Military Base Shift Brings Boom Times To Harford

Developers Scrambling To Meet Office Demand

November 10, 2009|By Lorraine Mirabella | Lorraine Mirabella,

Just outside the main gate of Aberdeen Proving Ground, construction workers are finishing up a three-story building's brick exterior, preparing to install windows and divide the vast interior into offices. Nearby, a cleared parcel sits ready for a second building to start soon - even though the developer has yet to sign up a single tenant.

The work at North Gate Business Park symbolizes the rush to build offices in Harford County as the long-awaited influx of jobs from a nationwide military base restructuring nears. Preparation or construction in at least half a dozen office parks near the U.S. Army post has made the area one of the few in Maryland where developers are scrambling to meet growing demand. In some cases, they're even building "on spec," before any leases are signed.

Those scenarios, experts say, are largely unheard of during the recession, as most businesses are shedding space and forgoing expansion, and developers can't get credit to build.

"It certainly is unusual," said Stephen Blank, a senior finance fellow with the Washington-based Urban Land Institute. "It points to a perception of the inherent strength in the local economy and the local market driven by the base realignment issue, and what people believe will be the growth industry that revolves around it."

In a boost for Maryland's economy, the government is bringing 8,200 military and civilian jobs, mostly to APG, by 2011, with projections of 13,000 to 17,000 related contractor, subcontractor and supplier jobs to follow. Several thousand jobs are expected by the middle of next year. A first wave, including some of the top military contractors now supporting Army functions being moved from Fort Monmouth, N.J., began seeking space earlier this year. They're finding it in short supply.

"My office right now, and many of the brokers around town, we are shoehorning people into the places we've got," said James C. Richardson, director of the county Office of Economic Development.

Richardson says Harford's situation is unique. "In this economy, I cannot tell you anyplace else in the nation where this is going on right now."

David Baird, a senior managing director with Cushman & Wakefield Inc. in Baltimore, said the commercial real estate firm estimates a need for 8.5 million to 10 million square feet of space both on and off the Army post for workers coming by 2011. About 3.5 million square feet is planned for the APG grounds.

Some construction has begun. Baltimore developer St. John Properties has started work on five buildings, about 300,000 square feet in all, in a sprawling business park called Government and Technology Enterprise (GATE) on the Army base. And Columbia-based Corporate Office Properties Trust is developing North Gate, planned to have 850,000 square feet of offices, outside the base.

Still, Richardson said, offices will be in short supply. To meet demand by 2012, he said, the county needs another 2.1 million square feet of space. Now Harford has 6.6 million square feet of office and flex office space, with a 6.9 percent vacancy rate, but much of the vacant space is either not large enough or not well located to handle the incoming contractors.

The vacancy rate falls sharply, to 2.9 percent, if only the larger, higher-quality office buildings are included, according to Cushman & Wakefield's third-quarter office market report. Meanwhile, other metropolitan area counties are struggling with double-digit vacancy rates: 15 percent in Howard, more than 16 percent in Anne Arundel, more than 12 percent in Baltimore County and nearly 16 percent in Baltimore City.

"The [Harford] vacancy rate is very low, by any measure," Baird said. "The demand is coming, and the challenge to meet all of this demand is one of timing. The ability to meet the demand and build space has been complicated by the credit crisis and general financing that affects development."

Some demand will be satisfied by the 400-acre GATE project, slated to become a 2 million- to 3 million-square-foot research and development park. Construction under way by St. John includes two 75,000-square-foot, three-story office buildings, two "flex" buildings and one one-story office building, with the first construction to be completed by May and the rest by October. Jerry Wit, senior vice president of marketing for St. John, said the developer has signed a lease with defense contractor Raytheon Co. to occupy a three-story building and move in by October.

On Monday, St. John announced defense firm L-3 Communications' Command & Control Systems and Software will lease the other three-story building.

"The other 150,000 [square feet] has no tenants, but we want to be BRAC-ready," Wit said, so that when the Army's new 2.4 million-square-foot Command, Control, Computer, Communications, Intelligence, Surveillance and Reconnaissance (C4ISR) operation opens next year, "their subcontractors can open at the same time."

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