Business was brisk in sales of historic downtown Frederick office and mixed residential/retail buildings.
Speaking of the economy recovery…after the first quarter of the dreaded sequestration, we crunched some numbers at MacRo to determine how Frederick’s commercial real estate market weathered the biggest cuts in defense spending in 60 years.
There is good news and bad news…whether the weather is partly sunny or partly cloudy we leave our loyal readers to decide.
The good news is that the number of commercial real estate sales transactions in Frederick during the first quarter of 2013 increased over the same period in 2012 by over 45%. Buyers and sellers are finally beginning to see eye to eye.
The bad news? There weren’t any deals over $1 million this past quarter, and the total dollar volume of sales transactions for Q1 2013 dropped to $18.6 million from $31.4 million during Q1 2012.
Overall, the first quarter of 2013 was heavily weighted with sales of historic downtown office and mixed residential/retail buildings—a total of 50% of all Frederick commercial real estate transactions were in this category.
We weren’t surprised, given that we’ve had numerous showings of MacRo properties this quarter to small- and medium-sized business owners looking to expand growing businesses into larger spaces.
Comparing Q1 2013 to Q1 2012, office leasing in Frederick County ticked down slightly on a total square foot basis (a little disappointing), but so did vacancies (which is good news).
Nationwide, office space use and design is experiencing a tectonic shift. With office demand growing at only half the rate of office-using jobs, and major employers fleeing Maryland for tax-sheltered Virginia, there is some concern within Frederick’s commercial real estate community about the realistic leasing potential of large vacant Class A spaces in this market.
The owners of the former Citibank building at 5280 Corporate Drive have refurbished the lobby, divided the building into smaller spaces for leasing to multiple tenants, and rebranded as Westview Corporate Center. Will the vacant building in Frederick’s Bechtel campus receive a similar makeover?
The most notable sale of property in Frederick County during the first quarter was the historic Landon House in Urbana. The property, which included the 6,000 SF mansion and 5.7 acres of land, sold for $850,000 in January. The mansion had been converted to office space, but the buyers of the property are a group of doctors who plan to convert it into a medical building.
Given the office space conversions taking place in Frederick, we found it interesting that the largest commercial office real estate transaction in the U.S. during the past quarter will also result in a major office makeover. The Sony Building on Madison Avenue in Manhattan sold for $1.1 billion ($1,290/SF). The purchaser plans to convert the entire office building into apartments.
The authors: Rocky Mackintosh is President of MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com. Kathy Krach is a commercial sales and leasing agent with MacRo.