Northeast Baltimore County
Summary Overview
Below you’ll find in more detail the demographics of the region, its retail sales gap analysis, and the performance of the region’s Industrial/Flex and Office markets as well as 10-year projections of net-new demand for each product. If you’re interested in searching for a specific address to confirm its location within the region, please use the search function (magnifying glass on the upper left-hand corner of the map below).
The Northeast region of Baltimore County encompasses the communities of Nottingham, Rosedale, Perry Hall, and White Marsh. The region is home to opportunity Enterprise Zones, two Opportunity Zones, as well as several Commercial Revitalization Areas. The region is serviced by MTA bus lines and commuter rail, commercial rail, and Interstates 95 and 695. Northeast Baltimore County maintains approximately 9% of all Office space, 30% of all Industrial/Flex space, and 23% of all Retail space located in the greater area of Baltimore County.
In short, based on current and projected demographic, employment, and real estate performance patterns, it is estimated that the Northeast region will have no positive net-new demand for Industrial/Flex space though 2030. By 2030, net-new demand for Industrial/Flex space is projected to at -2.35 acres, or -204,700 square feet.
For Retail space, given the dynamic changes in the retail market, increasing incomes, and the current excess of available retail square footage in the Northeast region, it is estimated the region will see positive net-new demand by 2026. By 2030, it is estimated the region will see positive net-new demand for brick & mortar retail of 18 acres (assuming a FAR of 1), or 787,000 square feet.
The office market is currently the softest market within the Northeast region. With nearly 14% of the current office space available for lease, it estimated that while there will continue to be gross-demand for office space throughout 2030, no positive net-new demand for the product will exist until well after 2030. By 2030, it is estimated the region will see net-new demand of -13.1 acres (assuming a FAR of .5), or -285,000 square feet.
Demographic Overview
Demographic and employment trends are two key drivers for Retail, Industrial/Flex and Office demand. In this section, an overview of the changing demographics within the Central Region are provided and compared to Baltimore County, the Baltimore Metropolitan Statistical Area (MSA), and the nation.
Median Age. With respect to consumer behavior for retail demand, the age of a region’s population generally correlates with the types of retail demanded. Understanding if a region is aging can help planners and developers better target brick & mortar retail options.
As can be seen in the graph to the right, since 2000 the Northeast region has aged, increasing from 37 years to 40 projected by 2030. Compared to the county, the region is projected to have a slightly younger population by 2030 with median ages 41 and 40 years, respectively. The region is projected to have a slightly younger population by 2030 than those of the county and the Baltimore MSA.
Proportion of Population Over 25 with College Education (2000-2030). Along with age, the proportion of college educated residents in a region also impacts the type of retail demanded therein. The Northeast region has seen significant growth since 2000 in the proportion of its resident population (over 25) having at least a bachelor’s degree (but also masters and terminal degrees).
In 2000, approximately 22% of the Northeast region’s adult population was considered college educated – significantly lower than Baltimore County, the Baltimore MSA, and the nation. By 2030, it is estimated that nearly 35% of the region’s adult population will have at least a bachelor’s degree; however, the region is projected to lag behind the county, the MSA, and the nation.
Household Growth Index and Average Household Size. Another critical component to identifying retail demand is projected household growth and the changes in household size overtime. As new households form within a region, they provide retailers with additional retail demand. The average household size can inform a retailer on what type of retail will be demanded. If household sizes are increasing, then retailers providing family friendly choices are likely to flourish; however, as household sizes decrease, retailers will be required to reevaluate their product offerings and even the location of their establishments.
As can be seen from the adjacent graph, the Northeast region’s household growth is projected to lag behind the nation quite significantly through 2030. By then, the nation is projected to have grown by 30%, compared with 13% for the Northeast Region, 12% for the county, and 16% for the Baltimore MSA.
In terms of average household size, the Northeast region maintains significantly smaller households than the MSA and nation, while having a slightly larger household size than the county. With less than 2.48 people per household in 2000, the Northeast region’s household size peaked in 2010 at 2.55 and is projected to decline slightly through 2030 to 2.49. While all regions are projected to decline, the Northeast region is projected to maintain a larger average household size than the county by 2030.
Median Household Income Growth Index and Monetary Value. While a growing community generally outpaces the surrounding region in household growth, a stable community, such as Baltimore County, can increase its demand for overall retail services by generating greater household income. The Northeast region is fortunate to have both growing number of households as well as increasing income. As shown in the previous tables, the Northeast region trails the Baltimore MSA, and the nation in terms of household growth. However, while the region outpaces the county in household growth, by 2030 it is projected to continue lagging behind the county and MSA in term of nominal median household incomes.
The Northeast region is projected to have a median household income of just over $93,000 by 2030, compared to $100,500 for the county, $107,000 for the MSA, and $80,500 for the nation. This increase in both households and income bodes well for the region’s demand for future retail services. However, increased demand is only one side of the retail ledger. Evaluating the current space market is another critical component to projecting total net-new demand for retail product. The following chapter presents our fundamental analysis and projections for brick & mortar retail space through 2030.
Retail Sales Gap Analysis
Retail Real Estate Performance. The real estate performance for the Northeast region’s retail market can be characterized by falling rents, expanded inventory, and moderately increasing availability rates. The region has added roughly 700,000 square feet (or 19.5 acres assuming an FAR of 1) of brick & mortar retail product to the market since 2006. During that time, rents per square foot have declined throughout the Great Recession and continued to do so through 2018 – ultimately bottoming out at just under $14 a square foot. However, since then rents have increased and peaked $19 a square foot by Q2 2020 but then, throughout the COVID-19 restriction, fell to just under $16.
While rents are still below the highs of 2006, availability rates (total amount of space that is currently being marketed as available for lease or sale in each time period - including any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date) have remained under 10% and at times have fallen to as low as 4.5%. Generally, a market experiencing less than a 10% availability rate is seen as stable but with falling rents in light of new inventory, the opportunities for future development will likely come from less than prime locations.
Net-absorption. The final indicator used to monitor real estate performance is net-absorption. For existing buildings, net-absorption is the measure of total square feet occupied (indicated as a Move-In) less the total space vacated (indicated as a Move-Out) over a given period of time. Lease renewals are not factored into net-absorption. However, in a lease renewal that includes the leasing of additional space, that additional space is counted within net absorption. Pre-leasing of space in non-existing buildings (Planned, Under Construction or Under Renovation) is not counted within net-absorption until actual move in, which by definition may not be any earlier than the delivery date.
Certainly, COVID-19 impacted the region’s retail market as nearly 150,000 square feet of negative net-absorption between Q1 2020 and Q1 2021 occurred during the mandatory shutdown. However, prior to COVID-19, the market was fairly stable (in light of falling rents) with 44,000 square feet of positive net-absorption during all of 2019.
Changes in Retail Demand by Segment. COVID-19 accelerated many trends occurring within the retail sector – most notably the sudden increase in the percentage of e-commerce sales. The table to the right presents the changes in retail demand by segment between 2019 and 2020. As can be seen, the COVID-19 restrictions negatively impacted several segments including:
- Electronics & Appliance Stores
- Clothing & Clothing Accessories Stores
- Gasoline Stations
- Food Services & Drinking Places
- Motor Vehicles & Parts Dealers
Gasoline Stations, Food Services and Drinking Places, and Motor Vehicles & Parts Dealers will all likely rebound as the economy fully opens; however, brick & mortar Electronics and Appliance Stores and Clothing & Clothing Accessories Stores will likely not recover as quickly as these segments will likely continue to be under threat from e-commerce – which increased its share of total retail sales from 12% to roughly 15% between 2019 and 2021.
Growth in Average Household Income. To calculate future demand for retail space, growth in average income (as opposed to median) is projected through 2030 - the table to the right displays these projections. The Northeast region is home to the residents with a modest average household income compared to other parts of the county and it’s projected to increase by 28% through 2030 – growing from $93,500 per household to nearly $120,000.
Regional Retail Demand vs Local Income. The increase in average household income coupled with new household formation in the region is projected to increase the total income of the region’s residents by nearly $2.1 billion through 2030. However, on average, the residents of this region spend roughly 63% of their income on retail purchases, which equates to approximately $4.2 billion in 2021 and growing to $5.5 billion in 2030 (assuming a constant 63% income to retail consumption ratio).
Proportion of Retail Demand for E-commerce. While $5.5 billion in retail purchases is considerable buying power, the growing percentage of e-commerce erodes the value of retail purchases done locally. It is estimated that e-commerce as a percentage of total local retail sales will grow from 16% in 2021 to 26% in 2030 within this region. As such, the growth in retail demand for local brick & mortar retail (net of online purchases) will continue, but just at a slower rate than in years past.
Regional Retail Sales: Local vs. Non-local Demand. Another factor influencing the demand for brick & mortar retail is the current distribution of retail sales throughout the county. As retail purchases do not follow regional borders, consumers who live in one region may very well travel across regional borders to access retail services. These phenomena are measured by separating local from non-local retail purchases. Local purchases are driven by residents of this region, with non-local purchases coming from residents traveling from outside of the region (either from other county regions or from adjacent municipalities). A positive non-local purchases value indicates the region is attracting retail consumption from residents of the surrounding regions. A negative non-local purchases value indicates that, on a net basis, not enough retail options exist within that region to satisfy local demand, therefore local retail purchases are leaking out of the region as locals drive across regional borders to access additional retail options. Generally, retail leakages (negative non-local purchases) indicate the need for additional retail options, but because this analysis is focused on regional demand (as opposed to site-specific), our projections of net-new retail demand assume a constant local vs non-local purchases ratio. This ratio is held constant due to overlapping trade areas for certain retailers.
For the Northeast region, in 2021 approximately $3.5 billion in brick & mortar retail purchases are projected to occur, of which $560,000,000, or 20%, are projected to leak out of the region. Assuming a constant local to non-local purchases ratio, by 2030 total brick & mortar retail sales are expected to increase to $3.5 billion on a nominal basis.
Retail Space Gross New Demand by Acreage. Given the growth in total retail sales by 2030 and assuming a $350 of sales per square foot planning estimate, it is projected the Northeast region will have a total of 1.5 million square feet of gross-new demand by 2030 (approximately 150,000 sf per year). Assuming a Floor Area Ratio (FAR) of 1, this translates to roughly 35 acres (or 3.5 acres annually) through 2030. However, this represents gross-new demand and does not consider the current available retail space that must be absorbed before any new brick & mortar retail development will occur.
Retail Space Net-new Demand by Acreage. To estimate the amount of net-new demand, the total available space for brick & mortar retail must be netted (subtracted) out of the gross demand. As of Q4 2020, approximately 824,400 square feet of retail space was available to be leased. Assuming a 10% frictional vacancy, this means approximately 742,000 square feet of space will need to be absorbed prior to triggering any new brick & mortar retail construction. As such, it is projected that first year of positive net-new demand will be 2026. Through 2030, the total net-new demand for brick & mortar retail is approximately 787,000 square feet or 18.1 acres (assuming a FAR of 1).
Industrial/Flex Market Performance
Industrial/Flex Rent per Square Foot / Industrial/Flex Available Square Footage / Total Inventory. The Industrial/Flex market can best be characterized by recently increasing rents, expanded inventory, and falling availability rates. While rents hovered between $3 and $6 a square foot through 2019, they have jumped to nearly $10 by Q2 2021. Ass the region has added nearly $4 million square feet of inventory since 2005, availability rates (total amount of space that is currently being marketed as available for lease or sale in each time period - including any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date) remained significantly high has the market struggled with absorbing the new product. However, since 2015, availability rates have trended downward to near period lows of 12%. These trends are likely supported by the boom in e-commerce both before and during COVID-19.
Industrial/Flex Net-absorption. The final indicator used to monitor real estate performance is net-absorption. For existing buildings, net-absorption is the measure of total square feet occupied (indicated as a Move-In) less the total space vacated (indicated as a Move-Out) over a given period of time. Lease renewals are not factored into net absorption. However, in a lease renewal that includes the leasing of additional space, that additional space is counted within net absorption. Pre-leasing of space in non-existing buildings (Planned, Under Construction or Under Renovation) is not counted within net-absorption until actual move in, which by definition, may not be any earlier than the delivery date.
To support the notion of an accelerating market, approximately 522,000 square feet of positive net-absorption has occurred since 2020. Given the increased demand for Transportation & Warehousing due to the growth in e-commerce, positive net-absorption is expected to continue throughout the next several years.
Industrial/Flex 10-year Projections
Employment Composition for Industrial/Flex Based Sectors. While the real estate performance for this product has been mostly positive since 2005, assessing the region’s changing employment composition of those industries that use Industrial/Flex space is critical. What drives demand for this product is employment growth in the following industries:
- Construction
- Waste Mtg & Remediation Services
- Transportation & Warehousing
- Manufacturing
- Other Services
- Professional, Scientific, & Technical Services
- Wholesale Trade
As the graph to the right illustrates, Transportation & Warehousing is projected to grow from approximately 22% of the region’s Industrial/Flex economy to over 27% by 2030. This growth in Transportation & Warehousing is a national trend driven by the growing demand of e-commerce retail and last mile fulfillment centers. As such, the composite space per worker assumption used to forecast future demand will likely increase from the current 710 square feet to closer to 1,000 square feet as Transportation & Warehousing uses demand significantly more space per worker than do other Industrial/Flex uses.
Net-new Employment for Industrial/Flex-based Industries. The net-new employment growth is what drives demand for Industrial/Flex space. The graph to the right presents the net-new employment growth by industries that utilize this type of space. In support of the shift in regional employment composition, the fastest growing industry in this market is Transportation & Warehousing. Over 3,100 new jobs are projected to come online by 2030, with 70% (2,200) of those jobs to be realized in the Transportation & Warehousing industry. This rapidly growing industry is in response to the growing demand for e-commerce fulfillment facilities and is projected to slow employment increases by 2030 to less than 130 per year. The other growing industry in the region affecting demand for new Industrial/Flex product is Manufacturing at roughly 500 jobs through 2030.
Industrial/Flex Gross Square Foot Demand. Given the growth in Industrial/Flex-based industries and assuming 710 square feet per worker planning estimate, it is projected the Northeast region will have a total of 2.2 million square feet of gross-new demand by 2030 (approximately 222,600 square feet per year). Assuming a Floor Area Ratio (FAR) of 2, this translates to roughly 25.55 acres (or 2.56 acres annually) through 2030. However, this represents gross-new demand and does not consider the current available Industrial/Flex space that must be absorbed before any new development will occur.
Industrial/Flex Net-new Square Foot Demand. To estimate the amount of net-new demand, the total available space for Industrial/Flex space must be netted (subtracted) out of the gross demand. As of Q4 2020, approximately 2.7 million square feet of Industrial/Flex space was available to be leased. Assuming a 10% frictional vacancy, this means approximately 2.4 million square feet of space will need to be absorbed prior to triggering any new construction. Given this, it is projected that no positive net-new demand will occur through 2030. While the market is projected to remain strong, given the excess construction over the last 15 years, plenty of space is currently available to satisfy gross-new demand through 2030.
Office Market Performance
Office Rent per Square Foot / Office Available Square Footage / Total Inventory. The Northeast region’s office market can be characterized by healthy increases in rents with relatively high level of available product (total amount of space that is currently being marketed as available for lease or sale in each time period - including any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date). With over 800,000 square feet of product hitting the market since 2005, given the nearly 19% availability rates as of Q2 2021, the region’s Office market will likely remain overbuilt for some time.
Office Net Absorption. The final indicator used to monitor real estate performance is net-absorption. For existing buildings, net-absorption is the measure of total square feet occupied (indicated as a Move-In) less the total space vacated (indicated as a Move-Out) over a given period of time. Lease renewals are not factored into net absorption. However, in a lease renewal that includes the leasing of additional space, that additional space is counted within net absorption. Pre-leasing of space in non-existing buildings (Planned, Under Construction or Under Renovation) is not counted within net-absorption until actual move in, which by definition, may not be any earlier than the delivery date.
Since the beginning of 2020, the region’s Office market has experienced negative net-absorption of roughly 24,000 square feet; however, Q2 of 2021 saw the first month of positive net-absorption year-over-year of 9,000 square feet.
Office 10-year Projections
Employment Composition and Growth for Office Based Sectors. Assessing the region’s changing employment composition of those industries that use Office space is critical. What drives demand for this product is employment growth in the following industries:
- Finance & Insurance
- Medical
- Real Estate & Rental & Leasing
- Professional, Scientific, & Technical Services
- Administration & Support
- Information
- Other Services
- Education Services
- Management of Companies & Enterprises
- Arts, Entertainment, & Recreation
As the graph to the right illustrates, Medical is projected to grow from 33% of the region’s Office economy to 37% by 2030. This growth in Medical is a national trend primarily driven by aging populations. Notably, the Information sector to is projected to lose market share by roughly 2%, while the remaining industries are projected to only lose a minor amount of market share.
Net-new Employment for Office Based Industries. Net-new employment growth is what drives demand for Office space. The graph to the right presents the net-new employment growth by industries that utilize this type of space. In support of the shift in regional employment composition, the fastest growing industry in this market is Medical. Over 1,180 new jobs are projected to come online by 2030, averaging about 118 jobs per year. The Real Estate, Rental and Leasing industries is also a growing sector in the region and is projected to add just over 300 jobs through 2030.
Office Gross Square Foot Demand. Given the growth in Office-based industries and assuming a 200 square feet per worker planning estimate, it is projected the Northeast region will have a total of 290,000 square feet of gross-new demand by 2030 (approximately 29,000 square feet per year). Assuming a Floor Area Ratio (FAR) of .5, this translates to roughly 13.3 acres (or 1.3 acres annually) through 2030. However, this represents gross-new demand and does not consider the current available Office space that must be absorbed before any new development will occur.
Office Net-new Square Foot Demand. To estimate the amount of net-new demand, the total available space for Office space must be netted (subtracted) out of gross-new demand. As of Q4 2020, approximately 641,000 square feet of Office space was available to be leased. Assuming a 10% frictional vacancy, this means approximately 576,900 square feet of space will need to be absorbed prior to triggering any new construction. Given the excessive quantity of availably inventory (nearly 14% of inventory), it is projected there will be no positive net-new demand through 2030. By 2030, the total net-new demand for Office space will be approximately -285,000 square feet or -13.1 acres (assuming a FAR of .5).