Baltimore Gas & Electric Co.'s real estate unit said yesterday that it plans to build Anne Arundel County's first speculative office building since 1993, underscoring the development industry's tentative recovery from its early-1990s calamity.
The 90,000-square-foot building at Constellation Real Estate Inc.'s National Business Park in Annapolis Junction, however, is half-leased before construction begins, with a defense contractor and a small telephone company making commitments that led Constellation to make a planned two-story building into a three-story complex.
"We have reached the point where additional space is needed to address demand," Constellation president Randall M. Griffin said. He said the demand is driven by the area's proximity to Washington and its large pool of high-technology workers.
Indeed, the bigger tenant in the complex is a contractor for the National Security Agency, which occupies a 12-story tower in the business park. Applied Signal Technology Inc. makes signal processing equipment; chief financial officer Brian Offi said the company plans to move its 12-person operation in Jessup to Annapolis Junction, where the company hopes to expand to 25 to 30 workers within four years.
Applied Signal will occupy 30,000 square feet of the building. American Communications Services Inc., a company that allows business customers in southern markets to bypass their local Bell operating company in connecting phone calls to the networks of long-distance carriers, will occupy 15,000 square feet.
The proliferation of speculative space was a major cause of the real estate slump of 1990-1993, when more than 10 percent of all the office space in metropolitan Baltimore was repossessed by lenders and the value of buildings that weren't repossessed dropped by 50 percent or more.
Constellation, for example, built the building NSA now occupies at National Business Park without any leasing commitment, and it sat on the market for more than a year before finding a tenant. This time, the company said, it is being more careful.
"Everyone is cautious after the excesses of the 1980s," Constellation senior vice president J. Richard Uhlig said. "Everyone is looking for a little verification that the market is healthy again. The speculative space of the 1980s was built in anticipation of the demand we were all sure would be there."
After the decline in commercial real estate, developers focused what little office development they did on buying and upgrading existing buildings, rather than building new ones, because lower rental rates couldn't cover construction bills, Uhlig said.
Jeffrey B. Samet, a vice president at the Baltimore real estate firm Colliers Pinkard, said vacancy rates in some parts of the area are now so low that developers can go ahead with more speculative projects with relative piece of mind.
He said only 6.5 percent of the newer Class A space in the southern suburbs is vacant.
Pub Date: 8/13/96