Developers Expect BRAC to Fill New Building

By Katie Arcieri, staff writer for The Capital
This article originally appeared in The Capital — an Annapolis Newspaper — July 21, 2009.

Developers of an Anne Arundel County business park broke ground on a 161,000-square-foot building yesterday [July 20, 2009], a sign of optimism amid one of the area's worst office markets.

Officials with Corporate Office Properties Trust said the five-story, $36 million project at National Business Park just northwest of Fort George G. Meade should be completed in about a year. Though there are no confirmed tenants and it is exceedingly rare to start work on a project without advance leasing to tenants, officials with COPT said they expect the building to be filled within six months of completion. Rand Griffin, president and chief executive officer for the publicly traded real estate investment trust, said the building will generate significant demand from contractors relocating to the area as part of the military base realignment and closure process known as BRAC. The first wave of employees from the Defense Information Systems Agency will relocate to Fort Meade in October 2011.

A recent DISA survey shows that 60 percent of its work force has decided to keep their jobs when the agency moves to Fort Meade. Of those employees, two-thirds have decided to follow their jobs here. Robert Leib, county BRAC liaison, said this is "very good news" from DISA's point of view. "Their goal from the beginning was to maintain as many of their employees as possible."

All told, Fort Meade is expected to garner around 22,000 new jobs over the next six years because of BRAC, new hires at the National Security Agency and private firms leasing office space at the Army post. The west county installation also was recently selected as the new home of a military operation called the U.S. Cyber Command, though it is unknown how many jobs that may bring. Griffin said the groundbreaking is a "significant risk," but one worth taking. The building is being financed with a $225 million construction revolver loan, he said.

"COPT has had a very long and successful history of taking risk where others feared to do so," Griffin said before a crowd of dignitaries under a tent at yesterday's groundbreaking ceremony. The company has succeeded with government tenants before. Its 285-acre park at the routes 32 and 295 is 98 percent occupied and home to large government tenants such as Northrop Grumman, Booz Allen Hamilton and General Dynamics.

Located near the NSA, the new building at 308 Sentinel Drive will mark the 22nd "Class A" building in the park and bring to three the number of buildings under construction there. Upon completion, the park will be composed of 5 million square feet of "Class A" space.

Currently, government and defense and information technology contractor customers make up 55 percent of COPT's revenue, Griffin said. He said he expects that to rise to 65 percent by the end of next year. The groundbreaking comes at a time when many businesses have pulled back on development plans as financing dries up. In the second quarter of this year alone, vacancy rates reached 19.5 percent in the BWI Thurgood Marshall Airport area, up from 15.3 percent during that period a year ago.

Despite this, the National Business Park is planning to charge rents around the mid-$30s per square foot, Griffin said. Comparatively, asking rents in Annapolis during the second quarter stood at $30 per square foot, according to MacKenzie Commercial Real Estate Services. They were $24 per square foot in the BWI area during that period. Observers say COPT is trying to capture market demand before its competitors do.

"It's a maintain-the-momentum move on their part," said Dennis Murphy, president of the Anne Arundel Commercial and Industrial Association. "They know there is going to be new demand. They don't want to lose it to other new developers in the area."

Dignitaries who attended the groundbreaking ceremony characterized the new building as a symbol of the local economy's strength and part of the much-needed infrastructure for BRAC. Lt. Gov. Anthony Brown said he has attended a number of groundbreakings recently, but that "this is one of the few that is a private-sector groundbreaking." "This is an exciting day for Anne Arundel County," he said. "This project means a great deal for our BRAC preparedness." U.S. Sen. Ben Cardin, D-Md., said the building is a "good sign" for Maryland's economy. "It's certainly helping us get out of the recession because you see earth being turned," he said.