 Construction Completions vs. Overall Net Absorption
Source: CBRE Research.
Figure 8: Direct Vacancy Rate by Size Range
Source: CBRE Research.
Figure 9: Under Construction & Percentage Preleased
Source: CBRE Research.
Figure 10: Historical First Year Taking Rents (psf/yr)
Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.
Explore Big Box Insights by Market
Northern/Central New Jersey has the most active seaport on the East Coast, with demand driven by both e-commerce and traditional retail occupiers.
The Columbus industrial market's rapid growth is expected to continue in 2022, based on record levels of absorption, rent growth and land acquisitions.
Record-high rents and land prices are expected to further increase as companies target major population centers in and around the Toronto area.
Contacts
Jonathan Beard
Executive Vice President
James Breeze
Vice President, Global Industrial and Retail Research
John Morris
President, Americas Industrial & Logistics, Advisory Services
