- The Washington Times - Thursday, July 24, 2003

The market for industrial and flex space in the Washington-Baltimore region improved sharply in the first half of the year, and some real estate analysts are predicting a full-blown recovery for the sector.

Vacancy rates for the space fell, sublease space disappeared and more new space is being leased even before construction has been completed, according to a recent market survey from Delta Associates.

Industrial space is generally any space used by companies for operations or storage. Flex space is industrial space that can be converted to office space. Lower vacancy rates and stabilizing rents in this sector often indicate overall improvement in the economy, because these mean that companies are leasing additional space to produce or store products.

About 1.5 million square feet of industrial and flex space was filled during the first half of the year, compared with 146,000 square feet during all of last year. Most of the space filled last year came toward the end of the year, leaving many analysts optimistic.

“Following a strong second half of 2002, the market is picking up momentum,” Delta Associates said in its report.

Delta said other market statistics suggest a recovery. Vacancy rates have dropped slightly, from 12 percent during this time last year to 11.9 percent, the group reported. Perhaps more telling is the increasing amount of space leased in buildings still under construction. About 38 percent of the 2.2 million square feet being built has been leased; at this point last year, about 25 percent of space under construction had been leased.

Also, about half of all industrial and flex space arriving on the market this year has been leased, compared with about 40 percent at this point last year.

Though most analysts are optimistic about the industrial/flex market, there is reason to be cautious. The vacancy rate for the sector while on the decline, has not dropped as quickly as the rate of new construction.

The vacancy rate dropped 0.1 percent during the past 12 months, but the amount of new space dropped 8.6 percent. Also, rent rates for industrial and flex space have remained flat. As a result, some tenants have moved to newer space that is relatively inexpensive, leaving older space empty.

Clark to build DOT headquarters

Bethesda-based Clark Construction will take the lead in building the $275 million headquarters of the U.S. Department of Transportation, which will serve as a cornerstone for the redevelopment of Southeast.

JBG/SEFC Venture LLC selected Clark to build the 1.9 million-square- foot complex, which will house more than 5,000 employees in two towers and will feature two large underground garages.

The DOT headquarters will be part of the Southeast Federal Center, an 44-acre site featuring mixed-use development with housing and retail. Five teams are competing for the rights to redevelop the area as part of D.C. planners’ broader vision of revitalizing the 2,700 acres along the Anacostia River waterfront.

In other news

• The Aerospace Corp. signed a lease to occupy 88,094 square feet at the Westfields Corporate Center in Chantilly. The company will occupy the entire new $16 million, three-story building in the complex, which is owned by Corporate Office Properties Trust.

• Bowman Consulting Group Ltd. leased 12,877 square feet of industrial space at Godwin Business Park I at 9813 and 9817 Godwin Drive in Manassas.

Property Lines runs Fridays. Tim Lemke can be reached at [email protected] or 202/636-4836.

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