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‘Game Changer’ Leaves Its Mark
BRAC’s Influence on Office Development

October 2011

The available office development inventory along I-95 has dramatically changed over the past two years from its original roots, design and quality. Historically, product was limited in size and height and dominated by mostly small, entrepreneurial and regional businesses, and amenities were few and far between. With one significant passage of federal legislation, the future of office space would be changed indelibly. A true “game changer,” BRAC was the start of the new face for what the local market perceives as quality office space. Not only has the image of the office market changed, but more significantly, the amount of space in the market has been exciting to see evolve.

Historically speaking, the office markets in both Harford and Cecil County have always been consistent in net absorption (the amount of space leased or occupied in any given year in comparison to total available space) with modest numbers that reflect the “suburban” nature of this region. From the early 1990s to 2005, it was comfortably assumed that the Harford County market for office space would absorb 30,000 to 40,000 square feet. It varied slightly, but, never in a notable, substantial way. Most of the product in Harford County was focused on low-profile, flexible office space that was driven by both location and price.Projects such as Tollgate Professional Center (Tollgate Road and Bel Air South Parkway), Emmorton Professional Center (Emmorton Road), MacPhail Center (MacPhail Road and Route 24), and Amyclae Professional Center (Rt. 543 and Route 22), by way of example, each catered to small, local business owners, area sales representatives, local attorneys, private doctors, and exemplified the usual and customary nature of suburban office projects. Look at the outlying, suburban areas of neighboring counties such as Howard, Carroll and Baltimore, and the product is the same. Different colors, different brick, but basically the same.

Aberdeen Corporate Park/Merritt Properties

Fast-forward to 2005 and the passing of the Base Realignment and Closure Act (BRAC), and the market has been greatly changed. Almost immediately, project developers were jockeying for sites, plans for the new office environment were put into motion, and the office landscape was about to be forced into an evolution that no one had expected. Yes, everyone in the BRAC process knew how it would look, what the potential demand would be, and how that demand would alter the local communities. No one knew exactly the numbers and when. Today, that still holds true. The “game changer” has happened, and it’s here. But, the rules of the game have also changed, and that was the unexpected. That is the crystal ball that so many in the market are hoping for a glimpse into in order to react and succeed.

The Numbers

Prior to 2005, the Harford and Cecil County office markets totaled 1,648,000 square feet and 680,000 square feet, respectively. For Harford County, the office inventory was predominately mid-sized, two-level office buildings, with an average building area of nearly 22,000 square feet. In Cecil County, the average office building size was nearly 17,000 square feet. To put this into perspective, the Baltimore County office market totals nearly 8,600,000 square feet, and the Columbia area encompasses nearly 13,000,000 square feet. The historical absorption of 20,000 to 30,000 square feet would not have a major impact to the market, more of a “trickle effect.”

In the past five years, more importantly the past two years, nearly 1,400,000 square feet of office product has been developed and delivered to the market. If you’re doing the math, that’s a 700 percent increase year over year. Unprecedented growth with an unimaginable impact. The average building size has nearly doubled in the past five years to 48,000 square feet in Harford County. In Cecil County, pending development projects will cause the average building size to grow by 50 percent. In shear size, buildings such as those in Water’s Edge Corporate Center, Box Hill Corporate Center, The GATE and North Gate Business Park have launched the region into the varsity leagues of the corporate office park environment. Simple, suburban designs have given way to true “Class A” amenities, higher parking ratios, environmentally friendly and high-tech features, and adjoining service and retail amenities as part of the tenant attraction. And it’s only just begun.

Today, commercial office developments such as Fieldside Commons, Hickory Ridge Technology Campus and Aberdeen Corporate Park, all in Aberdeen, are underway and continue the momentum of this new era in working office environment. Incidentally, these three developments will bring another 980,000 square feet office space to the market. With more office developments in the planning stages such as the expansion of Box Hill Corporate Center in Abingdon, and potential new office projects located along Route 40 in Havre de Grace, and the master planned James Run Corporate Park in Riverside, the landscape will continue to evolve, potentially bringing another 1 million square feet to the market.

The Rules Have Changed

In the numerous meetings leading up to 2005, everyone was positive, proactive and supportive to the BRAC initiative within the local and state levels of leadership. No question. It’s a great opportunity for the northeast region of Maryland. No one could have planned for or expected the changing tide in the national and global economy. The past three years have been an eye opener to everyone. What is the real impact to our local office market industry? Are the numbers still valid? Will everyone thought to move, actually move? Will the government’s changing plans and needs have an impact? Will all of this space be needed? Will it remain occupied? These are the multi-million dollar questions everyone is asking.

As we patiently await actions in Washington, D.C., and some level of resolve with the national budget and deficit, everyone agrees that there will be a shift in the numbers. How much and when? No one knows. Certainly, local leaders, developers and lenders are watching and waiting, on the edge of their seats. Regardless of the fallout over the upcoming year or two, the growth in this region has been phenomenal. It will certainly, and as expected, breed opportunity and growth. Perhaps just not on the scale as everyone had planned. I95