Columbia office space goes begging

March 11, 1991|By Norris P. West | Norris P. West,Evening Sun Staff

Every day looks like Sunday at 6751 Gateway. No cars are parked outside the new four-story office building, and there's not even a hint of activity inside.

It has been that way since construction was completed last July.

The firm that is marketing the building in the Columbia Gateway business park says it's not unusual that a buyer has not been found for an attractive 93,000-square-foot structure in Columbia after eight months. The economy has slowed things, an official says.

"We will come to the point where we will go from a period of excess in office space inventory to one of a shortage," said Richard Pettingill, vice president of Casey & Associates, which is marketing the building for a Virginia bank that foreclosed the loan on a major developer who encountered financial and legal problems.

The question is, "When will the turnaround occur?"

Pettingill said interest in commercial space in Columbia began to increase three weeks ago, just before the Persian Gulf war entered its final phase.

"Our telephone has been ringing off the hook," he said. "There is reason to be optimistic that we're reached the bottom and have leveled out."

But market analysts are more cautious about a speedy recovery of the commercial real estate market, which still is slumping along with the economy and a crisis in the banking industry that has made it difficult to get money to finance projects and to find tenants.

Jeffrey Samet, vice president of consulting at W.C. Pinkard & Co., said the commercial real estate market in the Baltimore metropolitan area is likely to remain soft for perhaps the next few years.

A recent Pinkard study showed that 16.6 percent of the 33.8 million square feet of office space in metropolitan Baltimore is vacant. The percentage is even higher in Columbia, where the vacancy rate is 24 percent for the 4.8 million square feet of space.

Analysts say projects such as 6751 Gateway are rare these days because developers like to have tenants signed on to occupy buildings before they proceed with construction.

"There's hardly any speculative development going on," said Joseph M. Cronyn, a senior associate at Legg Mason Realty Group Inc., which analyzes development trends. "Almost everything that is going on right now and that will be going on for the next year is on a build-to-suit basis."

Legg Mason, which also published a recent report on commercial real estate activity in the area, said commercial development has fared better in Howard County than the metropolitan area as a whole because of its strong economic foundation.

He said that, although demand for office space in Columbia and Howard County lags behind the supply, the vacancy rate will decline eventually because fewer offices are being built and tenants will scramble for the existing space.

Ed Ely, director of land sales and marketing at the Rouse Co., said he doesn't expect the Columbia market to rebound quickly but he looks for indications of a recovery in early June.

"There's a buyers' market that clearly exists today, but that might not be the case a year from now," Ely said, who also said most developers won't construct any speculative developments until at least next year.

But developers of the Columbia Corporate Park are going against the odds. With their first 100,000-square-foot speculative building -- finished two years ago -- 85 percent leased, they are seeking tenants for a twin structure that is nearing completion.

Stephen Shaw, who is leasing the building for Baltimore-based Merritt and the McGill Development Co., says he is encouraged by the interest that prospective tenants have shown in the Columbia projects.

"There are a lot of tenants looking for deals, testing the market," ,, Shaw said. "They're out there with brokers or by themselves, but they're out there."

He said a high-tech firm already has signed up to occupy a 159,000-square-foot building that is being constructed in the business park and the Marriott Corp. is building a Courtyard Hotel there. He said that, despite the slumping economy, the developers are optimistic and will continue to build as space is occupied.

"What we've tried to do is get buildings that are Class A office buildings," Shaw said. "In tough times, what people really want is a good product."

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