Baltimore Peninsula Developer Leans Into Flexible Office, Considers Building Entertainment Venue
As the 235-acre Baltimore Peninsula megaproject marches toward the completion of its most extensive building phase yet, the development team has embraced agility as a key to negotiating the obstacles working against the $5.5B project.
That flexibility is reflected in lead developer MAG Partners adopting measures like pre-built office space to boost leasing or potentially constructing a new entertainment venue that could draw visitors and spur hotel demand.
“We tend to think about the possibilities and to know how to pivot and be nimble,” MAG Partners CEO MaryAnne Gilmartin said during a tour of the project Wednesday. “That really separates the mediocre from the good.”
As she walked through the waterfront development’s almost completed Chapter 1B portion, which totals nearly 1.1M SF of office, residential and retail, Gilmartin detailed how her team has responded to headwinds since taking over as lead developer roughly a year ago.
Baltimore’s sagging office market presented arguably the most significant challenge to the development, which includes a considerable amount of office space.
The office market has gone through a tumultuous period as more companies have allowed employees to work from home. In the first quarter, Baltimore’s office market vacancy hit a new record high above 18% after leasing activity dropped about 50% from the fourth quarter, according to CBRE‘s Q1 market report.
With office leasing lagging in the market and MAG Partners set to deliver a glut of new space, the developer explored measures to boost the project’s attractiveness to more tenants.
Those measures include offering short-term leases, designing a pre-built office pilot program, and potentially converting office to lab space in the wake of the plummeting demand for office space.
“It’s been slow, but the world is coming back, and we think … that hybrid work is here to stay,” Gilmartin said.
Space in Rye Street Market that may end up pre-built offices or even lab space.
MAG Partners has identified pre-built office space — a concept where the landlord builds out, partitions, carpets and readies the space for occupancy — as a sector with the potential to attract tenants amid the Baltimore office market’s struggles.
She said Baltimore’s office market comprises about 14M SF of Class-A and Class-B space. However, she estimated only 10K SF of pre-built product is available in Baltimore.
MAG Partners plans to offer roughly 6K SF of pre-built office space in its Rye Street Market building, featuring designed units between 1,800 SF and 2,700 SF.
“I’m doing it as a pilot that I think is going to be very popular,” Gilmartin said.
MAG Partners also plans to offer tenants short-term leases of two to three years. Generally, the shortest lease offered on office space is five years, with 10-year leases the most common deals.
“The world is still evolving in the post-Covid condition,” she said. “We’re offering short-term leases, we are building out the space, which capital is precious today. So, the idea that a company not in the real estate business doesn’t have to get into the business of building their own space is also an enormous benefit.”
Most innovative approaches to boosting office leasing are confined to the Rye Street Market building, which landed Baltimore Peninsula’s first office lease when interior design and architecture firm Chambers signed a 10-year lease for roughly 9K SF of the building’s 228K SF of office space in September.
Robert Hickman, Chambers’ board chairman, said the development team’s vision for Rye Street Market as a home for smaller and emerging businesses fits well with the firm’s goals.
Chambers Chairman of the Board Robert Hinkman stands outside his firm’s office at Rye Street Market.
“We don’t want to be a huge company. We want to be a niche company,” Hickman said.
Given the demand for lab space in Baltimore, Gilmartin said the development team is also “experimenting” with turning office space at Rye Street Market into lab space. However, she said, that doesn’t mean converting the building to wet lab space that requires substantial infrastructure investment.
“It could be places for scientists and researchers to get together where they’re trying new technologies and innovations in the life science, space or bioscience space,” she said. “But we have the building here, and we’ve done the research, and we believe that we should dedicate a portion of this building to lab space.”
MAG Partners still needs to decide what the next construction phase will include once it has fully delivered Chapter 1B and various infrastructure and park projects by the end of this year.
Gilmartin said one possibility is to build a large public venue that attracts enough people to justify building a hotel and conference center on the property.
“This idea of there being a large-scale entertainment venue available here, whether it’s sports, culture, entertainment, we have inbounds that suggest that if we thought we’d pull it off, meaning that we could have a meeting of the minds, we could build a large-scale venue,” Gilmartin said.