Commercial Projects: Controlled but Creative

Slower pace, remarkable projects

By Suzann D. Silverman on Mar 13, 2012 in News | 1 Comment

One very positive response to the U.S. recession has come from what may perhaps seem a surprising quarter: While the movie “Field of Dreams” gave voice to the commercial development mantra “If we build it, they will come,” in the past few years this generally enthusiastic group has been admirably cautious. In fact, having contributed to the late ‘80s/early ‘90s recession with so much office development that the term “see-through buildings” became part of the real estate lexicon, this time around developers have significantly slowed the pace of new construction to the point, arguably, of helping to keep vacancy rates under control.

Office property, in fact, has exhibited the most noticeable drop-off: The amount of property under construction fell from 172.4 million square feet at the end of 2008 down to 60.7 million square feet at the end of 2011 (and 56.4 million as of Jan. 29, 2012), according to CoStar Group data. Year-over-year, the office total grew last year, but only by 3 percent. Also significant but not as extreme have been shifts in the growth of industrial and retail construction, with the industrial sector reducing its pace of construction from 170.9 million square feet at the end of 2008 to 46.8 million square feet three years later, while the amount of retail under construction dropped from 145.1 million square feet to a mere 34.3 million.

Indeed, Deloitte’s report titled “Real Estate Outlook: Top Ten Issues in 2012,” released in October, found that commercial real estate is being leased or purchased faster than new units are being completed, thanks to record low levels of construction activity. Office vacancy rates averaged 12.3 percent nationally in fourth quarter 2011, according to CoStar, which predicts a drop to 11.7 percent by the same time next year.

Nonetheless, caution and lack of financing have not resulted in a short-change in project design. Rather, some really remarkable projects have been announced or come to fruition in the past year (not to mention the year before—or major master-planned developments like the Flats East Bank project in Cleveland). Perhaps that proves that no matter what the state of the economy, quality, character and sometimes even a need in the market can drive enough demand to achieve success.

Among projects worth noting:

• • Hines’ BG Group Place opened last year. The nearly 1 million-square-foot Houston tower achieved Platinum-level LEED certification for Core & Shell, one of only three buildings in the world to do so. Features include a fully vegetated green roof, a landscaped “skygarden” terrace, highly efficient heating and ventilation systems, a condensate recovery system and façade sunshades.
  • New York’s Empire State Building completed a $550 million renovation started in September 2009, winning a LEED Gold certification, one of the few National Historic Landmarks to do so.
  • The city of Memphis is in the process of converting a long-vacant arena into a mixed-use facility housing a Bass Pro hunting and fishing superstore, a hotel, an aquarium, restaurants and a museum. The new center is scheduled for completion by Aug. 1, 2013.
  • Brookfield Office Properties is underway on a $250 million renovation of the World Financial Center in Lower Manhattan, with an 8 million-square-foot retail center including a European-style marketplace, high-end fashion retailers and waterfront dining, plus a glass pavilion providing connection to the new transit hubs.
  • The Westfield Group is renovating the 35-year-old University Towne Centre. The $1 billion project will expand the mall from 1 million to 1.8 million square feet by the end of 2013. To be renamed the Westfield UTC mall, it will include three new anchor stores, 150 shops, as many as 300 condominiums and about 5,000 square feet of office space.
  • Developer Wereldhave has a 120-acre mixed-use project under development in San Antonio. The $400 million project, to be developed in two phases, will include 205,000 square feet of Class A office space, 60,000 square feet of retail, a 186,000-square-foot hotel and 539 residential units.
  • Roadside Development is in the process of building CityMarket at O, a 1 million-square-foot complex north of downtown Washington, D.C., with more than 87,000 square feet of retail, 629 residential units and 500 parking spaces. The $300 million project incorporates the O Street Market Building; constructed in 1881, it will be restored and incorporated into a renovated 72,000-square-foot Giant Food Store. It will also include a Cambria Suites and aims to drive revitalization of Washington’s Shaw community district. The residential units will include a combination of seniors housing, market-rate apartments and condominiums.
  • The new Four Seasons Resorts Orlando, under development at the Walt Disney World Resort, is planned for a 2012 opening, with 444 rooms. The $360 million project will result in the largest Four Seasons resort in the world.
  • Kansas City, Mo., completed a new stadium, the Livestrong Sporting Park, a $200 million, 342,105-square-feet complex intended to be one of the most technologically advanced stadiums in the world, with new high-density Wi-Fi technology allowing fans to use mobile devices to access social networking applications.
  • Rock Gaming has underway two Horseshoe casinos, in Cincinnati and Cleveland. Horseshoe Casino Cleveland, a $350 million project, is set to open on May 14 in the former Higbee Building on Public Square. The $400 million Cincinnati project is scheduled for a spring 2013 opening.
  • Cousins Properties Inc. and Gables Residential broke ground on a $250 million mixed-use complex on Clifton Road in Atlanta. Emory Point is the first new retail project in the area in 20 years; its first phase will include more than 80,000 square feet of retail space and 443 luxury apartments.

• The Hyatt Regency New Orleans reopened in October, following a renovation of the 30-year-old in the downtown property, badly damaged by Hurricane Katrina. It underwent a $275 million redesign and revitalization resulting in 1,193 rooms and 200,000 square feet of event space.

• Merritt Properties broke ground on a $60 million construction of Aberdeen Corporate Park, a 265,900-square-foot mixed-use office complex near the U.S. Army’s Aberdeen Proving Ground in Maryland. It will be built to achieve LEED Gold certification.

Suzann Silverman is the Editor-in-Chief of Commercial Property Executive.

Projects compiled by Camelia Bulea and Michael Ratliff.

“2011: A Year in Commercial Real Estate,” a report on the commercial real estate projects completed, underway or announced in 2011, is available at CPE City Pages.