Commercial construction builds on region's growth

NORTHEAST FLORIDA -- Residential construction may be struggling, but commercial construction is going strong in Northeast Florida, according to information provided for The Business Journal's annual List of Commercial Construction Projects.

Projects that would have made the list in the past were too small to make the 2007 list. Based on project cost, No. 25 on the 2007 list was an apartment community at $13.8 million. On the 2006 list, No. 25 was a Target Superstore at $8.4 million and on the 2005 list it was a building at the University of North Florida at $9.9 million.

The U.S. Navy accounted for the largest project in 2007 -- a new hangar and apron for P-3 and C-130 planes at Naval Air Station Jacksonville, with a cost of $126 million. Rick Crews, public affairs officer at NAS, said the 1.37 million-square-foot facility will be the largest hangar in the Navy when it is completed in early 2009. It is being built to house the three P-3 squadrons at NAS and three additional squadrons that will be transferred from Brunswick, Maine, in 2009.

The 2007 list is similar to the 2006 list when it comes to private sector versus government projects. Of the 25 largest projects, 16 on the 2007 list are in the private sector, and 18 on the 2006 list were in the private sector.

Five warehouse/distribution projects made the 2007 list. In comparison, the lists of the previous three years had a total of two of that type of project. Several of the 2007 projects can be attributed to the July 2005 announcement that Mitsui O.S.K. Lines Ltd. will make Dames Point its base of East Coast operations. The container terminal under construction for Mitsui ranked No. 9 on the list, with a cost of $31.5 million.

Tom Jones, regional development partner for Jackson-Shaw, said one-third of the 335,000-square-foot Creekside Distribution Center at Jacksonville International Tradeport, which ranked No. 15 on the list at a cost of $25 million, will be used by current tenants who are expanding. The decision to build the facility was based on expansion announcements by the Jacksonville Port Authority and the very real possibility that some tenants would be lost if more space was not available.

Peter Anderson, president of the Pattillo Cos., whose Northpoint 100 distribution center was No. 8 on the list at $38.7 million, said the real impact of the Mitsui deal has not been seen yet. He expects it to drive industrial construction in the future, but attributed the increase of warehouse/distribution projects on this year's list to the continuing growth of Jacksonville and its good location for those interested in distribution to Florida and all of the Southeast.

Steven Halverson, president of Haskell, which was No. 1 on the General Contractors List for 2007 and has several of the largest commercial projects, is "cautiously optimistic" about the commercial construction market in Florida and nationally. For the past two years, Haskell has experienced 41 percent growth, he said, but he expects growth of 5 percent in 2008, a rate he describes as "slow but still quite positive."

Barry Allred, president and CEO of Elkins Constructors Inc., which had a mix of government and private sector projects on the list, said the opportunities for commercial construction projects have been steady for the past 20 to 22 months, and he sees that continuing into 2008. However, he is concerned that if the financial markets don't settle down before the second quarter of 2008, the commercial market may see some of the problems the residential construction market is experiencing.

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source: bizjournals.com

More shops planned near Town Center

SOUTHSIDE-- Another Atlanta developer is planning a shopping center next to the St. Johns Town Center that is expected to cost $75 million.

Pinehill Development Co. will transform 52.5 acres fronting Town Center Parkway between the town center and Costco Wholesale Corp. into 350,000 square feet of retail space called The Markets at Town Center.

"We're real excited about it," said Pinehill partner Barrett Howell Jr. "We really want it be a quality project for the area."

Although Pinehill has invested in other properties in the Jacksonville area, this is the 25-year-old real estate investment company's first development project in Florida. Pinehill invests and develops retail, office and warehouse space, primarily in Georgia.

Duval County Clerk of the Courts records show the company bought the property for about $44 million Aug. 23 under the name Pinehill Markets Operating LLC from large-scale local landowners the Skinner family.

The first phase of the 1.2 million-square-foot St. Johns Town Center, a partnership between Ben Carter Properties Inc. and Simon Property Group Inc., opened in 2005. Ben Carter Properties Chairman Ben Carter, well-known in Atlanta for numerous mall projects, said the town center is his most successful in sales per square foot. Pinehill Investments and Ben Carter Properties have worked together on retail projects in the Atlanta area.

Howell would not disclose details about prospective tenants at The Markets at Town Center beyond saying the company is negotiating with retailers. The construction timeline will be determined once tenant leases are signed. Ben Carter Properties will be the leasing agent for The Markets at Town Center.

Carter doesn't see The Markets at Town Center as competition that could harm sales or the ability to attract new retailers at St. Johns Town Center. "It's complementary," he said.

He is already planning a third phase for St. Johns Town Center expected to start construction in 2008. It could include three department stores and an additional 150,000 square feet of specialty shops.

Pinehill partner Ron Bobo said the company has been waiting for the right opportunity to develop in Jacksonville and bought the property near J. Turner Butler Boulevard and Gate Parkway partly because of its proximity to Carter's project, which he considers one of the best examples of a lifestyle center in the Southeast.

The Howell and Carter families have a long history dating back to Barrett Howell Sr. and Frank Carter, Ben Carter's father, who were friends. Howell said he has been familiar with the Jacksonville area since childhood, when he and his family started vacationing in Ponte Vedra Beach. When here, the Howell family often ran into the Carters.

Phillips Partnership PC in Atlanta is designing The Markets at Town Center and Balfour Beatty Construction in Dallas will build the project, which is expected to be completed in 2009.

Geneva Henderson, executive vice president of the commercial brokerage firm Lat Purser & Associates Inc., said the property where The Markets at Town Center will be built is a great site because of its location and demographics.

"There's an awful lot of interest in the outparcels over there."

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Retail landlords offer blue-light specials to tenants

Not too long ago, retail broker Joel English was offering neighborhood retail center tenants about $15 to $20 per square foot as in improvement incentive. These days, that sum just won't cut it.

English and other brokers and landlords in the retail real estate field have had to up the ante, offering as much as $35 per square foot or more for tenant improvements. And in some cases, landlords are throwing in other deal-sweeteners such as longer build-out periods and even free rent in an effort to shore up the struggling sector.

"It's a citywide problem," says English, president of Houston-based CEC Brokerage. "Landlords are getting anxious because there's too much retail on the ground and it's getting tougher to compete with the grocery-anchored centers."

Indeed, the third quarter of this year represented the third straight year-to-year drop in occupancy levels in the neighborhood center sector, as overall occupancy fell to 84.57 percent. That's down from 85.09 percent in the third quarter of 2006 and 85.68 percent in the third quarter of 2005, according to Houston-based real estate services firm O'Connor & Associates.

The south sector of the city recorded the highest occupancy rate, 93 percent, while the lowest occupancy was found in the far north sector at 77 percent.

"It appears that occupancy is trending down, so it would make sense that landlords are offering discounts to lease the vacant space," says Kathryn Koepke, a researcher at O'Connor & Associates.

Even with the incentives, English says, some centers are taking as long as three to four years to fully lease.

English has represented six centers on Louetta over the past year and says he has had particular difficulty finding tenants for the centers in that area of Northwest Houston.

That's where the financial carrots come in.

English was given the green light to offer that $35-per-foot tenant improvement at a retail center he is currently leasing at 4000 Louetta. The center, which was built in 2006, is only 70 percent leased.

English has also been involved in leasing a center in the 9000 block of Louetta, which was built in January 2007, that is only 40 percent leased, as well as another center on the same block built in March of this year that hasn't leased to a single tenant.

"It's very unfortunate because there's just a glut of this type of space out there, and it's hard to attract any sort of interest," he says.

Meanwhile, Lyle Cowand, senior vice president with retail brokerage firm The Weitzman Group, says certain areas -- such as north of Barker Cypress, north of Fry Road and north of Eldridge -- are home to a large percentage of these struggling neighborhood centers, which typically are designed to be unanchored.

He says the roads in those areas are full of vacant neighborhood centers flying banners that read "Free Rent."

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source: bizjournals.com

Business park developers doubling up

With construction just under way at Sunridge Business Park, its two developers are already making plans for another 1.8 million square feet of industrial space.

The park's attributes continue to pull developers into southern Dallas County, historically an overlooked and economically disadvantaged area.

Now, developers say the 880-acre park has uncongested proximity to everything that a big-box distributor could want: a major railroad intermodal yard; four major interstate highways, including frontage on Interstate 45 just south of Interstate 20; the huge Dallas regional market; and available work force.

Dallas-based real estate investor Industrial Works Management LLC has started design of its second building for the park. I45 Tradeport 2 is a $30 million, 810,000-square-foot industrial building. A speculative project, it should be completed by the end of 2008, according to company principal Stephen Sanders.

Industrial Works has already started construction of I45 Tradeport 1, a $20 million, 520,000-square-foot speculative building on 30 acres, set for completion in January.

Indianapolis-based Duke Realty Corp. previously announced it is building an 822,000-square-foot distribution center for U.K.-based Unilever. Set for completion in October 2008, the $29 million project sits on 53 acres in the park, said Jeff Thornton, senior vice president of Duke's Dallas operations.

Meanwhile, Duke has purchased 46 acres in Sunridge, and isn't wasting any time getting a site plan in the works to build a 1 million-square-foot building, according to Jeff Turner, Duke executive vice president for the south region.

"Right now in Dallas there are four to five major submarkets, most of which have a lack of developable land," Turner said. "So the eyes of the development community have shifted south."

The project will either be a build-to-suit or speculative construction, Turner said, depending on how the southern Dallas County market absorbs the industrial space now going up.

"When a new location gets hot and a couple of deals show up, we (developers) all want to jump in and see what the water's like," he said. Turner predicts the area is on its way to becoming a highly competitive submarket in Dallas-Fort Worth.

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source: bizjournals.com

Large ad agency cites area's vibrancy in decision to return

More than 25 years after leaving downtown Dallas for Las Colinas, TM Advertising is heading back -- another sign the city's once lackluster urban core is starting to shine once again.

The ad firm looked in Las Colinas, the Galleria area, Plano's Legacy corridor and at other downtown Dallas locations before deciding to take four floors in Comerica Bank Tower at 1717 Main St. in Dallas, said Tom Hansen, president of TM, formerly known as Temerlin McClain. The search took more than two years. About 340 employees will make the move on Jan. 2.

The cranes and construction in the downtown and adjoining Uptown markets are exhilarating, Hansen said. But in the end, the growing energy of people working and living downtown were what really lured the company back, he said.

"There are more people concentrated in a smaller space, so you're always kind of bumping into folks," Hansen said. "It's that friction of rubbing up against each other and running into people that creates that energy."

He predicted the location will fuel the ad firm employees' creativity.

"We have a very young, high-energy company," he said. "Our business is being in touch with what's going on culturally in the world. With what's happening downtown, we felt it was really important for us to be right in the middle of it."

TM's move shows growing momentum for downtown, said John Crawford, president and CEO of Downtown Dallas, a business and economic development group.

"We're very glad to have a national advertising firm moving into downtown Dallas," he said. "It indicates the renewed importance of a downtown address."

Crawford said more firms such as TM are choosing downtown to provide an environment that helps recruiting and retention of younger workers who want to live, dine and be entertained close to their workplace.

He expects the "live-work-play" philosophy to continue to drive downtown and reduce historically high office vacancy rates.

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source: bizjournals.com