Empower Montgomery recently commissioned Sage Policy Group to analyze the economy of Montgomery County, Maryland. The results show a county in economic decline while the country and neighboring counties are thriving.

Some key notes from the report include:

  • Montgomery County netted 6 new companies between 2011 and 2016 despite the State of Maryland expanding by nearly 6,300
  • Montgomery County was home to fewer jobs in 2016 than 2006 even though the count added more than 11,600 public sector jobs
  • Over three times as many square feet of office space is being developed in Northern Virginia than Montgomery Count despite a higher vacancy in Northern Virginia – speaking to relative optimism of business growth

What does all of this mean to a real estate investor?

  • Price in what it will take to lease space in a competitive market. Concessions such as free rent are increasing as tenants now have more leverage – I believe these will continue to increase. Investors need to make sure these rising costs are correctly accounted for.
  • Do not expect the market to be in a significantly different place in ten years than it is now. According to CoStar, average rental rates have only now reached where they were during the decline in 2009 and are still $1 per square foot less than their peak in 2008. Many investments are successful because of the owner’s ability to push rents over time. There is no reason this will occur in Montgomery County.
  • Look to non-office Real Estate Investments. Industrial has seen a rapid rise in rental rates. Existing Multifamily and Residential, while already expensive, benefit from the resistance of the government to add new housing. Niche assets like parking lots, life science facilities or self-storage may be poised to perform better than office.

Posted by Matt Brown, Director of Acquisitions