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THIRD QUARTER | 2014 MacKenzie Market Report

Office Market

www.mackenziecommercial.com BALTIMORE oFFICE oVERVIEW THIRD QUARTER | 2014

Regional Ofﬁ ce Market Turns the Corner in Q3 Presented by Anirban Basu, Sage Policy Group, Inc. Historical Vacancy Rates

As followers of the local economy know, Maryland has emerged as an economic laggard. The state’s unemployment rate is now 0.3 percentage points above the national average. Three years ago, Maryland’s unemployment rate was 1.5 percent below the national average and the state could boast of its resilience during the Great Recession. No more. Recently released gross state product data indicate that Maryland’s economy failed to expand last year even as national output expanded nearly 2 percent. Maryland’s ranked 49th in the nation in terms of gross state product expansion, ahead of only Alaska’s more volatile and much smaller economy. Over the past twelve months, Maryland ranks 44th among the 50 U.S. states in terms of percentage job growth – 45th if one includes the District of Columbia.

That said, to the extent that there has been evidence of growth in Maryland, it has generally taken place in the Baltimore metropolitan area, also home to the best baseball and football in the region. According to the Bureau of Labor Statistics, the Baltimore region added 24,600 jobs between August 2013 and August 2014, which represents 1.9 percent employment growth, precisely the rate of growth observed nationally for the same period.

Not surprisingly, the Baltimore region’s ofﬁ ce market has emerged as one of Maryland’s more respectable economic stories, though hardly a fabulous one. During the third quarter of 2014, net absorption totaled 63,722 square feet (sf) regionally. It was a tale of two submarkets, however, with Baltimore City + City Center sustaining -96,728 sf of net absorption, and suburban markets tallying 160,450 sf of positive net absorption. Vacancy in City Center stands at 18.2 percent, while suburban vacancy stands at 14.6 percent. The best submarket performer on a quarterly basis was the I-83 Corridor, which net absorbed nearly 113,000 sf. Year-to-date, that market has net absorbed nearly 189,000 sf, ranking second to regional leader Columbia (+244,898 sf). Quick Stats 14.75% 20.00%63,722 $22.04 Vacancy Rate VacancyAbsorption Rate Avg. Rental Rate

The overall direct vacancy rate for Strong absorption over the traditionally slow Average rental rates for the region have the Baltimore MSA remained virtually summer months helped boost year to date remained steady with the exception of the unchanged, decreasing a mere 0.2 percent absorption to a total of 364,803 sf. This Class A+ submarket in Baltimore's City from 14.77 percent in the second quarter absorption number does not include owner- Center which saw a $2.73 psf increase of 2014 to 14.75 percent in the third. occupied absorption that has occurred over from an average $25.48 psf to $28.21 psf. Reductions in the Baltimore County East and the course of the year which has contributed Overall, the region saw a $0.08 percent I-83 Corridor were offset by an notable 2.32 more than an additional 350,000 sf of space increase from the second quarter to $22.04 percent increase in the Annapolis market absorbed by companies consolidating into a marking a $0.27 decrease from the same from 12.90 percent to 15.22 percent. single tenant location. period one year ago.

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 3/2014. BALTIMORE oFFICE oVERVIEW THIRD QUARTER | 2014

Vacancy Rates % Vacancy Rates % Absorption/Vacancy Rates Absorption Rates Rental Rate/Vacancy Rates Rental Rates

Northern Metro Downtown Southern Metro Northern Metro Downtown Southern Metro

The Harford County submarket continues to struggle with a vacancy rate in Average rental rates remained consistent with any notable increases in the mid-twenties while neighboring submarket Baltimore County East saw the individual submarkets offsetting losing in others. Class A+ product in a 1.73 percent decrease in vacancy over the quarter. The Southern Metro Baltimore's City Center currently commands the highest average asking market remain statistically unchanged even as the Annapolis and Route rental rate at $28.21 psf while the remainder of the region is in the low 2 Corridor submarkets experienced increases in vacancy rates. Class A+ twenties per square foot. Notable increases in average asking rates product in the City Center has dipped below a healthy 10 percent to 9.12 occurred in the Baltimore County East and Baltimore City East submarkets. percent. Highlights

• Full-service wealth management and retirement plan consulting fi rm • 6031 University Boulevard has signed Revere Bank to an 8,401 sf. Greenspring Wealth Management, Inc. has expanded to 6,086 square • AOL subsidiary Advertising.com is relocating from Tide Point to 45,000 feet within 501 Fairmount Avenue bringing the four-story, 88,000 sf in the National Bohemian complex in Brewers Hill. Located at 3700 square foot to 88 percent occupancy. Two additional unconfi rmed O'Donnell Street the fi rm plans to open its new offi ces in the spring of lease transactions are expected to bring the building to 97 percent 2015. occupancy in the fourth quarter of 2014. • Law fi rm Hudson Cook LLP signed a long-term lease for 20,536 • Corporate Offi ce Properties Trust has continued its portfolio sf at 7037 Ridge Road in Hanover, Maryland. Part of the Station consolidation exercise completing three separate sale transactions Ridge offi ce park, the Class A building is Leadership in Energy and over the quarter for a combined value of $28,750,000. The properties Environmental Design (LEED) Gold certifi ed and within walking include 4969 & 4979 Mercantile Road, 5020, 5022, 5024 and 5026 distance to the Amtrak and MARC train station outside Baltimore/ Campbell Boulevard, and 9930 & 9940 Franklin Square Drive. Washington International Airport.

Number of Buildings 1,227 Market Size 76,497,016 sf

Criteria: MacKenzie tracks buildings that meet the following requirements and identifies these buildings as true reflectors of commercial real estate activity within the Baltimore Metropolitan Statistical Market (MSA). Office: Buildings 15,000 square feet (sf) in size and greater in the Metro areas within Anne Arundel County, Baltimore City, Baltimore County, and Howard County, buildings 20,000 sf in size and greater within Baltimore’s City Center, buildings 10,000 sf in size and greater in the Metro areas within Harford County, and buildings 5,000 sf in size and greater within Annapolis city limits. MacKenzie does not track owner occupied buildings or buildings lease exclusively to medical tenants.

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Notable Transactions Lease

Location Submarket Tenant Amount Leased SF

5585 Sterrett Place Columbia QSSR 120,000 sf

250 W. Pratt Street City Center Pandora Jewelry 87,682 sf

6956 Aviation Boulevard BWI Skyline Technologies 28,753 sf

6170 Guardian Gateway Harford County DRS Technologies 15,000 sf

Sale

Location Submarket Price PSF Building Size SF

7031 Columbia Gateway Drive Columbia $59,508,000 $240.32 247,624 sf

5233 King Avenue (Condo) Baltimore County East $1,039,400 $243.53 4,268 sf

954 Ridgebrook Road (Condo) I-83 Corridor $362,790 $145.12 2,500 sf

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Office Submarkets

www.mackenziecommercial.com Annapolis THIRD QUARTER | 2014

"The Annapolis office market in the 3rd quarter showed cyclical Vacancy Rates % slowing at the end of the summer. Tenants and buyers took a Rental Rate/Vacancy Rates Rental Rates vacation from what had been an active market for the first seven months of the year. The end of vacation and the return of school has helped push activity back in the market for September. The West Street corridor is experiencing good activity with deals competed at 1730 West Street (The Tate Building), Park Place, 125 West Street, and the potential sale of an undisclosed Class A Office Building. The last quarter of 2014 should be active with a handful of new to the market tenants looking for space as well as existing tenants in growth mode." - Justin T. Mullen Vice President 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

15.22%Vacancy Rate -91,73520.00%VacancyAbsorption Rate Avg.$23.24 Rental Rate

Annapolis' vacancy rate rose 2.32 percent The submarket suffered it's largest negative The average rental rate for the Annapolis from the second quarter's 12.90 percent to absorption since 2009 as more than 90,000 submarket remains among the highest in 15.22 percent. This jump is attributed to sf returned to the market driving the year- the Baltimore Metropolitan Statistical Area approximately 80,000 sf of space allocated to-date absorption to a negative 62,591 (MSA). Properties surrounding Annapolis for the Navy returning to the market. The sf. Several small and medium sized Towne Centre regularly command rates area's submarket rate stands at 16.94 transactions occurred within the quarter in the low thirties per square foot (psf) percent, the highest within the Southern to offset additional losses along Admiral offsetting lower rates on the out-skirts of the Metro market behind the Route 2 Corridor. Cochrane Drive. submarket.

Number of Buildings 137 Market Size 3,981,264 sf

Overview: The State Capital of Maryland and the county seat of Anne Arundel County, Annapolis is situated on the Severn River. The office submarket is bounded by I-97 to the east, South River to the south, and includes the Route 50/301 corridor on both sides of the Severn River. Designated a "Central City" by the United States Department of Housing and Urban Development, the submarket is driven by a combination of government and tourism. This diverse blend of businesses is evidenced by the area’s landscape which is comprised of an equal mix of historically significant buildings dating to the late 1600s and newer mixed-use lifestyle centers that have emerged over the last decade. Over the last ten years, the United States Naval Academy along with the area’s tourism and maritime industries have drawn the attention of firms looking for a more relaxed lifestyle for their employees. Steady growth in multiple sectors including healthcare, intelligence, and defense industries continue to drive market activity. Close proximity to major markets, the area is within 30 miles of both Baltimore and Washington, DC, has also proved beneficial in expanding the submarket’s boundaries.

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"The Baltimore City office market saw very little activity in the Vacancy Rates % third quarter. The vacancy ticked up slightly from 13.85 percent Rental Rate/Vacancy Rates Rental Rates to 14.56 percent. Overall the market area was flat for the quarter with the vast majority of the negative absorption coming from two projects, 3000 Falls Road and the Rotunda at 711 W. 40th Street. 3000 Falls Road, delivered new office and Retail space at the Mill Building. The Rotunda is repositioning itself with 130,000 square feet (sf) of new and renovated retail space, 140,000 sf of renovated office space and 375 new apartments. Additional parking along with the existing parking will total over 1,100 spaces. The negative absorption for this project came from existing tenants vacating because of the construction. Both the Mill Building and the Rotunda are additional examples of the live/ work trend that we are seeing in the Baltimore City Market."

- James R. Grieves, Jr. Vice President 1Q 2011 2Q 2011 3Q 2011 4Q 2011 Quick Stats 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014

14.56%Vacancy Rate -37,68220.00%VacancyAbsorption Rate Avg.$20.57 Rental Rate

Baltimore City's submarkets saw across Overall the submarket saw a reduction in Average rental rates in the remained steady the board increases in vacancy from the absorption that is attributed to mid-sized throughout the submarket fluctuating second quarter, most notably in the North tenants giving back space along Charles minimally in response to slow leasing market that saw an increase of 1.77 percent Street and Falls Road. The submarket activity. The traditional high average rental from 10.81 percent to 12.57 percent. The has also met challenges in absorption as rates in the South market have come in line Westside continues to struggle with a properties are purchased and renovated to with the rest of the submarket, falling more vacancy of 28.36 percent and rising. multi-family creating fewer leasing options. than $9.00 from the third quarter of 2013 to rest at $20.59 per square foot.

Number of Buildings 104 Market Size 7,747,127 sf

Overview: Baltimore City is located 38 miles north of Washington, DC and 95 miles south of Philadelphia. This submarket is divided into four main areas: Midtown, which is bounded by Centre Street to the south, I-83 to the east, Martin Luther King Jr. Boulevard to the west, and North Avenue to the north; Baltimore City North, which encompasses the remaining area north of Route 40; and Baltimore City East and Baltimore City West, which are south of Route 40 and separated by Hanover Street which runs north-south. Ranking 20th in population for U.S. Cities, Baltimore City is home to the world-renowned Johns Hopkins Hospital and School of Medicine and sports apparel giant Under Armour. Coupled with major investments by The University of Maryland Medical System in cooperation with the City, all are in the process of redefining Baltimore City’s broader landscape. Further private redevelopments in Baltimore City’s historic Midtown and North submarket buildings have also garnered interest as the City seeks to increase its residential population by attracting a highly educated and mobile workforce that seeks a live/work/play lifestyle. In response, growth in Baltimore’s biotech parks and entrepreneurial incubators are helping Baltimore emerge as a technology hub.

*NOTE: The Baltimore City submarket does not include the City’s central business district, which is a distinctly different submarket called City Center. www.mackenziecommercial.com

"Vacancy rates continue to drop nearly another point and half Vacancy Rates % while rental rates are on the rise indicating signs of continued Absorption/Vacancy Rates Absorption Rates recovery. Mid-sized deals are dominating the activity throughout the submarket, including notable transactions at COPT's White Marsh Corporate Center on Corporate Drive as well as Drayer Physical Therapy opening a White Marsh location at White Marsh Professional Center. The third quarter also signaled new players entering the market with Hill Management purchasing two buildings from COPT on Mercantile Drive and Douglas Legum purchasing four buildings from COPT on Cambell Boulevard. In addition, COPT sold off properties to IKEA for back office space as part of the overall repositioning of their portfolio to focus on government occupied projects. Look for this mid-market location to continue to generate activity over the next six to nine months as tenants seeking value-plays and firms gravitate to locations that offer commuter-friendly advantages." - Meghan G. Roy Vice President 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

13.27%Vacancy Rate 20.00%Vacancy34,037Absorption Rate Avg.$23.24 Rental Rate

Baltimore County East submarket vacancy Strong leasing activity by small and mid- After a year of relatively stagnant rental rate dropped 1.73 percent from 14.99 sized businesses in the White Marsh area rates, the average rate for the submarket percent in the second quarter to 13.27 contributed to a more than 40,000 square rose $1.53 per square foot (psf) from $21.20 percent in the third. The reduction also foot (sf) increase absorption from the second psf in the second quarter to $22.73 psf. The indicates a 2.16 percent drop from the same quarter of 2014. The area also recorded rate remains below pre-recession averages period one year ago. Little sublet space sales along Corporate and Mercantile Drives of $25.00 psf enjoyed in the second quarter currently available and strong activity in the adding to the rise in positive activity in the of 2007, but are well above averages in the market could continue this trend into the submarket. high teens experienced during the recession fourth quarter of 2014. indicating a stabilizing market.

Number of Buildings 56 Market Size 1,972,903 sf

Overview: The Eastern Baltimore County submarket is home to a diverse business community, including some of the region’s largest manufacturers such as GM Power Train, Middle River Aircraft Systems, Lockheed Martin, Signode, and ISG Sparrows Point. An integrated transportation network links Dundalk, Essex, Middle River, and Rosedale to I-95, I-695, Baltimore/Washington Thurgood Marshall International Airport, and Martin State Airport. MARC commuter rail is available in Middle River. Anchored by White Marsh, a planned 2,000 acre mixed-use community adjacent to I-95, and close proximity to Aberdeen Proving Ground, the U.S. Army’s oldest military proving ground, has helped the Baltimore County East submarket grow substantially over the last decade as more than $800 million in private, state, and county investment in infrastructure, parks, schools, and housing has encouraged employment-intensive development throughout the submarket. Notable investments in new office, flex, and industrial opportunities by regional developer Corporate Office Properties Trust (COPT) and Franklin Square Hospital are expected to add an approximate 700,000 sf of additional office space to the submarket in the coming years.

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The Baltimore County West submarket continually competes Vacancy Rates % with amenity rich neighboring submarkets BWI, Columbia, and Absorption/Vacancy Rates Absorption Rates Baltimore City for tenants. A draw for government contractors looking for a cost-effective alternative that places them next door to the government entities they support, the area maintains a low profile within the region.

"The Baltimore County West submarket remains quiet as neighboring submarkets Columbia and BWI kick off new projects drawing attention away from area. The area has a long history of stability, filling space as it comes available and never really tipping the needle heavily in either direction making the area a good judge of activity for the overall health of the region."

- Christopher C. Bennett Executive Senior Vice President/Principal 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014

Quick Stats

17.24%Vacancy Rate -34,78020.00%VacancyAbsorption Rate Avg.$19.86 Rental Rate

The direct vacancy rate for the Baltimore Several small and mid-sized vacancies Average rental rates remain steady, hovering County West submarket rose more than 1 added to weak absorption for the quarter near the $20.00 per square foot (psf) mark percentage point from the second quarter adding more than 30,000 square feet (sf) for the sixth consecutive quarter. from 16.05 percent to 17.24 percent. The back in to rotation. The loss comes after a sublet vacancy rate added an additional strong second quarter and bringing year to 0.1 percent to bring total vacancy rate a date absorption to -26,533 sf. full three percent above the third quarter of 2013's historical low of 14.24 percent.

Number of Buildings 68 Market Size 3,196,077 sf

Overview: Baltimore County West is comprised of three unincorporated, census designated communities; Woodlawn, Catonsville, and Arbutus/ Halethorpe. The submarket is adjacent to Baltimore City, and bordered by Howard County to the west, and Anne Arundel County to the south. I-70 and I-695 provide easy access to Towson, the Baltimore/Washington Thurgood Marshall International Airport, and Frederick and Montgomery Counties. Home to the headquarters of the Social Security Administration (SSA) as well as The Centers for Medicare and Medicaid Services, two of the largest employers in the State of Maryland, the Woodlawn submarket is driven heavily by government related activity. The area is often informally referred to as Security, Maryland, due to the importance of the SSA's headquarters as well as nearby Security Boulevard (Maryland Route 122) and Security Square Mall. Woodlawn has been designated an Enterprise Zone by the State of Maryland Business and Economic Development.

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The BWI submarket is largely comprised of office parks that Vacancy Rates % house technology and government contract focused firms. Absorption/Vacancy Rates Absorption Rates Ideally situated to offer ease of access to Baltimore, Washington, DC, and Baltimore Washington International Airport, the submarket regularly competes with neighboring submarkets Annapolis and Columbus for large corporate tenants.

"The BWI submarket remains relatively healthy with several mid-sized firms expanding their presence this quarter, however, Airport Square continues to struggle. Newer product with better amenities have caused a high vacancy in that sector of the submarket that will need to be addressed. Because activity is dependent on government growth and business, look for changes in the fourth quarter of 2014 and early 2015 to reflect budgetary effects from the start of a new government fiscal year."

Quick Stats

12.98%Vacancy Rate 20.00%Vacancy64,636Absorption Rate Avg.$24.49 Rental Rate

The region's vacancy rate remains steady Strong absorption during the third quarter Among the highest in the Baltimore region, having dropped 1.27 percent from the third is attributed to Skyline Technologies BWI's average rental rate routinely remains quarter 2013 to 12.98 percent in the third occupation of more than 28,000 square feet in the mid-twenties per square foot (psf). The quarter of 2014. Among the lowest in the (sf) at Aviation Boulevard and multiple small current average of $24.49 psf represents a Baltimore region, second only to the I-83 and mid-sized expansions along Concourse $0.29 psf increase from the second quarter Corridor in the Northern Metro Market, the Drive. Year to date, the submarket has of 2014 and $0.78 psf decrease from the area remains well below the 2010 high of 22 absorbed 52,672 sf and currently has 43,000 same period one year ago. This rate is on percent. sf of new space currently under construction. par with the five year average of $24.69 psf.

Number of Buildings 109 Market Size 8,820,058 sf

Overview: Located in northern Anne Arundel County, just south of Baltimore, the BWI Office submarket surrounds Baltimore/Washington International Thurgood Marshall Airport and includes Glen Burnie, Linthicum, Hanover, and several smaller business districts. The area, which is home to the National Security Agency and Fort George Meade, is supported by a diverse set of economic drivers including world class private sector employers, telecommunications, health care, retail and distribution operations, and a rapidly expanding information and defense industry including eight of the top 10 defense contractors in the nation. Over the past 30 years, the BWI submarket has transformed as technology and intelligence communities take advantage of the submarket’s close proximity to Fort Meade and major metropolitan markets in Baltimore and Washington, D.C., growing total office inventory to nearly 9 million sf (msf) of office space.

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"The announcement of Pandora Jewelry signing 88,000 square Vacancy Rates % foot (sf) lease at 250 W. Pratt Street for its new US headquarters Absorption/Vacancy Rates Absorption Rates created a huge buzz in the City Center. This together with last Quarters announcement that Koa USA is moving to One Charles Center continues the trend of companies moving into urban locations to accommodate the desire of their workforce to live and work in the City. This trend has been the driving factor to the redevelopment of many of Baltimore’s older office buildings into residential units. The Pandora Jewelry lease has also had another effect on the City Center real estate market - with 250 West Pratt Street now 98 percent leased the ownership has put the property on the market for sale. Also on the market for sale is 300 East Lombard Street. This marks this first time in several years that we have had multiple A Class properties on the market at the same time." - Matthew M. Curran Real Estate Advisor 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

17.59%Vacancy Rate -59,04620.00%VacancyAbsorption Rate Avg.$20.80 Rental Rate

Overall, City Center saw a 0.43 percent Strong leasing activity throughout the At $28.21 per square foot (psf) Class A+ increase in vacancy from the second submarket is expected to ensure a healthy space currently commands the highest quarter's 17.16 percent to 17.59 percent in new year when tenants begin taking average asking rental rates within the the third quarter. This slight rise is attributed occupancy of space in 2015. Losses in Baltimore region. This marks a $2.73 rise to a 2.36 percent increase in Class A Class A space (-67,688 sf) were offset by from the second quarter's $25.28 psf and a vacancy. Class A+ space dropped to 8.62 gains in Class A+ space (25,580 sf) while $3.88 psf increase from the third quarter of percent, keeping vacancy under 10 percent activity within the Class B and B+ market 2013's $24.33 psf. Rounding out the overall for the fourth consecutive quarter. cancelled itself out registering a loss of average are Class A ($23.26 psf), Class B+ approximately 18,000 sf in the Class B ($18.55 psf), and Class B ($17.72 psf) to market and a slight 1,864 sf gain in Class B. average $20.80 psf.

Number of Buildings 78 Market Size 14,463,105 sf

Overview: As the downtown district of Baltimore City, the City Center submarket is defined by Broadway Street to the east, Martin Luther King Jr. Boulevard to the west, Centre Street to the north, and Cross Street to the south. City Center is Baltimore’s dense central business district and easily accessible to both I-95 and 295. Baltimore’s City Center continues to expand eastward along the water’s edge to include Harbor East and the hotly debated Harbor Point. Total office inventory is nearly 14.5 million square feet (msf). Drawn to City Center for its water views and amenities including Oriole Park at Camden Yards, M&T Bank Stadium, as well as easy access to a variety of ethnic restaurants, shops, and residences, Baltimore’s City Center is a diverse mix of old and new. In 2011, The Downtown Partnership unveiled an ambitious proposal to transform the Central Business District’s landscape to include $100 million in new parks and public plazas adding up to revitalization of Baltimore’s urban core. Major projects for the Inner Harbor, Charles Center, and west side are expected to generate new opportunities and encourage private growth.

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The largest of the Baltimore Metropolitan Statistical Area (MSA) Vacancy Rates % submarkets both in number of buildings and square feet (sf), Absorption/Vacancy Rates Absorption Rates Columbia routinely draws firms looking for a commuter-friendly and amenities rich alternative to both Downtown Baltimore and Washington, D.C. Major lifestyle projects in the pipeline in the heart of Columbia are driving further interest to area.

"Strong sale activity and the kick-off Downtown Columbia transformation to a lifestyle location has fueled activity this quarter. Additionally, government contractor QSSR has signed on to approximately 120,000 square feet signaling a potential trend in large users seeking these types of amenities."

- Patricia B. Gottesman Research & Communications Director 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

11.14%Vacancy Rate 20.00%Vacancy56,833Absorption Rate Avg.$24.43 Rental Rate

Columbia's direct vacancy rate continued The market bounced back after suffering an Columbia's average rental rate has remained its gradual decline moving 0.43 percent approximate 58,000 sf loss in the second steady over the last three years ranging from from 11.57 percent to 11.14 percent. With quarter of 2014. The positive activity is $23.39 psf (third quarter 2011) to $24.74 psf the exception of a slight hiccup in the fourth attributed to multiple mid-sized gains along (first quarter 2014) indicating stable market quarter of 2013, the area's vacancy rate Columbia Gateway Drive, Maple Lawn, conditions. These rates are routinely among has steadily declined since the third quarter Marshalee Drive, and Old Dobbin Lane. the highest in the Baltimore MSA and are of 2011 and is now the second lowest in second only to BWI ($24.49) this quarter. submarket in the region behind the I-83 Corridor's 8.48 percent.

Number of Buildings 227 Market Size 13,23,439 sf

Overview: Located between Baltimore and Washington, DC in Howard County, Columbia offers convenient access to Annapolis, the Chesapeake Bay, and three international and regional airports. Commuter and bus services and the MARC commuter rail system are available to residents and businesses. Routinely recognized by national news organizations for its highly educated labor pool, the Columbia submarket boasts one of the largest concentrations of corporate, political, and financial centers outside of Washington, DC. Its long history of diversity and abundance of premier retail and recreational amenities has helped the Columbia market remain the largest within the Baltimore Metropolitan Statistical Area (MSA).

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Activity within the Harford County submarket is driven largely by Vacancy Rates % activity surrounding Aberdeen Proving Grounds (APG). The area, Absorption/Vacancy Rates Absorption Rates affectionately referred to as The Gate, has seen tremendous growth on and off base. With the exception of these projects, and several surrounding lifestyle center Boulevard at Box Hill, the submarket is comprised of mid-sized and converted dwellings making the area ideal for small and expanding businesses.

“While the numbers still look rather low, we’re seeing activity by local businesses start to gain momentum. Activity surrounding the medical community continues to be steady, but now were seeing small business owners grow and expand which is great news for the Harford community.” - Thomas C. Mottley Vice President 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

24.66%Vacancy Rate 20.00%VacancyAbsorption2,952 Rate Avg.$22.88 Rental Rate

The area's vacancy rate remains largely Leasing activity within the submarket saw Down a $1.18 per square foot (psf) from the unchanged and the highest within the an increase as DRS Technologies signing third quarter of 2013's $24.07 psf, the area Baltimore Metropolitan Statistical Area space at 6170 Guardian Gateway Drive in remains steady at $22.88 psf. The average (MSA). The area suffered as several large Aberdeen, an occupancy expected in early rental rate mirrors neighboring submarket projects outside Aberdeen Proving Ground 2015. Overall, absorption remains slight for Baltimore County East ($22.73 psf) and is entered the market vacant. Activity remains a second consecutive quarter. in line with the Northern Metro submarkets strong inside APG for those firms that can Reisterstown Road Corridor ($22.53 psf) gain access. and Towson ($21.41 psf).

Number of Buildings 106 Market Size 3,690,255 sf

Overview: Harford County is located along the I-95 Corridor just 23 miles north of Baltimore. Harford’s major business districts fall within the County’s Development Envelope and include Bel Air, the county seat, Aberdeen, Havre de Grace, Riverside, Joppa, and Edgewood. I-95, U.S. Route 1, U.S. Route 40, and Maryland 24, traverse the County providing easy access to its more than 20 business parks including Box Hill Corporate Center, Water’s Edge Corporate Campus, The GATE at Aberdeen Proving Ground, North Gate Business Park, and the HEAT Center. The U.S. Army’s Aberdeen Proving Ground (APG) is an economic generator for the region and the County’s largest employer with more than 13,000 employees. As a result of the recent military Base Realignment and Closure (BRAC) process, APG is the fastest growing area in Harford County.

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The I-83 Corridor is a mix of office, retail, and flex properties Vacancy Rates % that intermingle with one another along Interstate 83. News Absorption/Vacancy Rates Absorption Rates surrounding spice company McCormick exploring the market for a new Headquarter's location has industry professionals speculating. The 125 year old company currently houses both its headquarter offices and manufacturing locations within the submarket's boundaries.

"The I-83 Corridor has enjoyed its most successful year in memory. Vacancy is at an all-time low and the growth of employment of Pennsylvania residents has helped sustain the market. Rental rates have gotten healthier for the Landlords but it is in reaction to success that has been had in the market. Look for the market to remain “steady as she goes”.

- Matthew B. Mueller Vice President 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

Vacancy8.48% Rate 112,66820.00%VacancyAbsorption Rate Avg.$19.70 Rental Rate

The lowest within the Baltimore Metropolitan Strong absorption in the submarket is The corridor's average asking rental rate Statistical Area (MSA), the I-83 Corridor attributed to taking approximately 90,000 dropped nearly $2.00 per square foot (psf) continues to enjoy a vacancy rate below ten square feet (sf) at 1 Fila Way. The area also from $21.65 psf in the second quarter to percent indicating healthy market conditions. saw notable move-ins at 4 N. Park Drive in $19.70 psf in the third quarter. This is the This is the fifth consecutive quarter that the Hunt Valley. lowest average rate has been since the first area as reduced its vacancy rate. quarter of 2006.

Number of Buildings 131 Market Size 7,702,580 sf

Overview: The I-83 Corridor, which includes the business districts of Timonium, Hunt Valley, Loveton, and Sparks, encompasses the majority of Northern Baltimore County and stretches from Pennsylvania to Towson. Excellent infrastructure connects the Corridor to Baltimore City by way of Interstate 83 and Maryland Route 45, more commonly known as York Road. In addition, the light-rail system offers easy access to Baltimore City, Washington, DC, and the Baltimore/Washington Thurgood Marshall International Airport. Arguably one of the most diverse submarkets, the I-83 Corridor is a blend of office, flex, and retail properties, dotted open land, and industrial landmarks. Attracted by numerous amenities including ease of access via Interstate 83, close proximity to Towson, and life-style epicenter Hunt Valley Towne Center, businesses in the Corridor are a blend of technology, professional services, and corporate and regional headquarter locations.

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. Reisterstown Road Corridor THIRD QUARTER | 2014

"The Reisterstown Road Corridor continued to see an improved Vacancy Rates % 3rd quarter of 2014. Vacancy numbers continued in a downward Absorption/Vacancy Rates Absorption Rates trend, with large vacancies being filled at Mill Run Circle and Painters Mill Road. The market seemed to have good amount of traffic this quarter, especially with small to medium size users. It also appears there is still a good amount of space available for these size tenants, especially in the buildings around the Beltway and I-795. The hope is that as Class A and Class A Medical space continues to fill up, the trend will continue with the Class B, and small to medium size users."

- T. Henson Ford Leasing Representative 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

18.61%Vacancy Rate 20.00%VacancyAbsorption6,793 Rate Avg.$22.53 Rental Rate

The Reisterstown Road Corridor continues Absorption activity throughout the Corridor The average rental rate for the Reisterstown to struggle as it recovers from major losses remains steady as positive and negative Road Corridor rose a slight $0.14 per square sustained in early 2013. The area has activity all but cancel one another out. In foot (psf) over the quarter from $22.39 psf in remained relatively unchanged since the first this case, 6,793 square feet (sf) of positive the second quarter to $22.53 psf in the third. of the year with direct vacancy dropping 0.15 absorption marks a 33,024 sf recovery from This nearly a $1.00 increase from the same percent from the second quarter's 18.75 a 26,231 sf loss in the second quarter 2014 period one year ago. percent to 18.61 percent. bringing year to date absorption to 61,316 sf.

Number of Buildings 84 Market Size 4,650,535 sf

Overview: The Reisterstown Road Corridor submarket is bounded by Greenspring Avenue to the east, Liberty Road to the west, the junction of Butler Road, Hanover Pike and Reisterstown Road to the north, and the Baltimore City line to the south. It includes Pikesville, Owings Mills Town Center, McDonogh/Garrison, Historic Reisterstown, and the Red Run Boulevard corridor. The Reisterstown Road Corridor is an assorted stretch of retail, flex, and office properties connecting Baltimore City to the rolling hills of Northern Baltimore County via Interstate 795 and Reisterstown Road. The submarket is currently seeing revitalization as more than $1 billion in improvements pour into the area. Most notably, Metro Centre at Owings Mills, a 47 acre, pedestrian-friendly development surrounding the Metro subway station, is under construction having Phase I of its master plan nearing completion. Designated by the State of Maryland as a transit-oriented development project, the project includes offices, shops, restaurants, a new public library, and a satellite campus for the Community College of Baltimore County.

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"The quietest of the Baltimore submarkets, the Route 2 Corridor Vacancy Rates % continues to struggle to attract office users from amenity rich Absorption/Vacancy Rates Absorption Rates competitors Annapolis and BWI. While retail and non-office properties continue to revitalize their parks and storefronts achieving decent occupancy, not much is happening to improve the quality of the office product. Retail and industrial user continue to dominate this area as office users consist of those seeking bargain rates or a location close to home causing the vacancy rate to remain relatively high. Anyone seeking a bargain should consider this area an alternative to higher priced markets to South and West – the area is poised for action, it just needs a push in the right direction." - Bethany S. Hobbs Real Estate Advisor 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

16.64%Vacancy Rate 20.00%Vacancy-8,238Absorption Rate Avg.$20.93 Rental Rate

Traditionally one of the quietest of the The Route 2 Corridor suffered a second Regularly competing with neighboring submarkets with the Baltimore Metropolitan consecutive loss in the third quarter as submarkets Annapolis and BWI, the Route 2 Statistical Area (MSA), the Route 2 multiple small businesses throughout the Corridor offers a cost effective, and stable, Corridor's vacancy rate rose 1.80 percent submarket. The smallest of the submarkets, alternative to higher priced submarkets in from 14.84 percent in the second quarter of both in number of buildings and overall the area. 2014 to 16.64 percent. This rate was also square feet, small changes within the affected by approximately 25,000 square Corridor can make a big difference in the feet (sf) of vacant space entering the market viability of the area. as 1005 Brandon Shores Drive was added to tracking.

Number of Buildings 41 Market Size 1,455,030 sf

Overview: Located in northeast Anne Arundel County, the Route 2 Corridor stretches from Severna Park to Pasadena, and includes the business districts of Glen Burnie and Arnold. Route 2 (or Ritchie Highway) connects Annapolis and the Baltimore Beltway offering access to other points in Anne Arundel County. In addition, Route 50, which extends from the southern part of the market (Severna Park), makes travel to Washington, DC an easy drive. The smallest of the Baltimore submarkets, the Route 2 Corridor submarket of Anne Arundel County provides an assortment of office and retail facilities which cater to their local clientele. From the urbanized northern reaches of Glen Burnie, which is home to the monstrous MVA facility and other structures typical of an urban area, to the small strip centers that serve wealthy suburbanites in "South County", the Route 2 Corridor is a microcosm of our region. The larger buildings in the north that were once populated by the "nationals" have all seen a retrenchment, while the smaller "mom and pop" tenants along Route 2, are slugging it out as they compete for allegiance from their loyal neighbors.

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"The Towson Commercial market continues to be driven by the Vacancy Rates % extensive retail activity in the Downtown area. The Cinemark Absorption/Vacancy Rates Absorption Rates Theatre Complex opened in early July with up to seven eating establishments slated for late fall openings lead by The Bone Fish Grill. The mixed-use development proposed by Caves Valley Partners has signed an LOI with a major food retailer for the heart of its development; this activity will act as a catalyst for increased activity in the office and residential markets. Federal Realty in proposing an apartment complex behind the Suntrust Bank at Washington and York Roads. All of the above will contribute to the long term plans of the local government for a live, work, play Downtown environment." - William W. Whitty, Jr. Senior Vice President/Principal 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 Quick Stats

16.15%Vacancy Rate 20.00%Vacancy17,284Absorption Rate Avg.$21.41 Rental Rate

Direct vacancy within the Towson core Absorption activity in the submarket is Average rental rates for the submarket were remains largely unchanged for the third attributed to small and mid-sized tenants steady for a fourth consecutive quarter rising consecutive quarter rising a slight 0.9 expanding and relocating within the $0.50 over the second quarter's $20.91 per percent from the second quarter's 16.06 submarket boundaries leading to a slight square foot (psf). This average is $0.92 psf percent to 16.15 percent. An additional 0.7 increase in positive absorption. higher than same period one year ago. percent of sublet vacancy drives the total vacancy to 16.22 percent for the submarket.

Number of Buildings 89 Market Size 5,703,643 sf

Overview: Towson, the county seat of Baltimore County, is located directly north of Baltimore City, inside the beltway, east of I-83, and along York Road. It is home to two universities, Goucher College and Towson University, as well as three regional hospitals, Greater Baltimore Medical Center (GBMC), St. Joseph Medical Center, and The Sheppard Pratt Health System. Steady growth of business and development continues to stimulate Towson’s local economy. Known for its four-story Towson Town Center shopping mall, downtown Towson continues to revitalize its retail, restaurants, residential, and office buildings with a private investment of roughly $500 million. Currently, more than $85 million in development projects continue to thrive as projects like Towson Square, with the construction of new restaurants, new 8,500-seat Cinemark Theater, and parking garage, show significant progress along the Towson skyline.

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. THIRD QUARTER | 2014 MacKenzie Market Report

Retail Market

www.mackenziecommercial.com BALTIMORE Retail oVERVIEW THIRD QUARTER | 2014

The backbone of the Baltimore Metropolitan Statistical Area mile away, David S. Brown Enterprises’ Metro Centre at Owings (MSA) is often considered to be the community and neighborhood Mills has delivered the fi rst phase 117,000 square feet of its shopping centers which continue to dominate market activity with projected 300,000 square feet (sf) of retail space and recently a wide variety of small shop leasing. As vacancy rates tighten to announced that Canadian-chain Eggspectation will be joining the less than 10 percent, the uncertainty of consumer demand driven Fractured Prune, Time Square Kitchen, and Subway. by fl at income and job growth continues to place Landlords in a Baltimore’s $400 million Horseshoe Casino has been open just position of fl exibility regarding rent reductions, rent abatement, over a month adding to the competition of destination gambling. and TI concessions. Given the moderate inventory absorption Optimism is high thought it is still too early to know the positive over the last quarter, tenant retention remains a top priority. effect casino traffi c will have on the surrounding area’s business Average rental rates in our MSA for these centers have sustained activity. With the traditional holiday shopping season fast the national average of $17.00 to $24.00 per square foot (psf) approaching, the pressure to open new locations by the end of while the higher quality “A” centers in the MSA (ie: Baltimore City, October remains high. As retailers compete for your consumer Annapolis, Howard County, York Road Corridor, etc..) the upward dollar, look for innovative techniques in mobile payment options, pressure on rents are reaching the $35.00 to $50.00 psf range. product promotions and the power of social media. All in the Tenant improvement allowances remain relevant, but discounts name of satisfying your thirst to “stay connected”. and other concessions are scarce. The success of The Shops at Canton Crossing Phase I, now 99 percent occupied, has developer Chesapeake Real Estate Group pre-leasing phase II of the project and are rumored to have Dick’s Sporting Goods, Pier 1 Imports, and Nordstrom Rack leading the tenant roster. - W. Christopher Walsh Vice President Local developer, Greenberg Gibbons, once again thrusts itself to the forefront with its recent acquisition of Towson’s 142,000 square foot (sf) Shops at Kenilworth from Towne Properties, of Cincinnati, Ohio. Given Greenberg’s fi rst class reputation, the energy surrounding Towson will continue as they strive to create the Best in Baltimore. The developer also announced the signing of several notable national retailers for its Foundry Row project in Owings Mills. Greenberg Gibbon’s regulars LA Fitness, Sports Authority, DSW, Panera Bread, Ulta, and Zoe’s Kitchen, will join emerging area concepts Smashburger and Nalley Fresh when the project delivers sometime in late 2015/early 2016 leading speculation to surround the Reisterstown Road market as competing properties compete for top-tier retailers; less than a Quick Stats 4.77% -32,40120.00% $18.80 Vacancy Rate VacancyAbsorption Rate Avg. Rental Rate

The overall vacancy rate for the Baltimore Though the region recorded a negative Average rental rates for the region continue MSA remains well under 10 percent with absorption for the quarter, activity with the to recover from to pre-recession levels near multiple submarkets recording rates under area is expected to "right itself" in the coming $20.00 per square foot (psf). The Southern 5 percent. Areas with strong demographics months as the traditional holiday shopping Metro Markets (Annapolis, Fort Meade, and and pyschographics (Annapolis, Ft. Meade, season takes hold. The area currently has Columbia) continue to command the highest Columbia, and York Road Corridor) are less than 300,000 sf under construction. of the average asking rental rates averaging consistently strong as retailers ﬂ ock to new slightly above $20.00 psf thanks to multiple construction and lifestyle center oriented projects commanding rates closer to an projects. average $35.00 psf.

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. BALTIMORE Retail oVERVIEW THIRD QUARTER | 2014

Vacancy Rates % Absorption/Vacancy Rates Rental Rate/Vacancy Rates Avg. Rental Rates

Occupied Vacant

20,000,000 $22.00 8.0%

7.0% $20.00 15,000,000 6.0%

$18.00 y 5.0% 10,000,000 $16.00 4.0% Square Feet 3.0% 5,000,000 $14.00 Direct Vacanc

Asking Rental Rates Rental Asking 2.0% $12.00 1.0% 0 $10.00 0.0% 2010 1Q 2010 2Q 2010 3Q 2010 4Q 2011 1Q 2011 2Q 2011 3Q 2011 4Q 2012 1Q 2012 2Q 2012 3Q 2012 4Q 2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q 2014 2Q 2014 3Q 2014 4Q

Conditions throughout the region continue to tighten with the exception The region dropped below the 5 percent mark for the ﬁ rst time in recent of the Reisterstown Road Corridor which continues to hover around memory following several years of steady activity just below six percent 11 percent. Though this rate is considered by industry professionals indicating tightening market conditions. The Columbia submarket as "healthy", compared to its counterparts the York Road Corridor (2.68 continues to garner the largest average rental rate, commanding percent) and Columbia (2.18 percent) the area remains somewhat vacant. approximately $24.48 psf. The Annapolis and Fort Meade submarkets are Multiple new projects in various stages of the pipeline are set to deliver also routinely among the top average rental rates for the region at $23.00 along the Corridor increasing competition. Baltimore City remains the psf and $22.86 psf respectively. Baltimore County East continues to largest of the submarket with more than 1,500,000 million square feet struggle at $14.76 psf even as neighboring submarket White Marsh/Perry available. However, the market remains tight with a 6.65 percent vacancy Hall averages $17.11 psf. rate as larger locations absorbed leaving small in-line spaces available.

Highlights

• Saint Agnes Hospital has leased 38,000 square feet (sf) of space at 40 • Syracuse New York-based Dinosaur Bar-B-Que, a biker- and blues- West Plaza, the site of the former Room Store. The new multi-specialty oriented barbecue chain, is opening its fi rst Baltimore location in Fells healthcare center will provide greater coordination of care and give Point. Currently under review with the Liquor Board, the space is patients increased access to physicians specializing in primary care, expected to be approximately 8,295 square feet at 1401 Fleet Street. obstetrics and gynecology, a variety of specialists and services for • Stone Cove opened its second location, Maryland’s fi rst, in Bel Air Town imaging and laboratory. Center. Located at 502-592 Baltimore Pike, the restaurant features a • Merritt Park Shopping Center has signed Texas Roadhouse to the unique concept that places the guests “in the kitchen” allowing patron’s newly remodeled center located at the corner of Holabird Avenue to interact directly with the Chef. and Merritt Boulevard. The steak chain was recently recognized by • The Westview Promenade in Frederick Maryland signed leases with Nation’s Restaurant News’ second annual Consumer Picks as the top J.Jill for 3,000 sf and Plow & Hearth for 5,000 sf to open late this fall. steakhouse. • Wolf's Furniture is preparing to open an outlet store in the Ballenger • Thomas Run Station sold for $5,500,000. The three retail buildings Creek Plaza in Frederick Maryland. The furniture store will be portfolio on Churchville Road in Bel Air, Maryland is 100-percent leased occupying 40,000 sf of space formerly leased by grocer Super Fresh. with tenants including Dunkin’ Donuts, State Farm Insurance, Goodwill • Chick-Fil-A has announced a second Baltimore City location. The and La Garderie Childcare fast food chain will join CVS at 400 E. Pratt Street when the new • Metro Centre at Owings Mills has signed Montreal, Canada-based sit- promenade space delivers later this fall. down restaurant chain Eggspectation, 5,582 square feet of space. The new Transit-Oriented Development (TOD) encircling the Owings Mills Metro Station is the fi rst Baltimore County location for the restaurant. www.mackenziecommercial.com

* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. BALTIMORE Retail oVERVIEW THIRD QUARTER | 2014

Number of Buildings 2,363 Market Size 105,352,066 sf

Notable Transactions Lease

Location Submarket Tenant Amount Leased SF

6501 Baltimore National Pike Baltimore South St. Agnes Hospital 38,000 sf

10 Carroll Plaza Carroll County Home Goods 23,000 sf

5 Bel Air S Parkway Harford County AC Moore 24,000 sf

400 E. Pratt Street City Center CVS 9,660 sf

Sale

Location Submarket Price PSF Building Size SF

203 International Circle York Road Corridor $1,100,000 $922.13 psf 3,650 sf

6855 Loch Raven Boulevard York Road Corridor $2,250,000 $922.13 psf 2,440 sf

7657 Arundel Mills Boulevard Fort Meade $1,950,000 $620.23 psf 3,144 sf

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. THIRD QUARTER | 2014 MacKenzie Market Report

Industrial Market

www.mackenziecommercial.com BALTIMORE Industrial oVERVIEW THIRD QUARTER | 2014

Overall vacancy Warehouse vacancy Industrial Market Extends Momentum in Q3 Flex vacancy Historical Overview Warehouse Avg. Rate Presented by Anirban Basu, Sage Policy Group, Inc. Flex Avg. Rate

Both Regional Warehouse and Flex Markets Progress $12.00 12.00%

As has been the case for many a quarter, the most interesting $10.00 10.00% action in in the industrial market. Net absorption in the regional warehouse segment approached 1.7 million square feet (msf) $8.00 8.00% during the third quarter alone, with the Harford/Cecil market tallying 863,931 square feet (sf) of net absorption on its own $6.00 6.00% over a three-month period. That market has net absorbed almost precisely half of what the regional market has absorbed $4.00 4.00% year-to-date (1.33 msf out of 2.70 msf).

$2.00 2.00% The Carroll County market has net absorbed nearly 400,000 sf over the past year while the Baltimore County East market has $0.00 0.00%

chipped in another 235,000 sf. Direct vacancy fell from 10.1 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 percent a year ago to 9.2 percent over the past four quarters. Despite impressive net absorption and declining vacancy, warehouse asking rent has actually slipped over the past year, from $4.78 per square foot (psf) a year ago to $4.76 psf more recently.

Dynamics within the fl ex market are less robust. During the third quarter, the regional fl ex market net absorbed -70,455 sf, though year-to-date, the market has net absorbed more than half a msf. Harford/Cecil leads the way, with net absorption of 142,500 sf over the past year. However, Harford/Cecil availability stands at 14.6 percent, above the regional average availability share of 13.6 percent. The BW Corridor and Baltimore City have also net absorbed more than 100,000 sf over the past year. As with the warehouse market, asking rent has slipped in the fl ex market, from $10.72 psf a year ago to $10.57 psf today. This is likely an indication of motivated lessors of space, which when coupled with a regional economy that continues to expand implies active leasing during the months ahead. Quick Stats - fLEX 9.22% -70,455 $10.57 Vacancy Rate Absorption Avg. Rental Rate

Quick Stats - WAREHOUSE 8.64% 1,690,16520.00% $4.76 Vacancy Rate VacancyAbsorption Rate Avg. Rental Rate

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. BALTIMORE Industrial oVERVIEW THIRD QUARTER | 2014

Vacancy Rates % Vacancy Rates % Absorption/Vacancy Rates Absorption Rates Absorption/Vacancy Rates Absorption Rates

Flex - Vacancy & Absorption By Region Warehouse - Vacancy & Absorption By Region

120,000 20% 15% 13.2% 13.5% 650,000 100,000 12.4% 12.4% 15% 12.9% 10% 550,000 11.8% 80,000 8.0% 7.6% 8.2% 10% 450,000 4.1% 8.0% 5% 60,000 7.2% 5% 6.9% 350,000 4.4% 4.8% 40,000 3.8% 0% 0% 250,000 20,000 -5% 150,000 -5% 0

-10% 50,000 Rates Vacancy Vacancy Rates Vacancy -20,000 (sq. ft.) Absorption -10% Absorption (sq. (sq. ft.) Absorption -50,000 -40,000 -15% -15% -150,000 -60,000 -20% -250,000 -20% BW Corridor I-83 Corridor Baltimore City BW Corridor I-83 Corridor I-83 Carroll County I-97 / Annapolis I-97 / Baltimore City Carroll County I-97 / Annapolis Harford / Cecil County Baltimore County East Harford / Cecil County Baltimore County West Baltimore County East Baltimore County West

The vacancy rates in the ﬂ ex market rose a slight 0.19 percent over Baltimore's warehouse market continues to contract as space is the quarter due to small elevations in the Annapolis, Arbutus, Carroll absorbed. The Annapolis, Carroll, I-83 Corridor, Reisterstown Road and Woodlawn markets. The Reisterstown Road Corridor continues Corridor, and Woodlawn submarkets are experiencing vacancy rates to struggle (16.49 percent), but overall the market remains strong. below 5 percent indicating a healthy market. Strong activity in the Negative absorption for the quarter is fairly distributed throughout the BWI, Carroll, and Harford/Cecil submarkets experienced strong gains region with relatively mild losses in the Arbutus, BW Corridor, Carroll, absorbing a combined 1,525,921 sf. The Baltimore County East and I-83 Corridord, and Woodlawn submarkets that cancelled out gains in Baltimore City submarkets were the only areas to see a decline, losing the Baltimore City and Harford/Cecil County submarkets. Average rental approxiamtely 54,000 sf and 38,461 sf respectively.The region's average rates remained steady for the fourth straight quarter. The Annapolis rental rate continues to remain under $5.00 psf even as some markets submarket continues to garner the highest average at $14.16 psf while experience record averages closer to the $10.00 psf range as exampled the remainder of the region hovers at approximately $10.00 psf. The by the I-83 Corridor which is averaging $8.39 psf. Carroll County market showed the highest year-over-year gain, rising $1.35 psf to average $9.11 psf. Highlights

• 504 Advantage Way sold for $31,000,000. Located in Advantage • Cosmetics giant Sephora held a ribbon cutting for its new facility Business Park Aberdeen, Maryland, the 528,780 sf bulk warehouse in Harford County. The company made headlines in 2013 when is currently 100 percent leased by three tenants including the 34th it purchased the property in Perryman, Maryland to expand its largest private company in the US Gordon Food Service (GFS). distribution capabilities. The new 650,000 sf facility will be used • Merritt Properties broker ground on NAFCO & Congressional to fulﬁ ll online orders and retail shipments. The project received Seafood Company’s new headquarters and seafood distribution economic development support from both the Maryland Department facility at 7775 S. Chesapeake Bay Court in Jessup, Maryland. The of Business and Economic Development and Harford County. 70,000 sf seafood processing facility is expected to be completed by • A Class “B” warehouse located at 8730 Greenwood Place in Savage February 2015. Maryland was purchased for $9,900,000. Though the 121,500 sf • Packaging solutions company Quality Packaging Inc. signed a warehouse had undergone some improvements since its purchase in 10,200 sf lease at 8800 Kelso Drive to be used as a warehouse and 2010 for $4,500,000, the deal highlights the desire for product in a distribution center. tightening Baltimore market. • A 42,214 sf ﬂ ex building at 1805 Margaret Avenue in Annapolis, Maryland sold for $4,300,000.

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* All information furnished regarding property for sale, rent, exchange or ﬁnancing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be veriﬁed to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 9/2014. BALTIMORE Industrial oVERVIEW THIRD QUARTER | 2014

Number of Buildings 4,828 Market Size 238,296,574 sf

Notable Transactions Lease

Location Submarket Tenant Amount Leased SF

9001 Whiskey Bottom Road BW Corridor Coastal Sunbelt Produce 244,500 sf

504 Advantage Way Harford/Cecil Gordon Food Service 235,000 sf

10621 Riggs Hill Road BW Corridor Fabrication Events 28,145 sf

7430 Montevideo Road BW Corridor Sunbelt Equipment 10,000 sf

Sale

Location Submarket Price PSF Building Size SF

8730 Greenwood Place BW Corridor 9,900,000 $81.48 121,500 sf

516 Shaw Court BW Corridor $1,100,000 $146.67 7,500 sf

1701 Parkman Avenue Baltimore City $840,000 $68.35 12,290 sf