CREDA Research Foundation
After a long stretch of relative stability in the office market, property owners are beginning to see demand soften as they grapple with high construction costs, modest rent increases and heightened requirements from prospective tenants.
The Office Space Demand Forecast, released by the CREDA Research Foundation at the end of May, concluded that the U.S. office market’s momentum weakened in early 2026 as leasing activity slowed. Before that dip, the market had achieved its longest stretch of demand growth since mid-2022, the report said. Modest positive absorption of office space combined with heightened conversions and demolitions of office buildings kept vacancy rates relatively steady: 11.9 percent in late 2025, 11.8 percent in Q1 2026.
The Baltimore market has experienced similar conditions. However, the tech/AI boom that has driven space demand in some large cities has not impacted this region as much, said Henson Ford, Vice President, MacKenzie Commercial Real Estate Services.
MacKenzie’s latest market analysis concluded that “the Baltimore office market softened in Q1 2026 with net absorption turning slightly negative at -22,293 square feet, signaling a modest pullback in occupied space following a relatively stable end to 2025. Overall vacancy rose to 15.4 percent (from 15.3 percent last quarter and 14.3 percent one year ago) while average asking rents increased to $24.58/sf from $24.32/sf.”
Within that relatively stable market, landlords are contending with significant challenges and a few changes.
High quality, hot location
Put simply, many office tenants have grown pickier.
In addition to wanting high-quality, highly amenitized space, prospective tenants want to be in locations where “when you go to coffee, lunch, happy hour or dinner, you run into clients, potential clients, and other movers and shakers,” Ford said. “I’ve had people look at very nice buildings with attractive buildouts, parking, and good amenities. But if the tenant mix isn’t what they want, they go somewhere else.”
Source: MacKenzie Commercial Real Estate Services on the Baltimore market.
That flight to quality has produced some very healthy submarkets, such as Harbor Point, downtown Columbia, and Green Spring Station. But it is also fueling sharp differences and challenges within submarkets.
“In Owings Mills, Metro Centre office space has filled,” Ford said. But just a few miles away in the Red Run corridor, “there are probably half a dozen buildings with at least 50,000 square feet available and a couple with over 100,000 square feet. We are seeing these mini markets develop within submarkets.”
Tenants are also seeking “really nice, turnkey improvements,” he added. “That’s a huge factor in the competition for tenants. I am seeing tenants pay asking or slightly above asking rate in order to get those turnkey improvements on a five- to seven-year term.”
Office conversions
Conversion of office properties to other uses is impacting the office market and could become more prevalent, Ford said.
Occupied office space in the BWI corridor has declined recently as owners opted to convert several buildings to self-storage or retail.
“Certainly, we’ve had buildings for sale that we market as office units, but also to people looking to redevelop them into multifamily or hospitality,” Ford said. “In suburban markets at B and C class buildings, maybe those buildings become self-storage or additional parking for other buildings. But it’s tough math for the sellers.”
Companies featured in this article: MacKenzie Commercial Real Estate Services and CREDA Research Foundation.