BGE bets on office space need Its real estate arm joins other developers building speculatively

Commercial real estate

June 17, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Spurred by increasing demand for office space from telecommunications and other fast-growing high-technology businesses, Baltimore Gas and Electric Co.'s real estate arm intends to construct a $12 million building at its 175-acre National Business Park in Annapolis Junction.

Like other real estate developers that are bullish about the area's continued job growth and decreased office vacancy rates, Constellation Real Estate Group Inc. plans to build the 90,000-square-foot project without commitments from tenants.

"We are currently riding a wave of momentum with regard to high-energy firms, and our goal is to stay ahead of this strong office space demand," said Randall M. Griffin, Constellation's president.

Constellation is so confident about its prospects that it is contemplating developing a conference center and hotel with as many as 120 rooms there.

But Constellation's speculative building comes as the ranks of developers planning such office projects are growing, a trend that could squeeze the company as such projects are completed.

In nearby Columbia, for instance, roughly 1.5 million square feet of new office space is planned or under construction. Constellation also is planning to add 200,000 square feet of office space in Annapolis beginning this summer. Like the Annapolis Junction project, its One Annapolis Exchange building has yet to line up tenants.

"Unless they have a tenant that they're seriously negotiating with, I'd say they're pushing the edge of the envelope," said Jay Gouline, a Johns Hopkins University real estate professor and president of a local property investment firm.

Hotels have also proliferated. In the past two years, more than a dozen "limited service" lodging projects have been completed in Anne Arundel County.

Other local commercial real estate experts contend that overbuilding isn't a problem.

"Speculative development is taking place in those markets with the lowest amount of office vacancy rates, such as Howard County, Owings Mills and the Baltimore-Washington corridor," said Jeffrey B. Samet, a partner at Colliers Pinkard, a commercial real estate firm in Baltimore.

"What we have is a backlog of demand. We're not anywhere close to generating excess space, and the developers are thus far being very selective about where they build," Samet said.

Constellation intends to complete the new project, 134 National Business Parkway, by next spring.

Company officials, who say they are "not at all" concerned about the speculative nature of their new four-story project, have good reason to be confident. In the past 18 months, the company has completed two other new speculative office projects, containing 178,000 square feet, in National Business Park.

Both buildings are fully occupied by such occupants as American Communications Services Inc., Applied Signal Technology Inc. and Credit Management Solutions Inc.

The park, which is to contain as much as 1.5 million square feet, is anchored by a 12-story office tower occupied by the National Security Agency, which is in charge of U.S. electronic eavesdropping. National Business Park contains more than 660,000 square feet of office space.

Constellation is also likely to benefit from Wall Street capital to maintain its building, thanks to a pending merger with a Philadelphia real estate investment trust. The $203 million deal with Corporate Office Properties Trust is expected to close by December.

Pub Date: 6/17/98

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