High-profile developments throughout Maryland aiming to provide in-demand space across a variety of sectors expect substantial progress in 2019.
Projects ranging from “Chapter 1” of Weller Development Co.’s $5.5 billion Port Covington overhaul in Baltimore to the Chestertown Business Campus project in Kent County seek to capitalize on market appetite for industrial buildings, multifamily residential and cybersecurity supporting infrastructure.
“My two favorite asset types of all, globally, are urban retail and (workforce, Class B and Class C) suburban multifamily,” CBRE’s Spencer Levy said during NAIOP Maryland’s “Capital Stacks” event in November.
Levy, chairman of Americas research and senior economic advisor for CBRE, is optimistic about those assets’ potential for the “investible future,” which is less than five years out. His reasoning is simple: Demand for those properties outstrips supply.
Columbia development moves forward
The Howard Hughes Corp.’s planned redevelopment of downtown Columbia, particularly the in-progress Merriweather District, is well-positioned to capitalize on growing demand for suburban live, work and play building.
At full build-out the developer plans to complete 2,300 residential units, 250 hotel rooms, and 314,000 square feet of street-level retail in the Merriweather District portion of its downtown Columbia redevelopment. Overall in downtown Columbia the developer expects to deliver 14 million square feet of mixed-use building with 4.3 million square feet of office space, 1.25 million square feet of retail and 640 hotel rooms.
Howard Hughes Corp. already established a toehold in Maryland’s burgeoning cybersecurity sector in the Merriweather District. Software maker Tenable Inc. plans to move its headquarters to 6100 Merriweather Drive, the latest office building in that community. The firm leased 150,000 square feet of space over five floors in the 12-story, 350,000-square-foot building. Tenable expects to occupy the space in the third quarter of 2019.
Towson a hot spot for activity
Towson has also attracted substantial development investment from builders who see opportunity in suburban live, work and play projects.
Greenberg Gibbons took control as lead developer of the $350 million Towson Row and restarted construction after the discovery of a rock surface on the site forced Caves Valley Partners to halt work and reconsider the project.
Construction restarted on the 1.2 million square foot project in 2018 after Greenberg Gibbons secured $40 million in public financing for Towson Row. The builder anticipates Towson Row, which is expected to consist of office, retail, residential and hotel space, to deliver in 2020.
To the north, along York Road, Retail Properties of America Inc. expects to deliver the $125 million Circle East project in early 2019. The company is redeveloping the site of the former Hutzler Bros. department store while adding parking, retail and a 371-unit apartment building across the street.
“The appeal of a live-work-play environment continues to trigger construction in Columbia, White Marsh and Towson. Projects in these three submarkets account for more than 20 percent of the Baltimore market’s current development pipeline, with additional projects expected to break ground in the next 12-24 months,” according to a CBRE report on the Baltimore metro area office market released in the second quarter of 2018.
Arguably the most watched project in the state, now that Amazon won’t be moving its “HQ2” to Maryland, is the overhaul of Port Covington. After years of earning community support, lining up private investment and public financing the project is expected to start making substantial tangible progress.
The so-called first chapter of building at the project is expected to start construction in 2019, with the goal of delivering in late 2020 or early 2021. “Chapter 1” of construction, including the already completed Rye Street Tavern and Sagamore Spirit Distillery, will feature 3 million square feet of space. That building will include 1.26 million square feet of offices, 1.33 million square feet of residential and 269,000 square feet of retail.
Weller Development Co. in October announced cybersecurity startup studio DataTribe, the world’s largest cybersecurity venture capital firm AllegisCyber, and investment bank and Columbia-based corporate advisory firm Evergreen Advisors as the first tenants in “Chapter One.” They intend to create the world’s largest cybersecurity hub at what’s being called “Cyber Town USA.”
The goal of becoming the leading cybersecurity center is bolstered by AllegisCyber bringing a $400 million cybersecurity investment fund to back rapidly growing startups. DataTribe, which builds five companies a year and is expected to help prove a network firm for AllegisCyber investments, provides $2 million in seed funding, and puts up to $6.5 million annually in a firm’s Series A funding round, to firms emerging from its incubator.
When the overall Port Covington project is complete, which is expected to take roughly two decades, Weller Development Co. expects 14 million square feet of vertical construction to have been completed. Baltimore-based sports apparel brand Under Armour also plans to independently build a 3.9-million-square-foot global headquarters on the South Baltimore peninsula.
Warehouse space in demand
Warehouse and distribution space proved to be the most in-demand asset type in Maryland during 2018. That’s been the trend for the last several years as e-commerce companies snatch up space to get products to customers in the populous Washington and Baltimore metro areas quicker.
Developer Chesapeake Real Estate Group, which built the largest speculative industrial project in Anne Arundel County and subsequently leased it to Best Buy, continues to fill the pipeline with new building.
The firm plans to deliver a 340,000-square-foot building in 2019 at its Brandon Woods III development, started construction on a two-building 350,000-square-foot industrial project in Edgewood in October. In a joint venture with Atapco Properties, Chesapeake purchased a 52-acre parcel of land in White Marsh, where it wants to build a business park with industrial on property once slated to become a shopping center.
Tradepoint Atlantic continues to build the largest multimodal development in the nation at Sparrows Point in Baltimore County. Over the next two decades the firm wants to deliver 15 million square feet of vertical construction, on roughly 3,250 acres of the former steelmaking site, with a price tag of about $2 billion.
Tradepoint Atlantic initially applied for $150 million in tax increment financing from Baltimore County this fall. The developer sought the financing to complete public infrastructure work supporting the redevelopment of Sparrows Point. Following negotiations with the developer the county instead offered a $78 million financing alternative.
Former Baltimore County Executive Don Mohler unveiled a proposal in November requiring Tradepoint Atlantic to pay for infrastructure work up front. The county, under the new deal, pledges to reimburse the developer for up to $44 million in sewer work and $34 million for road improvements. The substitute proposal emerged as a result of Mohler’s concerns about tax increment financing requiring the county to sacrifice tax revenues for 30 years.
Current Baltimore County Executive John A. Olszewski Jr., who took office in December, indicated he’s willing to consider the new financing proposal. The deal must be OK’d by the Baltimore County Council and subsequently by the executive.
Olszewski, a Democrat, won the general election in November by a comfortable margin over Maryland Insurance Commissioner Al Redmer, a Republican, in a county Gov. Larry Hogan, also a Republican, won handily.
Olszewski narrowly secured his party’s nomination in a three-way race including former Baltimore County Councilwoman Vicki Almond, and chief rival state Sen. Jim Brochin. Brochin refused contributions from developers while campaigning against the influence of real estate investors in county government. Olszewski, who campaigned as the most liberal candidate of the three, won his party’s nomination over Brochin by nine votes.
Olszewski was born, raised and lives in the Dundalk community adjacent to Tradepoint Atlantic. He previously represented the neighborhoods surrounding Sparrows Point in the House of Delegates. His father, John A. Olszewski Sr., represented the area as a Baltimore County Council member for four terms before leaving office in 2014.
Various steel mill operators at Sparrows Point served as major employers in East Baltimore and eastern Baltimore County for more than a century. During the last 40 years, however, steel manufacturing in the U.S. declined. The fortunes of a succession of firms running the steelmaking plant at Sparrows Point followed suit.
Steel manufacturing on the site dwindled to a fraction of its previous output and employed fewer and fewer people. Eventually steelmaking halted completely in 2012. As a result neighborhoods, such as Dundalk, struggle with unemployment. The site served as an environmentally contaminated monument to the region’s loss of industry until a joint venture, which eventually settled on the name Tradepoint Atlantic, purchased the property in 2015.