Q3 2022 Suburban Maryland Market Report

With the delivery of Marriott’s new headquarters at 7750 Wisconsin Avenue in the Bethesda/Chevy Chase submarket, Marriott vacated their historic North Bethesda Headquarters at 10400 Fernwood Road. With their old space totaling 755,000 SF of space being redeveloped into a senior living facility and hence removed from office market numbers, this was a significant move that pushed absorption numbers up. With the Marriott move, along with a few large leases inked in the third quarter, the Suburban Maryland office market maintained the leasing momentum it saw in the first two quarters. The National Institutes of Health (NIH) signed the largest lease in the third quarter, renewing 226,091 SF on 8 floors of 6707 Democracy Boulevard in North Bethesda.

Vacancy rates inched upwards to 17.9% compared to 17.3% at the end of the third quarter last year, and remain 240 basis points higher than pre-pandemic levels. Average rental rates are resisting downward pressure from rising interest rates and refinancing woes, rising to $30.16/SF, compared to $28.67/SF a year prior. Rising rents are being balanced by increasing abatements and an increase in tenant improvement dollars.

Activity in downtown Bethesda has been tepid, but there are rumors of leases brewing at Avocet Tower, the most recent delivery at 7373 Wisconsin Avenue. The I-270 Corridor continues to be a hotbed for biotech and life sciences demand, with vacancy for lab space remaining in the low single digits.