Friday, May 2, 2008
Annapolis Junction opens ‘green’ space for NSA
by Sonny Goldreich | Special to The Gazette
Lisa R. Talley⁄Special to the Gazette The former Doubletree Hotel in Rockville has been rebranded and revamped into the Hilton Washington DC⁄Rockville Hotel & Executive Meeting Center. The 315-room hotel, which has 20,000 square feet of meeting space, received a $22.5 million makeover, according to information from the JBG Cos. of Chevy Chase, owners of the building, and Pyramid Hotel Group of Boston, which manages the property.
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Anne Arundel County showed off its new environmentally friendly building in Annapolis Junction in advance of its official opening later this month — which is probably the last time anyone will want publicity for the property.
That’s because the 117,600-square-foot Class A office space soon will be filled with a bunch of private-sector intelligence spooks working for the National Security Agency, which has a ‘‘black budget” kept secret from the public.
The NSA contractors must leave the neighboring Fort Meade campus to make room for its expansion under the Pentagon’s Base Relocation and Closure program.
The office building — gold certified by the U.S. Green Building Council’s Leadership in Energy and Environmental Design system — is the first of three planned at the Annapolis Junction Business Park under a joint project of Konterra Realty of Beltsville and Boston Properties.
The new property, at 8210 Dorsey Run Road, hosted the 16th annual VIP Real Estate Tour lunch sponsored by the Anne Arundel Economic Development Corp. last week. Konterra President Tate Armstrong did not return a call for comment about who is moving into the building but its space has no renters yet, according to CoStar Group, the Bethesda real estate data service.
That’s no cause for concern about vacancies, according to what Ray Ritchey, Boston Properties’ executive vice president and acquisitions and development director, told analysts during the company’s recent annual report briefing.
‘‘Really, we’re dependent upon the direction of NSA to its contractors to vacate the base and all indications are that they are going to leave the fort very, very quickly and that activity will be extremely brisk in the coming year there,” he said. ‘‘We do have 18 months of lease up so we are still very confident of a very successful project there.”
It’s not surprising that Ritchey should be so sanguine about the project’s future prospects, given that the first building was constructed according to NSA security specifications and the agency is all but giving tenants their marching orders to move to the business park. Boston Properties acquired a 50 percent share in the 30-acre joint venture from Konterra in July for $14.9 million. The three planned buildings will total 425,000 square feet.
Annapolis Junction Business Park is part of a 200-acre mixed-use development, half of which is reserved for ‘‘mission-critical” requirements, according to the county economic development office. Those are buildings that feature secure, robust and redundant infrastructure and systems that operate 24 hours a day, seven days a week. The other 100 acres are planned for more typical office use.
The business park is to eventually include up to 2.5 million square feet of office, hotel and retail space.
Only existing tenantswant space in ’burbs
Demand for office space in the Maryland suburbs has dwindled to existing tenants, according to the first-quarter market report by CB Richard Ellis.
Vacancy rates through the Washington region will rise over the next few years as balance is restored between slow demand and a swollen development pipeline. Currently, ‘‘tenants who are taking new space, are either consolidating or reducing their space requirements,” the report said.
‘‘The rapid changes in the economy, coupled with the long lead time to construct a new building, has left developers little time to adjust to changing tenant demand,” said Rob Hartley, research manager for the Washington, D.C., and Baltimore markets for CB Richard Ellis. ‘‘Some of the projects currently under construction were started when demand for real estate was setting high water marks for net absorption. Developers are just now responding as evidenced by the drop in the amount of construction activity especially in the outer submarkets over the last four quarters.”
Vacancy increased by nearly one percentage point due to the delivery of six buildings in suburban Maryland totaling 671,007 square feet with just 32.9 percent of it pre-leased. The Class A vacancy rate increased from 9.8 percent to 11.8 percent during the first quarter of 2008. Class B rates held steady in the first quarter.
Despite the rising vacancy rates, landlords are pushing rents higher in an effort to achieve the perceived value of their buildings, the report said. Tenants have shown a willingness to pay higher rents, especially in the close-in submarkets of Silver Spring and Bethesda-Chevy Chase. The rental rate in Montgomery County led the market at $30.21 per square foot. Frederick and Prince George’s counties’ asking rates were $23.73 and $23, respectively.
Columbia’s Oekos buysbuilding for $44.2M
Oekos Management Corp. of Columbia acquired a group of buildings in the Rivers Corporate Center, just off the intersection of Routes 32 and 29, for $44.2 million, according to Manekin LLC, which brokered the deal.
The portfolio — nine single-story office and research and development buildings — was sold by a group of Howard County private investors. The buildings total 280,000 rentable square feet of space on Guilford Road and Old Columbia Road.
Rivers Corporate Center is 93 percent leased with tenants including United Healthcare, Data Direct Networks, Applied Data Systems and Staples. The portfolio, offered in the fourth quarter of 2007, generated 11 offers from a variety of investors, including pension fund advisers, real estate investment trusts and private investors.
‘‘This deal confirms the resilience of the market in uncertain economic times,” said Manekin’s Don Schline, who handled the transaction with Liz Martin. ‘‘The CAP rate based on in-place income is in line with the CAP rate that would have been expected before the onset of the debt crisis of 2007.”
COPT gets tenantfor M Square park
Corporate Office Properties Trust landed a tenant to take up about one-fourth of the space in a new building at the M Square Research Park in College Park.
The University of Maryland’s Earth System Science Interdisciplinary Center this month will occupy 41,500 square feet of research office space in the four-story, 116,000-square-foot Class A office building at 5825 University Research Court.
The building is the first of three totaling an estimated 315,000 square feet planned for construction during Phase I development of the project. COPT recently announced the formation of a joint venture with the University of Maryland and Manekin, in which COPT owns a 45-percent interest, to co-develop, lease and manage about 750,000 square feet of new office space in eight buildings.
The 124-acre M Square Research Park site is owned by the university and has been designated as its official research park. M Square Research Park is adjacent to the University of Maryland campus at the intersection of Route 1 and Paint Branch Parkway. Other tenants include the National Oceanic and Atmospheric Administration and the university’s Center for the Advanced Study of Languages.
Forrester lands $10M school project
Forrester Construction of Rockville has been awarded the $10 million Clemens Crossing Elementary School project in Columbia.
The Howard County Public School System project will include a 57,000-square-foot renovation, including the fit-out of existing open space classrooms and resource areas, new finishes, light fixtures, exterior windows and entrance area storefront, as well as new heating, ventilation, air conditioning, sprinkler and fire alarm systems.
The architect is SMG Architects of Baltimore. Construction is to begin in June and be completed in August 2009.
Park Place getsnew tenants
Six new office tenants recently signed leases at Park Place, a $250 million mixed-use project in downtown Annapolis, according to CB Richard Ellis, which handles leasing for the property.
Together, these leases constitute more than 50,000 square feet. With these leases, Building I is now 89 percent leased. There is about 19,000 square feet remaining in Building I and 110,000 square feet of office space in Building II available for lease.
‘‘Park Place has generated tremendous interest and excitement because there is nothing like this anywhere else in Annapolis,” said Jeff Bach, senior vice president at CB Richard Ellis. ‘‘This mixed-use project offers the best of everything, from the high quality construction of the buildings to first class amenities including Morton’s Steakhouse and a 225-room Westin Hotel and ample, convenient parking.”
The project consists of 245,000 square feet of Class A office space as well as 65,000 square feet of retail and 216 luxury residences.
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