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2020 North America Industrial Big Box Review & Outlook

Baltimore
March 22, 2021

“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 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.”
William Pellington – Executive Vice President

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 3.4% projected growth rate over the next five years. Baltimore is ranked among other major industrial markets for reaching a high population concentration within a 100-mile radius. Including New Jersey, Inland Empire, Los Angeles and Chicago. 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 region. According to CBRE Labor Analytics, the local warehouse labor force of 41,730 is expected to grow by 12.1% over the next 10 years. The average salary for non-supervisory warehouse workers is $14.90 per hour, 5.9% above the national average.

Figure 2: Baltimore Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.
*Median Wage (1 year experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).

Location Incentives

Over the past five years, there have been 131 economic incentives deals totaling more than $153 million at an average of $6,723 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 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 a 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 in operation in 2021.

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.

Capital Markets


"2020 started off very strong with Q1 sales volume up by 150% year-over-year. However, because of the COVID pandemic, annual sales volume dropped by 22%. In the second half of the year, cap rate compression of 30 to 50 bps across the quality spectrum benefitted sellers. During that period, the lowest cap rates ever recorded for occupied assets were achieved, with a 4.55% average cap rate along the I-81 Corridor and a 4.37% average cap rate along the I-95 Corridor. The market benefitted from new foreign capital sources, as well as significant demand from domestic sources. Investors are expecting significant rent growth in the region over the next five years, which will further enable aggressive underwriting."
Jonathan Beard– Senior Vice President

Figure 4: Cap Rate Comparison

Source: CBRE Research

Supply & Demand

With 77.4 million sq. ft. of total inventory, Baltimore is one of the smallest big-box markets in the U.S. but is garnering outsized interest from occupiers. Transaction volume of 7.3 million sq. ft. in 2020 was up by 5.3% year-over-year. The market’s relatively low vacancy rate of 4.6% helped increase the average taking rent to $5 per sq. ft. last year.

Developers have focused on mega big-box construction, with all 2.8 million sq. ft. completed last year made up of buildings of 500,000 sq. ft. or more. Nearly 90% of the 3.1 million sq. ft. currently under construction is in this size category and 59% is preleased. Robust preleasing will keep vacancy rates low and increase taking rents in 2021.

Figure 5: 2020 Occupier Transaction Market Share

Source: CBRE Research.

Figure 6: Transaction Volume

Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Comparison

Source: CBRE Research.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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2020 North America Industrial Big Box Report & Outlook

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Contacts

James Breeze
Senior Director, Global Head of Industrial & Logistics Research
Research
+1 602 735 1939
Matt Walaszek
Director of Research
Research
+1 312 297 7686
John Morris
Executive Managing Director, Americas Industrial & Logistics Leader
+1 630 573 7020
Richard Barkham, Ph.D.
Global Chief Economist, Head of Global Research & Head of Americas Research
+1 617 912 5215
Spencer Levy
Global Chief Client Officer and Senior Economic Advisor
+1 617 912 5236