Soft Commercial Office Environment Provides Fuel for Residential Asset Class in Greater Hunt Valley Submarket

Danielle Beyrodt, Hill Management Services; Paul Obrecht III, Blue & Obrecht Realty; Jannine Hayes, Knott Realty Group; Danielle Bridge, Hill Management Services; Jennifer Busse, Rosenberg Martin Greenberg; Denise Kramer-Buchman, Hunt Valley Business Forum

The persistent softness of the commercial office real estate environment, combined with the continued demand for a variety of residential housing types, is prompting developers and investors alike to rethink the best and highest use for land, as well as office and industrial buildings in the greater Hunt Valley submarket. This was the conclusion of Jennifer Busse, Partner, Rosenberg Martin Greenberg; Jannine Hayes, Commercial Leasing Representative, Knott Realty Group; and Paul Obrecht III, Senior Vice President, Blue & Obrecht Realty at Hunt Valley Business Forum’s recent Annual Public Policy Symposium, held at the Executive Plaza complex at 11350 McCormick Road in Hunt Valley.

The three panelists stated that, though the COVID healthcare crisis reshaped how many companies interact with traditional work environments, vacancy levels at many stabilized buildings and mixed-use communities remain strong, but the ability to backfill certain spaces and drive new leasing activities remains challenging. This is causing them to reconsider sites originally planned to support commercial office space. Obrecht specifically pointed to 2311 York Road, a five-story, 78,000 square foot asset which recently lost its full-building tenant. Obrecht Properties determined that it was unlikely to attract new office tenants in the near-term, so they pivoted and are marketing it for retail uses. Obrecht added that “leasing activity in this category remains strong.”

As a counterpoint to this perspective, St. John Properties, Inc. is pushing forward with Hunt Valley Exchange, a 17-acre parcel fronting York Road. The company indicates that Phase I will include two flex/R&D buildings totaling 96,240 square feet of space, as well as an 8,125 square foot inline retail building. Delivery for Phase I is slated for Q3 2026.

Post-COVID commercial office blues

“Companies pivoted quickly once COVID hit and many have been slow to convert back to five-day-per-week schedules, although we see shifting sentiments of late,” explained Knott Realty’s Hayes. “There are no pure-office developments underway in the greater Hunt Valley submarket; instead, we are seeing former commercial office buildings being converted into new uses.”

“Allowing residential zoning in manufacturing and business zones in Baltimore County is the big story,” explained Obrecht.  “Historically the county has strongly resisted allowing residential in manufacture zones as it is considered a threat to business, but in response to housing shortages and office vacancies it was allowed in numerous instances during the Comprehensive Zoning Map Process. He added “development headwinds include escalating construction costs, which soared 20 percent in 2023 and another four percent last year, interest rate increases and the long wait to receive Baltimore County permits, which are taking close to two years for new construction. This is a major problem and is contributing to rising rental rates for new buildings and contributing to locally unprecedented rental rates for new projects.”

Lizzy Bennett Sweeney, Cushman & Wakefield; Richard Hornig, Excel Mechanical Contractors; Gail Chrzan, Blue & Obrecht Realty

Rosenberg Martin Greenberg’s Busse provided an overview of the Mixed-Use Overlay District, a bill passed by the Baltimore County Council last year. It essentially allows developers and owners to repurpose outdated buildings for new uses, and allow opportunities to create areas which support high-density and multi-use buildings. Busse said that it “allows flexibility similar to what we are used to seeing with Planned Unit Developments.” She said that, while recognizing the need for more housing, the lack of available commercial office space puts Baltimore County and Maryland at a disadvantage because it stifles job creation and does not add to the tax base. “Baltimore County appears motivated by the existing housing shortage and pursuing all opportunities to address this situation,” she added.

Stephanie Caronna, St. John Properties; Andrew Beyrodt, Hill Management Services

Asset conversions and new residential projects planned

• Knott Realty Group is considering new uses for its proposed flex development at 20 Texas Station Court, which can accommodate approximately 160,000 square feet of space.
• Hill Management Services earned rezoning for 9603 and 9525 Deereco Road that allows higher density uses, but has no immediate plans to change the property.
• Knott Realty Group is considering an active-adult product for its property at 931 Ridgebrook Road in the Highlands Corporate Park. The site was formerly designated for 155,000 square feet of commercial office space.
• Bushrod Investments and Birchwood Capital Partners have acquired a 31-acre site at 180 Sparks Valley Road which will include an age-restricted community containing 52 villa-style homes and a 158,000 square foot assisted living component. Site work has commenced on The Heights at Hunt Valley.
• 245 Shawan Road – the site of the former Hunt Valley Inn – has been designated for a 290-unit townhome community.
• Hill Management Services is considering a development on available acreage of the Executive Plaza complex for 200 to 250 “boutique-style” apartments, which will be “larger” and “higher-end” than nearby competition.
• Obrecht Properties is taking a new look at development plans for its proposed 220,000 square foot industrial/warehouse building at 111 Sparks Valley Road. The final result might be townhomes.
• 8 Greenridge Road, located adjacent to Heaver Plaza, received new RAE-1 zoning, which makes it eligible for elevator-apartments. The owner is reportedly a 55+ product.
• Schwaber Holdings wishes to transform Lutherville Station into a mixed-use Transit-Oriented Development, but the local community is fighting back with a “No Apartments – No Compromise” position. Last summer the project was downzoned to “16-units per acre,” which puts the developers “back to the drawing board.”

The Hunt Valley Business Forum serves as the collective voice for Hunt Valley-area businesses, with a mission to promote growth and development through networking, educational programs, and relevant communications. For more information about the group, as well as a list of upcoming events, please visit www.hvbf.org

Source: CityBiz