No national economic downturn will rain on the Baltimore/Washington region's commercial real estate parade, according to nearly 150 experts surveyed recently by the university's Real Estate Institute.
In Trend Watch 2001, its third survey since 1998 of area commercial real estate specialists and related business experts, the Allan L. Berman Real Estate Institute of the School of Professional Studies in Business and Education gives Baltimore City credit as "the most improved jurisdiction in terms of getting business done." Howard County receives kudos as "the most favorable jurisdiction in which to do business," and multifamily properties are praised as "the strongest real estate sector in the market today."
Although nearly 82 percent of the respondents to the survey cite a downturn in the U.S. economy as the greatest threat to the continued strength of the region's real estate market, the area's office, industrial, retail, hotel and multifamily sectors overall have proved quite resistant to external factors, the 49-page report says.
Trend Watch thinks that even though the market is near its peak, the demand for most of these facilities far outweighs the potential for economic slowdown.
In fact, commercial real estate as an investment class beats out the stock market for the first time in the history of Trend Watch surveys, with a majority of this year's respondents choosing that segment when asked where they would invest $25 million, the report says.
Michael Anikeeff, director of the Real Estate Institute, said the survey interviews were conducted by graduate students under the leadership of faculty member Lewis Bolan. Bolan said the survey's findings are exclusively those of the report's authors and that the opinions expressed in it are those of the experts interviewed by the institute's students.
Respondents to the survey overwhelmingly cite downtown office markets as one of the most preferred locations for new investment, and a full 93 percent of respondents say that a trend toward urban living will increase in the coming years.
"The strength of multifamily property is phenomenal," according to Trend Watch. In the first survey of 1998, fewer than 1 percent of respondents said they would invest $25 million in the multifamily sector; "this year, the majority of Washington area respondents say multifamily product would be their investment preference," the Hopkins researchers report.
In the 1999 survey, one-third of Washington area experts said they would invest in downtown Washington office space; in the 1998 survey, suburban office space was the favorite investment choice. In Baltimore, suburban offices and industrial/warehouse locations are the most popular in 1999, with retail and central business district office space close second- and third-place choices.
In many respects, Baltimore received more favorable assessments in the new Trend Watch survey than it has in the past.
Compared with the 1999 survey, "Trend Watch 2001 respondents are more bullish on long-term prospects for Baltimore," according to the report.
"The Ravens aren't the only champions in Baltimore. Downtown multifamily housing has generated an excitement in the local real estate community unmatched by other property types. Largely driven by strong demographics among young adults, first-time renters and affluent over-45 empty nesters, the demand for downtown housing also reflects a general optimism about the city," the report says.
Among other Trend Watch 2001 findings:
In the Washington area office sector, the leadership position is shifting away from Northern Virginia and back toward the District of Columbia. "Forty-eight percent of Washington area respondents view the District as offering the best opportunities for general investment."
In the industrial sector, the Baltimore/Washington corridor will increase in importance; growth will be evident in such outer suburbs as Harford, Loudoun and Frederick counties; rental rates will continue to go up; obsolete industrial properties will be converted into residential and commercial uses.
In the retail sector, the best performances are coming from neighborhood centers; big-box retailing will have problems in the short-term; overall long-term growth potential is good; overbuilding is being held in check by restrictive zoning; urban locations have long-term viability; urban redevelopment is opening up retail opportunities.
In the hotel sector, market caution is keeping supply and demand in equilibrium; profits will remain positive in 2001; upcoming transactions will require more equity and use less leverage; convention centers in Baltimore and Washington are creating new demand.
In the multifamily sector, outstanding demographic trends are positioning multifamily properties well for the future; there is a strong market for downtown and urban infill luxury apartments; revitalization of urban neighborhoods is energizing the multifamily market; a major component of the market in Baltimore City is adaptive use.
The Trend Watch 2001 report was sponsored by Atlantic Builders Group Inc., MIE Properties Inc., Nottingham Properties Inc. and James W. Todd.
Anikeeff and Bolan will present a detailed analysis of the findings and discuss the survey's implications with a panel of local real estate experts at the April 11 meeting of the Urban League Institute Baltimore District Council, which will be held in the Jean R. and Allan L. Berman Auditorium at Hopkins' new Downtown Center, 10 N. Charles St. Anyone interested in attending should call 800-321-5011. Registration ranges from $25 for a student to $65 for real estate people who are not members of ULI.