Recycling suburban office space

As vacancy rates fall, developers give new life to old sites

Commercial real estate

June 09, 2000|By Meredith Cohn | Meredith Cohn,SUN STAFF

In the same way that fashion trends cycle back, new businesses are trying on for size the former Merry-Go-Round headquarters in Towson, abandoned since the clothing chain went bankrupt four years ago.

Heritage Properties bought and began rehabbing the space into a $30 million office park a year ago. One major office tenant plans to move in in September, and others have expressed interest, the developer said.

Heritage is not alone in recycling buildings, even in the suburbs. With new and expanding businesses continuing their search for office space, developers have spread out from downtown to meet the demand. As available land is chewed up, they've turned to rehabbing.

Vacancy rates for suburban office buildings have dropped to the single digits. Class A, the nicest and most expensive space, has a vacancy rate of 7.1 percent, and Class B, the next tier, has a rate of 8.5 percent, according to a report by the Society of Industrial and Office Realtors.

Called Radio Park, Heritage's newest business center is designed for businesses looking for lower rent and abundant free parking - two prime factors that have driven some companies from downtown Baltimore.

"Towson Marketplace across the street was renovated, and there's a lot of other activity in the area," said Rick Bechtold, vice president of development for Heritage. "That gave us a lot of confidence in our project."

After the rehab, the space will not be top of the line, but that's what attracted the first tenant. United Concordia Cos. Inc., a dental insurance company, was looking for more space and a better deal on rent. Thomas A. Dzuryachko, president and chief executive, called Radio Park a "convenient, cost-effective facility."

United Concordia, a Harrisburg, Pa.-based company, will move from nearby Towson Commons to 23,671 square feet in Radio Park, taking nearly 10 percent of the space. Rents are in the $16.50-a-foot range, which is average for the location and product.

Heritage expects the other tenants to be office users that need large, contiguous spaces. There's some retail available at the site, which will also supply a conference room and fitness center.

Real state brokers are welcoming the availability of large spaces, at all prices ranges, in a business campus environment. Rehabbed buildings are also giving their clients good locations near the highways.

"This is a terrific example of something stagnant now offering something exciting," said Matthew Haas, an associate with Manekin LLC, a commercial real estate firm that represented United Concordia in the deal.

Heritage will continue to look for other recycling opportunities, but its next project is a new 90,000-square-foot office building in Towson called Fairmont Place.

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