COVER STORY, OCTOBER 2007

OFFICE, INDUSTRIAL AND FLEX
Taking a closer look at developments in the Northeast.
Stephanie Mayhew

Despite the lack of viable development sites and high barriers to entry developers are still finding key sites to develop office, industrial and flex projects throughout the Northeast. Many of these new facilities are located in mature markets  experiencing a growth or a resurgence, and some are in markets that are beginning to show their true worth. Northeast Real Estate Business profiles five different developments in some very different markets.

The Renaissance Centre 

The Renaissance Centre in Wilmington, Delaware, offers 234,000 square feet of Class A office space.

In the last several years, many urban cities in the Northeast region have been diligently redeveloping and reinvigorating their waterfront areas, taking advantage of the gems that these locations offer. Along with a plethora of retail and residential developments that often pop up along new waterfront developments, office developers are looking into the sites, keen to offer their tenants a whole new lifestyle and amenity package.

In Wilmington, Delaware, which has made roughly $1 billion in investments in its waterfront and surrounding area in the last few years, The Commonwealth Group recently completed construction of The Renaissance Centre, a 234,000-square-foot Class A office building located about 4 blocks from the riverfront at 405 King Street. The $41 million project is also situated just minutes from the courthouse, one block from the popular Ships Tavern district and it is also close to the train station and major highways. “The building is different because it is outside of the traditional Wilmington Central Business District,” says Donald Robitzer of The Commonwealth Group. “It is really a bridge between the redevelopment efforts that are going on at the riverfront and the established CBD along Delaware Avenue.”

As the city continues its efforts to revitalize the riverfront and the surrounding areas of the CBD, the demand for new Class A office space continues to grow. “There are only two new office buildings in town that are available, The Renaissance Centre and 500 Delaware Avenue, which is already probably 80 percent to 85 percent filled,” says Robitzer. “People want to be in new up and coming locations in the newest Class A buildings, so they can have a certain presence in the marketplace.”

Currently, the McCarter & English law firm occupies the entire eighth floor, and The Commonwealth Group is in serious talks with several other prospects. Because of the building’s close proximity to the new courthouse, there has been substantial interest from law firms, but Robitzer notes that there has been interest from engineering firms, banking firms and insurance firms as well. “The building’s proximity to the things that are important in Wilmington and the growth that is going on in the city is helping to attract all types of users,” says Robitzer. “It is an up and coming area that is different and hip and within walking distance to the riverfront.” The new building offers extremely efficient floor plates that can accommodate tenants looking for space anywhere from 1,500 square feet to 147,000 square feet. 

When asked whether or not he foresees problems competing with larger office markets surrounding Delaware, Robitzer responds, “I think The Renaissance Centre is very well positioned given its proximity to New York City and Washington, D.C. It is essentially in the middle of those two markets and only half an hour away from Philadelphia.” Robitzer also notes that in comparison to rents seen in New York City that can range from $50 to $100 per square foot, rents in the $30 per square foot range can be very appealing to prospective tenants. 

The eight-story building, which abuts Wilmington’s historic district, was designed with careful consideration of the location and the modern needs of tenants. “Tevebaugh Associates was instrumental in blending new age design with the old world architecture found in the historic Market Street units that are in the same block,” says Robitzer. “The Commonwealth Group wanted something that would mix with that, but yet was 21st century.”

The new building also combines several green elements such as a special green roof on top of the 192-space garage as well as several other LEED certified energy efficient elements. The interior of the building features high-end finishes of marble, granite, cherry wood, seamless glass and imported tile. Amenities within the building include a grand lobby, a ground-floor restaurant, a coffee and tea shop, an on-site fitness center, a meeting room, a relaxation area and a reading room.

Buildings such as the Renaissance Centre will help increase property values in the area and aid in bringing more retail stores and restaurants because of the increased density of the daytime population. In addition, Robitzer notes that the success of the building will show other developers that you can be successful in Wilmington outside of the traditional CBD. “This building is in the center of the redevelopment action in Wilmington,” he says. “It really ties the established business district with the riverfront.”

The Towers at Hutchinson Metro Center

Simone Development is currently constructing The Towers at Hutchinson Metro Center in the Bronx, New York City.

After experiencing much success with the initial 460,000-square-foot Class A office building at Hutchinson Metro Center, Simone Development began construction on Phase II, The Towers at Hutchinson Metro Center. The two new towers are part of the multi-phase, state-of-the-art, Class A office complex that is situated on 42 acres in the Pelham Bay section of the Bronx, New York City.

This past June, Simone Development completed the topping off of Tower I, the first of two 13-story office towers that will comprise Phase II of Hutchinson Metro Center. Tower I will contain 260,000 square feet of Class A office space and is slated for completion in December with tenant occupancy anticipated for February 2008. Together, the two towers will offer tenants 520,000 square feet of Class A office space, and future site plans include a total of 1.9 million square feet of space.

The two new towers will be located strategically off the Hutchinson River Parkway with easy access to major highways and bus and subway services. The site is also less than 30 minutes away from JFK and LaGuardia airports. “It is in the center of everything,” says Joe Simone of Simone Development. “The central location of Hutchinson Metro Center in the Bronx makes it extremely convenient to all of the bridges, airports, Manhattan and the other boroughs. Simone also explains, “In terms of pricing, Hutchinson Metro Center is a fraction of Manhattan rents, yet, it has all of the conveniences of being in the boroughs.” The location of the new towers in the Bronx also allows for an amenity that is hard to come by in Manhattan — free and abundant parking.

Plus, the towers are only 2 miles south of the Westchester border, making the facilities not only convenient to the amenities of the city, as mentioned above, but the towers are convenient to the suburban neighborhoods outside of the city as well, allowing access to a tremendous labor pool.

Other amenities include a fitness center, a state-of-the-art teleconferencing center, an on-site child care facility, the full-service Metro Café with Cyber Lounge, an attended gatehouse with 24/7 security, a dry cleaners, a sundry shop, landscaped courtyards with gardens and seating areas, and a free shuttle service to the nearby subway station. In addition, there will be four levels of covered parking under Tower I as well as parking throughout the office campus. “The combination of the location plus the abundant parking and the amenity package is what makes Hutchinson Metro Center so unique,” says Simone.

As the outer boroughs of New York City begin to build identities of their own beyond Manhattan, the demand for first-class office space has been growing. The new towers have been designed to be flexible to fit large and small tenants alike with leasing efforts focusing on general Class A office tenants. However, due in large part to the complex’s location less than a mile from the Albert Einstein College of Medicine, Montefiore Medical Center, Jacobi Medical Center and Calvary Hospital, the development is attracting a fair amount of attention from medical tenants. In addition, Simone notes that many of the tenants showing interest in the new towers are tenants that are already in the park and are looking to expand. Tara Stacom, David Green and JoAnn Stock of Cushman & Wakefield are the exclusive leasing agents for Hutchinson Metro Center.

Once complete, the new towers will have a tremendous economic impact on the Bronx. Having already increased the daytime population within the borough with the construction of the first building in Hutchinson Metro Center, Simone remarks that the new towers aim to bring more people and jobs to the area, in turn, aiding the retail market and the residential market in the Bronx. Construction is set to begin on the second tower when Tower I is 60 percent leased.

Overlook Center

Normandy Real Estate Partners and Neelon Properties are developing the six-story Overlook Center in Waltham, Mass.

Normandy Real Estate Partners and Neelon Properties are set to capitalize on the viable Waltham market with a new office building at one of the most visible locations on Route 128. The six-story building, which is located at 21 Hickory Drive, will feature 105,000 square feet of Class A office space with  amenities such as a two-story lobby, concierge services, a café, an on-site fitness center, a four-level parking garage as well as 9-foot ceilings.

The Overlook site was originally home to two outdated buildings that were owned by Neelon Properties. Seeing tantamount potential in both the Waltham market and the strategic location along Route 128, Normandy and Neelon seized the opportunity to work together to bring a cutting-edge, top of the market, Class A suburban office property to Waltham. The two older buildings were demolished and the groundbreaking took place this past June with vertical development set for fall. The building is slated for completion in the fourth quarter of 2008.

The new building will catch the eyes of approximately 150,000 to 200,000 cars a day along the heavily trafficked corridor. Thus, it is not surprising that  the location of the building also lent to the design of the exterior of Overlook Center. The exterior will sport a significant, cutting-edge architectural design with glass, a spire and abundant light, making it a phenomenal signage opportunity for tenants.

Because of this highly visible location, Justin Krebs, principal of Normandy Real Estate Partners, explains that the marketing efforts are being aimed at image conscious,  high-growth, good quality tenants that range from the financial services industry to the technology industry. “The building is perfect for a company that has the desire to have visibility, name recognition, and want to market and brand itself as a high quality tenant in high quality office space with the best visibility on Route 128,” he says.

The building is also highly efficiently designed from a loss factor stand point. “A tenant that might have a need for a large amount of square footage could actually find that they can be in fewer square feet because Overlook was designed with a less than 10 percent loss factor in mind,” says Krebs. The marketing and leasing efforts for the building are being headed up by Alex Dauria of Jones Lang LaSalle.

According to Krebs, historically, the Waltham office market has been one of the strongest suburban markets in Boston. “It tends to be the first to have a return, it shows the strongest rental growth and it is also a very mature market,” he says. “The good news is that there are very tight barriers to entry and few developable sites remain in the market.”

Krebs also notes that the Route 128 west office market has the lowest vacancy rates, and Waltham has one of the lowest vacancy rates of all of the suburban Boston office markets. In addition, the market continues to show strong rental growth. “There is a significant demand from 50,000-square-foot to 100,000-square-foot tenants currently looking in the marketplace,” says Krebs. “If you look at the Waltham office market over the last 2 years, there have been consecutive decreases in vacancy rates and consecutive increases in positive absorption, making Waltham a key location.”

The success of the Waltham market is bound to continue given the growth of the downtown Boston office market. Waltham’s proximity to downtown Boston and a quality labor market make it what Krebs calls the “ground zero” suburban location for Boston. “We have recently seen a significant number of downtown Boston tenants looking at building opportunities in the Waltham market,” he says.

5031 Richard Lane

High Real Estate is tapping into the Pennsylvania flex market with a new facility at 5031 Richard Lane.

Flex buildings have become a hot property type across the Northeast region because the buildings allow businesses to combine their corporate office environment with their manufacturing or distribution efforts all within one functional building that has the look of an office but with industrial capabilities. After taking a look at the flex market in eastern Pennsylvania, High Real Estate found that there was a void, particularly on the west shore of the greater Harrisburg market. “After completing a market study of the region, High Real Estate discovered that one, there are not many developers putting flex space on the market at the current time, and two, there are not many buildings of this nature being presented for future development,” says Linford L. Good, senior vice president of Brokerage Services for High Real Estate. “There is a big-box space and office space, but the flex market was underserved.”

To help meet the demand, High Real Estate, which has been developing in the eastern Pennsylvania market since the late 1980s, broke ground last month on a 121,000-square-foot flex building in the Upper Allen Township in Cumberland County. The new facility is situated on 15.9 acres at 5031 Richard Lane in the Rossmoyne Business Center, a master-planned corporate center featuring office, light industrial and retail facilities. The new facility is designed to allow tenants to take as much space as they need in 10,000-square-foot increments. “A tenant could do an assemblage of the 10,000-square-foot units, taking 30,000 square feet or even the whole building,” says Good. “Primarily, the prototype would be 2,000 square feet of office space and 8,000 square feet of warehouse space.”

However, staying true to its name, the building is flexible in terms of the percentage of office or industrial space. “The building is designed to accommodate a more significant build-out of office space and still accommodate the parking,” says Good. “A tenant can take 20 percent office or 50 percent office or make it all office.” In addition, amenities like 24-foot ceilings would allows a tenant to include a substantial warehousing component. “High Real Estate has found that 24-foot ceilings are a very valuable amenity for flex tenants because it is often necessary for them to have the ability and the capacity to stack up goods,” says Derry Young, a commercial asset manager for High Real Estate.

Other amenities of the energy-efficient building include insulated cavity-wall architectural masonry, an abundance of parking, numerous entrances and large expanses of windows along the building’s façade in order to enhance the office-use component. Specific warehouse amenities include 40-foot by 40-foot column spacing, 35 truck doors and 11 overhead drive-in doors. The Rossmoyne Business Center also offers a full array of amenities including lodging, financial services, childcare, dining and shopping.

The flexible space increments of the facility make it a great alternative for smaller distribution companies. “There is not a lot of good quality, attractive product for smaller distributors,” says Young. “You only find mainly older product, but it might not have a dock door and a drive-up door and it probably won’t have a very attractive façade. We provide a very professional-looking front office that has the functionality of the dock doors and the drive-up doors.”

In addition to the lack of available flex space in this market, the viable location was another factor driving the development. “It is a great location, sitting on the west side of the greater Harrisburg market at the confluence of Route 15 and the Pennsylvania Turnpike almost on the clover leaf,” says Young. “It is a very strategic location and the Harrisburg market in general is a transportation hub.” The building is slated for occupancy early next summer.

Key Distribution Center

Higgins Development Partners recently completed the 603,000-square-foot Key Distribution Center in Carlisle, Pennsylvania.

Also taking advantage of the prime industrial development sites in Pennsylvania, Higgins Development Partners recently completed the 603,000-square-foot Key Distribution Center. Located at 1700 Ritner Highway in Carlisle, Pennsylvania, the warehouse/distribution center lies in the burgeoning industrial market of eastern Pennsylvania. According to Gene Preston, senior vice president of Higgins, the company continually tracks approximately 25 different industrial markets on the East Coast, and the Lehigh Valley, Harrisburg and Hazelton markets consistently show up at the top of their list.

The greater Harrisburg market has become a sought after location for warehouse distribution facilities for the entire Northeast portion of the country. “There has been development on a speculative basis as well as build-to-suit development,” Preston says. “The I-78 corridor enables companies to move their goods from Boston to Washington, D.C., without any traffic congestion.” In addition to the strategic location of the eastern Pennsylvania market, Higgins explains that there are other important advantages to doing business in this market. “There is a lower cost of doing business, a readily available labor pool and generally it is a more affordable place for companies to do business,” he says.

Thus, the demand for industrial buildings, especially larger buildings ranging from 500,000 square feet and up, continues to be strong in this thriving market. Higgins notes that as industries move from manufacturing to distribution, today’s companies are looking for larger sized buildings to store extra trailers or goods and that allow for plenty of trailer parking.

In addition, to ample square footage and parking, the building contains all of the Class A amenities that today’s distribution companies demand. Amenities include 32-foot clear height, 50-foot by 50-foot column spacing, ESFR fire protection system, 60 9-foot by 10-foot tailgate doors, two 12-foot by 14-foot drive-in doors, and an abundance of paved on-site parking – 345 and 199 car and trailer spots respectively.

©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.