Rouse plans office building 6-story structure could be sign of economic recovery

'It's been quite a famine'

No tenants yet, but low vacancy rates buoy confidence

September 24, 1996|By Craig Timberg | Craig Timberg,SUN STAFF

The Rouse Co. is readying plans to build a 120,000-square-foot office building in Columbia, a project that may mark a final stage of Howard County's recovery from the recession earlier this decade.

The construction of speculative office buildings -- those built without tenants signed up -- stopped as recession overtook the state in 1990. Vacancy rates also soared, with nearly a quarter of the county's office space going empty.

But September's edition of Economic Indicators, a quarterly report by county officials and business leaders, says the vacancy rate for office space is down to 7.4 percent.

Low vacancy rates are usually good news, but county officials worry that Howard's rate has gone so low that it hurts their ability to find new homes for growing businesses.

"You have to have a product on your shelf to have customers come in your store," said Richard Story, executive director of Howard's Economic Development Authority. "You need inventory."

That's why he and other county officials cheered the news that Rouse is planning a six-story office building in Columbia's Town Center.

The new office building, which has no tenants signed up, would be on Little Patuxent Parkway, between Rouse's RWD and Parkside buildings, said Duke Kassolis, a Rouse senior vice president in charge of office space.

He said the plans are still conceptual but that he hopes to begin seeking county approval for the project in the next few months. "We are feeling optimistic about bringing forward another building," he said.

Kassolis said Rouse would construct the building largely on a speculative basis for general office users, although law firms and insurance companies typically fill such space.

Rouse is planning the project because demand for office space is growing and because the company, which developed the planned city of Columbia, wants enough offices to continue attracting new businesses to the area, he said.

The offices available now are mostly small and scattered around the county, limiting options for companies seeking offices of 10,000 square feet or more.

The Manekin Corp., the other company that dominates office property in Howard County, has faced similar problems finding room for potential customers seeking space for large offices, said Cole Schnorf, senior vice president of development in Manekin's Columbia office.

The company is considering several projects for specific tenants.

Schnorf said Manekin would like to build speculative office buildings again but must wait until the rent payments for existing offices rise and banks become more willing to lend money to projects not already fully leased.

"If we could find a financial backer now, we might have an interest now," he said.

The change in attitude thrills county officials. Office construction has lagged behind most other parts of the local economy -- home construction, residential real estate, retail -- which have enjoyed a strong recovery for the past few years.

Rouse's project may signal that office construction finally is returning, although nobody expects the kind of speculative building that fueled the 1980s boom -- and helped cause the crash of the early 1990s.

"It's been quite a famine," said Deputy Planning Director Marsha McLaughlin. "We're thrilled if they're going to go forward with [speculative office] space."

Office buildings are usually good deals for local government: They pay high taxes, use few services, lure high-paying jobs to the area and rarely spoil the environment.

September's issue of Economic Indicators, a mix of hunches and various data, also reported:

Rainy weather hurt county farmers, delaying the planting of corn and soybeans. Short grain supplies and record-low prices for cattle also hurt farmers.

Residential real estate was strong throughout the summer, particularly homes costing less than $300,000.

The average price of a single-family home rose to $207,000 in March, 2.7 percent higher than a year earlier. The average condominium price rose to $115,000, up 11.8 percent in the same time.

Total sales of new homes are up 15 percent, although profits for home builders remain thin.

Retail sales were the highest in three or four years, although sales of new cars have been slow. Trucks and sport utility vehicles sold better.

The unemployment rate for county residents crept up from 2.7 percent in March to 3.2 percent in June. Maryland's was 4.7 percent in June. But unemployment for the year is still down, and the average weekly wage is $618 a week, up 2.5 percent from a year ago.

Pub Date: 9/24/96

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