St. John Properties builds ahead of demand in Frederick
The Daily Record | Adam Bednar
St. John Properties, aiming to capitalize on growing demand for Fredrick County industrial assets, recently started construction on the first buildings at the Arcadia Business Park.
The first stage of vertical construction includes two flex/research and development buildings totaling 82,200 square feet of space. Work also began on a 112,000-square-foot bulk warehouse. While there’s interest from potential tenants, the developer has not yet secured leases. The buildings are slated for delivery this coming summer.
“Classic St. John Properties: We assess the market and build on spec. Our general model is to build out in front of demand,” Matt Holbrook, regional partner for St. John Properties, said.
Once complete, the pair of flex properties will provide 16-foot to 18-foot clear ceiling heights, dock and drive-in loading, and suite sizes starting at 2,520 square feet.
The warehouse building will include 32-foot minimum clear heights, 50-foot by 52-foot column spacing, and dock and drive-in loading with a 130-foot deep single-loaded truck court.
Efforts to build Arcadia Business Park stretch back more than a decade. But St. John Properties halted the project following the 2008 financial collapse.
During the ensuing decade the developer reconsidered the proposal’s program. Officials hope the park’s focus on warehouse and flex space benefits from increased demand from biotechnology and e-commerce firms.
“It’s just a really well-positioned property. It took a lot of time and patience to get to this place, but we’re long-term owners. We’re not just looking for the next lease,“ he said.
Industrial properties remain in high demand throughout Maryland’s two major metro areas. But Frederick County straggles in building those assets compared to its neighbors in the Washington metro area.
Fredrick County’s inventory of industrial space, warehouse and flex totaled more than 11.3 million square feet at the start of 2018, according to an analysis by CBRE. Prince George’s County provided 49.3 million square feet of catalog, and Montgomery County supplied roughly 20.8 million square feet of industrial stock.
E-commerce, as it has in the Baltimore region, continues to drive demand for industrial assets in the Maryland of the District.
As a result, warehouse/distribution properties in Maryland’s portion of the Washington metro area attracted most of the new leasing during the previous quarter.
The asset type attracted 254,763 square feet in new deals by the end of September, which, according to Cushman & Wakefield, represents an increase of 395 percent year over year.
New leasing activity in suburban Maryland’s flex/office services sector, according to the same report, decreased 48 percent in the third quarter year over year, totaling 101,027 square feet of rented space.
Demand for flex/office services space in Frederick County, Holbrook said, remains in good shape, buoyed by growth of the biotechnology industry along the Interstate 270 bio corridor.
“I think there’s healthy demand for (flex space) but it’s a very localized play,” he said, noting performance for the asset type varies broadly based on location. “(Arcadia Business Park) is right off (Route) 85, and right off (Interstate) 270. So we’re confident that it will hit the mark. … (We’re) already seeing the biotech demand move up the corridor because space is scarce in Montgomery County.”
Research on the local market supports Holbrook’s bullish viewpoint. Cushman & Wakefield’s most recent projections expect the industrial market in suburban Maryland to continuing breaking in favor of developers and landlords.
“The Suburban Maryland industrial market is well-positioned to benefit from rising rental rates, low supply and the boom in eCommerce. As rental rates move increasingly closer to those in central business districts, tenants seeking large blocks of space at affordable prices could be pushed farther out,” according to Cushman & Wakefield’s outlook.