Land: Arundel property hits $440K per acre; prices at record highs

For Gerard J. Wit, a vice president at Baltimore development firm MIE Properties Inc., a good land deal is like a winning lottery ticket.

But lately, the executive isn’t exactly hitting the mega-millions.

When Wit recently bid about $150,000 an acre for what he called a “pedestrian” commercial site in Glen Burnie, the broker representing the seller pretty much laughed him out of the running. MIE’s competitors offered at least $350,000 an acre for 10 acres of land. Plain land.

While residentially zoned land in Greater Baltimore is grabbing top dollar, now commercial land is following suit. The scarcity of raw land, coupled the high demand fueled by low interest rates is pushing up prices for sites that can accommodate office and industrial complexes. Nowhere is this more apparent than in Anne Arundel County.

According to CoStar, a real estate reporting service, commercial land in Anne Arundel County went for an average of $8.47 a square foot, or $369,071 an acre during the first half of this year. That’s up from $4.49 a square foot or $195,399 per acre during the first half of 2004.

James P. Lighthizer, a partner with Chesapeake Real Estate Group LLC in Glen Burnie, said he is seeing raw commercial land – without infrastructure improvements sell for as much as $10 a square foot or roughly $440,000 an acre in Anne Arundel County.

The demand by the government and defense contractors – driven by the nation’s increase in homeland security spending – in Anne Arundel County property is primarily pushing prices upward, Lighthizer said.

And the trend isn’t expected to subside – with the Base Realignment and Closure proposal to shift about 7,000 jobs to Maryland. Anne Arundel County, home to Fort Meade and the National Security Agency, and Harford County’s Aberdeen Proving Ground are expected to be the beneficiaries of these jobs. While the bases will accommodate some of these positions, the potential spinoff companies will need somewhere to locate. That means development will continue to ramp up.

David P. Scheffenacker Jr., president of Preston Partners Inc. in Lutherville, said with land going as high as $10 a square foot, developers would need to ask about $28 a square foot in office rents to make a profit.

While some recent office rents in downtown Baltimore have topped $30 for the best waterfront space, office rents in the Baltimore/Washington International corridor are typically lower. According to a second quarter report from MacKenzie/Cushman & Wakefield in Lutherville, asking rents in the BWI hover around $21 a square foot, with those in Annapolis at $23.

For MIE, which develops flex buildings, the higher land prices are just not doable.

“It’s a problem for us,” Wit said. “Flex buildings don’t bring the higher rents. We’ve got to look a lot harder to find land that works.”

Companies such as MIE typically get between $9 and $12 a square foot for flex space, which can be used for offices or warehouses.

Throughout his career, Wit said he has never seen commercial land prices creep this high.