2017 Year-End Market Report

ECONOMic Overview

Montgomery County continues to experience a steady rise in employment since 2014, a positive change from stagnant growth in prior years. Montgomery County recorded over 550,000 employees, an increase of 2.6% from last year and trended above the then year average of 516,360. Montgomery County’s unemployment rate continued to contract and ended Q3 2017 with a rate of 3.2%, down from 3.3% from November 2016.

Year-over-year, Montgomery County added a total of 9,149 jobs which reflected the diversity of healthy job growth in office producing jobs. Industry sectors with the best job growth from last year are: Professional and Business Services (+4,391 jobs), Health Care and Social Assistance (+1,887), and Public Administration (+1,614). The fastest growing sectors to experience the most growth year-over-year: Health Care and Social Assistance (+1.9%), Professional and Business Services (+1.2%) and Education Services.


Montgomery County experienced bright spots in 2017. Vacancy rates ended the year at 16.3%, a slight downtick from mid-year. Direct rents remained at at $28.03 per square foot (PSF), but are expected to see an increase as options for new class A space are limited and construction activity is starting to experience momentum.

New leasing activity, according to Cushman & Wakefield, totaled 2.4 million square feet (MSF), up 10% from the 2016 year-to-date total of 2.1 MSF. The Bethesda/Chevy Chase market captured the largest new lease this year in its Central Business District (CBD). Marriott’s 720,000-square foot (SF) lease at 7750 Wisconsin Avenue secured the top spot as the largest new lease executed in 2017. The hotel giant stirred up much anticipation with its announcement to relocate within the market and eventually identified Wisconsin Avenue as its new home. The global hospitality company is expected to move into their new headquarters by Q2 2022. Booz Allen Hamilton’s 65,000 SF deal at JBG SMITH’s new project at 4747 Bethesda Avenue came in as the second largest lease. Fox 5 TV was another huge win for the County. The local news affiliate announced its plans to relocate from Washington D.C., where they have been since 1966, and named Carr’s new project at 7272 Wisconsin Avenue as its new headquarters. The media company is slated to move in by June 2021 and will occupy 60,000 SF. LURN Incorporated rounded out the top five new leases with a 25,000 SF deal at 2098 Gaither Road in Rockville.

Renewal activity was strong in 2017 with Hughes Network Systems executing the largest renewal and second largest overall deal in Montgomery County. The telecommunications company opted to renew its 108,330 SF lease at 100 Lakeforest Boulevard. The National Institutes of Health (NIH) came in as the second largest renewal for the year as it renewed 89,708 SF at 2115 East Jefferson Street.

Submarket Activity


Construction on a new interchange at Interstate 270 and Watkins Mill Road began in the second half of 2017 to help alleviate traffic congestion.

Hughes Network Systems 108,330 SF deal was the largest renewal executed in 2017.

iFly Indoor Skydiving’s new home will be in the Shady Grove Development Park where Minko Development plans to develop the approximately 8,500 SF building.

North Bethesda/Potomac

NIH’s 89,708 SF renewal was one of the largest leases of the year.

Johnson Development Associates acquired the Rockville ground along I-270 for land on West Montgomery Avenue next to the Best Western Hotel.

Developer Federal Realty Investment Trust (FRIT) will be the first tenant occupying approximately 50,000 SF of its new office building 909 Rose Avenue.

Bethesda/Chevy Chase

After the merger of JBG & Vornado Realty, the newly formed JBG SMITH Properties will establish its headquarters in a new trophy building in downtown Bethesda at 4747 Bethesda Avenue.

The Purple Line Construction broke ground and is expected to deliver by 2022.

New leasing in the market accounted for over 50% of activity in 2017.


Champions Oncology, which specializes in the development and sale of advanced technology solutions, relocated into a new lab facility at 1330 Piccard Drive.

The Rockville market totaled about $28 million in office sales and 402,387 SF sold. Some of the most notable sales were 451 Hungerford Drive for $14.5 million and 12500 Ardennes Avenue for $7.3 million.

Federal Realty Investment Trust signed five new tenants that will occupy the former Timpano Restaurant site. The shopping center’s landlord demolished the Italian restaurant fronting Rockville Pike that closed over a year ago.

North Rockville

Alexandria Realty & Equities (ARE) signed its first tenant at 5 Research Court & has leased over 32,000 SF in the building to a local biotech firm, Vigene Biosciences.

LURN Inc. leased 25,000 SF at 2098 Gaither Road, one of the largest leases in North Rockville.

Glazer Properties, a Rochester, NY-based developer better known for buying shopping centers, reportedly paid just under $25 million for 15245 Shady Grove Rd.

Silver Spring

BlackRock sold Silver Spring Centre office building at 8455 Colesville Road for $38.7 million to Goodstone LLC.

Phenix Salon Suites, TG Jewelers, and Twin Fashions are some of the newest arrivals to Silver Spring’s mall overhaul by Petrie Richardson Ventures and Rockwood Capital.

850 Sligo Avenue, which was sold earlier this year, will be converted from office space into apartment units and possible ground-floor retail space. Moonlight Inc., which purchased the building for $4.25 million, announced the conversion.

Investment Activity

Investment sales were healthy in 2017, totaling 5.2 MSF and $590 million. The largest trade of the year was 4550 Montgomery Avenue’s sale to AXA Investment Managers for $132 million or $381 PSF. The Donohoe Companies acquisition of 7101 Wisconsin Avenue for $105 million was the second largest deal, and 6701 Rockledge Drive rounded out the top three with its sale to Boyd Watterson Asset Management for $43 million or $177 PSF. The Bethesda/Chevy Chase market had the highest sales volume in 2017 with a total of $590 million sold.

Industrial Activity

Montgomery County industrial market performed well throughout 2017 and, according to Transwestern’s Q4 report, Montgomery County’s overall vacancy ended the year at 8.2%. Rents increased 3.3% year-over-year to $11.94 PSF.

There was one construction delivery this year. SunCap Property Group’s 330,000 SF warehouse at 800 N. Frederick Avenue, which was 100% pre-leased to FedEx, will be used as a distribution center. As of now, there are no new projects in the construction pipeline.

The largest investment deal was JK Moving & Storage, Inc. acquiring a 57,216 SF warehouse building at 7501 Lindbergh Drive, Gaithersburg from Suddath Company for $6.25 million or $109.24. A portfolio sale of three properties located on Airpark Road traded in the second half of the year for a total $10 million or $129 PSF. The sale included two warehouse buildings (7650 Airpark Road and 7750 Airpark Road) and one ex building at 7660-7680 Airpark Road. Investment activity totaled 1.7 MSF and $114 million in sales for 2017.


Montgomery County is on track to see an increase in employment over the next five years and is projected to expand by 20,165 jobs. The industry sectors with the highest growth demand in the next five years are: Health Care (+6,930), Professional and Business Services (+4,687) and Educational Services (+2,170).

Commercial real estate activity is expected to strengthen as the construction pipeline opens up and more tenants demand newer Class A product. The Bethesda CBD alone is expected to see more than 1.8 million SF of trophy office development over the next few years, which will allow more competitive product in the inventory. In return, we can expect rents to increase modestly as landlords of existing product compete with newer assets in the pipeline.

Development Activity


Marriott Headquarters: 7750 Wisconsin Avenue, Bethesda, MD—expected to deliver by 2022.

Fox 5 Headquarters: 7272 Wisconsin Avenue, Bethesda, MD—expected to deliver by 2021.

United Therapeutics New Headquarters: 1000 Spring Street, Silver Spring, MD—expected to deliver by 2018.

JBG SMITH Headquarters and Host Hotels & Resort Headquarters: 4747 Bethesda Avenue, Bethesda, MD—expected to deliver by 2019.


Washington Adventist Hospital: 12040 Plum Orchard Drive, Silver Spring, MD—expected to deliver by 2019.


Pike & Rose: H&M (delivered in 2017), L.L. Bean (delivered 2017), REI (delivered 2017), Red Door Spa (expected to deliver in 2018), and UNIQLO (expected to deliver in 2018).

Cabin John Shopping Center: Purchased by EDENS; slated for redevelopment and name change.

ACAC Fitness and Wellness Centers: 2500 Seneca Meadows Parkway, Germantown, MD—delivered 2018.

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Mallory Square Phase II: 15250 Siesta Key Way, Rockville, MD—expected to deliver by 2018.

Camden at Shady Grove: 9709 Key West Avenue, Rockville, MD—delivered 2017.

Camden Washingtonian: 10201 Washingtonian Blvd., Gaithersburg, MD—expected to deliver by 2018.

The Elms at Century: Century Blvd., Germantown, MD—expected to deliver 2018.

The Elms at Clarksburg Village Encore: 22800 Sweet Shrub Drive, Clarksburg, MD—delivered 2017.