Report: Federal leasing sinks 96 percent in 2012 -- Gazette.Net


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That sickening thud you hear echoing across the region and the nation is the sound of the collapse of federal leasing this year, which plummeted 96 percent.

Government agencies didn’t need the fiscal cliff to spoil their usual voracious appetite for space, according to the agency’s master broker, Jones Lang Lasalle.

The company said in its 2013 Federal Perspective report that “gridlock within the 112th Congress yielded a dramatic pullback in the rate of new federal leasing activity ... as unprecedented scrutiny of the General Services Administration and bipartisan support for reining in federal real estate expenditures handcuffed government decision-makers and left agencies uncertain of their future space planning needs and capabilities.”

Without agency budgets or authorizations to spend, the GSA could do little more than renew existing leases on a short-term basis. The result was only $45.9 million in new leases awarded in fiscal 2012, down from $1.2 billion in fiscal 2011.

The report said the GSA has stacked up 44.6 million square feet of leases in holdover, adding pressure on lawmakers to resolve the budget showdown. But the long-term stability of federal agencies remains a major positive because most leases run 30 years.

In the meantime, the Washington, D.C., region will continue to experience a fairly flat trend, as federal and private tenants “are opting primarily for renewals, consolidations or contractions as they wait out potential sequestration,” the report states.

But prospects for the Baltimore suburbs are somewhat better, due to the government’s growing cybersecurity complex in Anne Arundel and Harford counties.

“Federal government demand continues to drive activity in the suburbs, with Fort Meade and Aberdeen Proving Ground serving as the primary receiving zones of expansion,” according to the report.

Foulger-Pratt pays $5.1M for North Bethesda building

McShea & Co. announced the sale of 11600 Nebel St. in North Bethesda on behalf of the seller, Klinedinst Management of Bethesda, to Foulger-Pratt Development of Rockville for $5.1 million.

The 31,205-square-foot office is two blocks from the White Flint Metro station and is fully leased. The property was originally developed in 1970 and sits on 1.26 acres.

The building is inside the White Flint sector plan, which was approved for high-rise, mixed-used development in 2010. The transit-oriented sector will have room for 17 million square feet of development and an estimated 19,000 jobs.

The McShea team conducted more than 20 investor tours of the property since it came on the market in the summer and received numerous offers.

“We’re delighted to have bought the Nebel office building, which offers us both short-term cash flow and also long term redevelopment potential in the dynamic White Flint submarket,” Dick Knapp, Foulger’s senior vice president in charge of multifamily development, said in a news release.

Scheer Partners to market Rockville medical building

Scheer Partners of Rockville announced that Guardian Realty of North Bethesda has hired it to lease its 75,880-square-foot office building at 15200 Shady Grove Road, just off I-270.

Nate Crowe, a Scheer vice president, and Jamie Rash, a company associate, are targeting medical practices to lease the remaining suites in the Rockville property.

Last fall, Guardian also engaged Scheer to lease space in its 50,549-square-foot medical-office property — formerly the Kaiser Permanente building — at 501 N. Frederick Ave. in Gaithersburg, at the corner of Perry Parkway.

Medicare building in Windsor Mill trades for $14.5M

Government Properties Income Trust of Massachusetts paid $14.5 million for the Medicare and Medicaid building in Windsor Mill, according to Cassidy Turley, which represented the seller, a partnership of CSG Partners and Blue Vista Capital.

The 80,398-square-foot building at 7210 Ambassador Road is fully leased, with the federal health agencies taking up 98 percent of the space. The building is in Baltimore County immediately east of the I-695 Baltimore Beltway.

The Woodlawn submarket of Baltimore is viewed favorably by investors, given the established and growing presence of the Social Security Administration and Centers for Medicare & Medicaid Services, which together employ more than 13,000 workers in the region, Jonathan Carpenter, Cassidy senior vice president and principal, said in a news release.

Utz chips in with lease in Frederick

Utz Quality Foods has signed a lease for 12,000 square feet of office space at the Riverside Technology Park in Frederick, according to landlord St. John Properties of Baltimore.

The potato chip maker will move 25 workers to 8445 Progress Drive, which is between I-270 and I-70 on Monocacy Boulevard. The six-building business park totals 490,000 square feet of space.

Utz chose the site for a direct store delivery location for its chips and pretzels, serving customers in Western Maryland, Washington, D.C., and Northern Virginia.

“After considering multiple sites for this new requirement, Riverside Technology Park emerged as the most logical choice for Utz based on the business community’s strategic location, the customization of the facility and the professional image of the corporate park,” Matt Holbrook, regional partner for St. John, said in a statement.

Procter & Gamble warehouse sells in Harford County

Chambers Street Properties of Princeton, N.J., announced that it has entered the Maryland market in a big way with the acquisition of Gateway at Riverside, an 800,797-square-foot class A industrial building in Belcamp.

The seller, Preston Scheffenacker of Lutherville, reports on its website that Noxell, a unit of Procter & Gamble, occupies the entire building. The cosmetics maker expanded its lease this year.

No sale price was disclosed; the property sold for $23.3 million in 2005. The building, at 4608 Appliance Drive, is assessed at $24.7 million.

The purchase includes an adjacent 15-acre parcel, which has the potential for a 400,000-square-foot expansion. The building was completed in 1991 and renovated in 2005.

The property — Chambers’ first in Maryland — is just off I-95, almost midway between Baltimore and Philadelphia.

“This is a highly desirable asset leased to a strong tenant in an excellent location with future development potential in the supply constrained greater Baltimore market,” Phil Kianka, Chambers’ executive vice president and COO, said in a news release.

Colliers reports a pair of $3M building sales

Colliers International in Baltimore reported that it brokered the sales of a psychiatric rehabilitation facility in Columbia for $3.7 million and a warehouse and office building in Elkridge for $3.1 million.

Way Station of Howard County, an affiliate of the Sheppard & Enoch Pratt Health System, bought the single-story, 28,750-square-foot psychiatric rehabilitation facility from RREEF Real Estate. The firm has been leasing the building, at 9030 Route 108, for more than 10 years.

In Elkridge, TKW Chesapeake Properties bought a single-story industrial building at 6317 Macaw Court from Macaw Court LLC. The deal includes the 12,000-square-foot warehouse and office building’s 7-acre property.

Building products firm signs Elkridge lease

NAI KLNB said it brokered a lease for 28,684 square feet of space to YKK AP America at 6670 Business Parkway in Elkridge.

James Caronna, principal for NAI KLNB represented the tenant and Ben Meisel of Cushman & Wakefield represented the landlord, Prologis.

YKK AP, which is relocating from the Jessup area, intends to utilize the building to manufacture and distribute a variety of aluminum building products such as door entrances, storefronts, curtain-walls and window wall systems servicing the commercial building industry. The company is part of the YKK Group, which produces fastening products, including clothing zippers.

The company plans to assume occupancy in January.

The single-story building is part of the Meadowridge Distribution Center, which has 82,400 square feet of space next to Md. 103 and I-95 near Baltimore-Washington International Thurgood Marshall Airport.

Commercial real estate news items may be mailed to Robert Rand, The Business Gazette, 9030 Comprint Court, Gaithersburg, Md. 20877; emailed to rrand@gazette.net; or faxed to 301-670-7183.