The office vacancy rate in Montgomery County increased about 40% since 2018 and now registers in about 16.5%, according to a presentation Monday before the council’s economic development committee.
Much of the increase is due to a hybrid workforce and the loss of businesses during the pandemic, the panelists noted. Low unemployment and high interest rates also are factors.
“Hybrid working isn’t going anywhere. It’s here to stay,” said Ryan Metzroth, Willco CEO. “It’s hard to beat someone’s living room, on a couch, especially if they have family members running around.”
Noted Councilmember Natali Fani-Gonzalez, who chairs the committee, “We need to fill more jobs, get people to move here. That’s just common sense.”
“We are oversupplied,” said Bradley Wilner, executive vice president of CBRE. Much of that office space is antiquated, he added.
Renters, who realize they are in demand, are requesting building upgrades that cost the landlord a lot due to current high construction and materials costs.
The tenants already in buildings throughout Montgomery County are consolidating their spaces, preferring to end some leases and move all their work to one location, said Metzroth. “Shrinking footprints of tenants is a really big one,” he said of current trends.
Most of the vacancies in the county are located in large office buildings. Hardest hit is the Bethesda-Chevy Chase and the North Bethesda-Potomac areas.
The highest occupancy rates center around the I270 corridor.
The climate probably will get worse as leases expire and are not renewed, and companies reduce their office space, some of the panelists agreed.
Council President Evan Glass, a member of the economic development committee, called a building’s utilization rate “the canary in the coal mine.”
The developers urged the council to streamline the time it takes a business to apply for the necessary permits and that company moving in.
They also requested the county do what it can to decrease commuting times and to keep a lid on business taxes so the county appears more business friendly.
They criticized the council’s recently adopted rent stabilization law. Pete Briskman, JLL executive managing director, called that “a red flag.”
Prayas Neupane, director of economic development for Montgomery County Economic Development Corporation, said large companies looking for office space tend to seek out areas where they are close to their customers and transportation and where the talent pool of future employees is well educated.
Other concerns include real estate availability, and the business tax climate.
On Monday at 9:30 a.m. – The ECON Committee will receive a briefing from the Planning Department on the state of the office market in Montgomery County, followed by a panel discussion with industry leaders. Staff report: https://t.co/Rra5we71OS. pic.twitter.com/0nkRiGdWbk
— Montgomery Council (@MoCoCouncilMD) September 7, 2023
