News, Notes and Comments on New Projects, Trends and Construction In the Commercial Real Estate Development and Planning Pipeline Around the U.S.
JLL: CRE Construction Industry Emerges from Downturn Leaner, More Diverse
The U.S. commercial construction sector is finally emerging from a long slumber since late 2009 as a more diversified and reshaped industry, with less risk and revived funding for construction and development, according to Jones Lang LaSalle’s 2013 Construction Outlook.
"The construction industry has evolved significantly in the last five years," said Todd Burns, president of JLL’s Project & Development Services group for the Americas. "In particular, commercial construction is now characterized by an absence of overbuilding coupled with a diverse focus that is less dependent on residential housing.
Growth in sectors such as health care, retail, distribution and lodging has shaped a more stable industry in the long-term, the report states.
In The Pipeline
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Cautious optimism is the prevailing sentiment among industry leaders in fourth-quarter 2013, based on three key industry indicators.
The Dodge Momentum Index, which tracks projects in planning stages, jumped 11.1% in August from the second quarter of 2013.
The American Institute of Architects (AIA) Architecture Billings Index reached 52.7 and regained momentum lost during the first quarter of 2013. The Construction Backlog Index (CBI) also demonstrated steady improvement, rising to 8.2 months of contractor backlog.
Four trends are helping -- and in some cases, hindering --construction growth in the current economic cycle, according to the JLL report.
- Financing is back, and echoing the healthy activity in construction spending, commercial lending conditions are improving even as lending standards have remained stagnant. In 2009, frenzy of overheated lending drove record construction starts in the wake of the 2008 global financial crisis. By 2009, construction lending froze as banks scrambled to reduce risks.
The low cost of capital and re-emergence of the CMBS market have enabled both increased liquidity and easier lending. New CMBS issuance totaled $50.8 billion through the beginning of August, twice the level of the first eight months of 2012. According to the Federal Reserve Board’s Commercial Lending Sentiment survey, 47.8% more respondents reported higher demand for CRE loans in the third quarter of 2013 compared to the second quarter, the biggest improvement in demand in more than a decade.
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Office Depot to Relocate Chicago HQ to Boca Raton, FL
Office Depot, Inc., fresh off the completion of its merger with OfficeMax, has confirmed that it will relocate the corporate headquarters of the combined company from Naperville, IL to Boca Raton, FL.
The company said it made the decision after a thorough evaluation taking such factors into consideration as operating costs, existing leases and subleases, taxes and incentives, and the limited ability to incorporate functions in the current space.
Office Depot Chairman and CEO Roland Smith said choosing Boca Raton, the pre-merger headquarters of Office Depot, is a critical step toward integrating the two companies.
"Our analysis concluded that Boca Raton provides the best platform for us to achieve planned synergies, leverage assets to drive improved profitability, and launch a compelling vision for the future," Smith said.
The company will remain in its current 625,000-square-foot campus at 6600 North Military Trail in Boca Raton, which has ample space to accommodate associates who will relocate from Illinois, the former headquarters for OfficeMax.
Office Depot and OfficeMax retail store locations, customer service centers, warehouses and distribution centers are not affected by the move.
JV Formed to Develop Of $100M Tysons Office Tower
American Real Estate Partners and The Association for Manufacturing Technology will develop 7901 Westpark Drive, a 10-story, $100 million office tower anchoring the Arbor Row master planned district of Tysons, VA.
The 200,000-square-foot tower designed by KGD Architecture will be at Westpark Drive and Galleria Drive. Groundbreaking is expected in the fourth quarter of 2014.
AMT's offices are now in the existing 7901 Westpark building, which will be demolished to make way for the new building. The association is expected to occupy about 30,000 square feet in the new building.
The building will include a 200-seat conference center, a rooftop terrace, fitness center and cafe space.
TriStar Begins Spec Warehouse Project Near St. Louis
By Trevor Peglowski
St. Louis-based TriStar Properties has begun development of one of the first speculative industrial buildings built in St. Louis since the recession, a 540,000-square-foot warehouse at Gateway Commerce Center near Edwardsville, IL.
Cassidy Turley Senior Vice President Ed Lampitt will lead the leasing effort for the building, which will be expandable to more than 1 million square feet and will be available for occupancy in the summer of 2014.
The property located in an enterprise zone is part of a 600-acre land parcel TriStar recently made available in Gateway Commerce Center. The first spec building was constructed in the center in 2005, Lampitt said.
"This is an important project for continued growth in the St. Louis market," he said.
Gateway Commerce Center, at Interstate 270 and Interstate 255, contains 10 million square feet of industrial development and includes corporate tenants such as Unilever, Proctor & Gamble, Ozburn-Hessey Logistics and Hershey.
Work Begins On One Greenway in Boston's Chinatown
Private-equity firm New Boston Fund, Inc. and Asian Community Development Corp. have closed on the financing and ground lease and started construction on One Greenway, a 362-unit development bordering Chinatown and the Rose Kennedy Greenway.
One Greenway will include two buildings that bookend a third of an acre of publically accessible open space. The 312-unit North Building includes 217 market rate rentals and 95 affordable rentals, while the South Building, to be built in a subsequent phase, will contain 50 affordable condominiums.
Construction for the North Building is slated to be complete in the summer of 2015. Suffolk Construction is the general contractor and ADD Inc. is the architect.
Hertz Breaks Ground on New Global HQ
The Hertz Corp. has broken ground on its future global headquarters at U.S. Route 41 and Williams Road in Estero, FL.
The project is expected to create estimated 400 headquarters jobs to be filled locally and 300 positions to be filled by Hertz employees relocating to Estero upon its completion in 2015. Construction of the new Hertz headquarters, first reported by CoStar in May, will be overseen by Turner Construction and design firm Gensler.
In May, Hertz announced that it would move its global headquarters to Florida in the wake of its November 2012 acquisition of the Dollar Thrifty Automotive Group. Hertz has established temporary headquarters operations in Naples, FL, while the Estero building is under construction.
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