NEW LIFE FOR SPEC OFFICE MARKET

NEW LIFE FOR SPEC OFFICE MARKET

BY ELEANOR WALKER
CNA Architecture

Optimism fueled by economic growth, pent-up demand and the growing availability of capital in the Puget Sound region has created a resurgence in speculative development and an increase in build-to-suit opportunities.

The region's prospects for growth are attracting a crowded field of institutional and private investment groups, real estate investment trusts and developers, all competing for a dwindling number of available properties.

"Competition for developable land is fierce, and decision-making timeframes have been drastically shortened," says Mark Woerman, principal of CNA Architecture Group in Kirkland. "Speculators need a whole host of increasingly complex regulatory and approval issues dissected -- off-site mitigations, neighborhood issues, etc. -- and they need that information now."

Woerman cites activity in the Kent Valley industrial area as a case in point. Over the past five years, generally perceived as a "developmentally challenged" period, the Kent Valley has been a hotbed of development.

"Five years ago, there were three or four really solid development groups who could perform in that marketplace," Woerman says. "Today there are no less than 13 qualified groups, all vying for the same deals. One of our most successful clients is actively looking to diversify into additional Puget Sound markets as the competitive field broadens."

The Eastside office market is nearly as frenzied. Due to the area's land crunch, suburban developers have begun to join their urban counterparts in the redeveloping marginal sites.

"SpaceLabs Medical is a perfect example," Woerman says. "When it came time to expand, they purchased a portion of an existing office park adjacent to their campus. They tore down three buildings less than 15 years old to make way for their expanded general purpose facility. That kind of redevelopment is in its infancy on the Eastside, but given the market's upward pressure and the lack of available property, it's clearly a coming thing. We're positioning ourselves to deliver very quickly and thoroughly the kinds of assessments clients need to determine the risks associated with the development of these kinds of parcels."

While all this growth and activity is good news for developers, design firms and contractors, it presents some significant challenges.

Woerman foresees the possibility that greater pressure on resources such as land, materials, and labor may impact what has historically been a predictable marketplace. This scarcity could increase costs that had previously only risen at the rate of inflation and significantly extend design, permitting and construction timeframes.

CNA has made a conscious effort to structure itself and its process to help clients identify the single best delivery avenue to meet their time, performance, budget and quality requirements under these complex conditions. A team effort is the only way to get there.

"Time was, when an opportunity presented itself, a developer or owner could assemble a team without any thought to alignments. Architects routinely positioned themselves on as many teams as possible in pursuit of a project," Woerman says. "No more. What we're seeing now is a much stronger commitment to established teams -- this architect is with this developer for this project, and that's it. Now, the entire team is part of the race for the deal.

"Every day, we leverage our contacts in our daily working relationships with contractors, subcontractors, other consultants, and real estate people to keep ahead of what's going on out there," Woerman said.

CNA mobilizes teams of architects, contractors, real estate brokers, environmental and other experts to cut through the issues and help clients make good decisions about how and where to spend their money, how to assess and minimize their risk.

"We've always done business this way," Woerman says. In fact, the promise of doing so was the driving force behind his move (with Arlan Collins and Keith Null) from NBBJ to CNA nine years ago. "But now the opportunities are fewer and the competition fiercer. The current situation means change of all kinds. To respond to it, we're aligning ourselves with clients and team members who share our commitment to our 'best buy' philosophy."

These opportunity-specific teams dissect the who, what, when, where and how of deals to identify the single best response. "There's no room for preconceptions. In today's market, they just get in the way," he said.

For example, on the Image Entertainment project in Las Vegas, Woerman said: "Our team, which included planners, industrial engineers and real estate people, helped the owners acquire a large piece of property. After we guided them through the entitlements process for the entire parcel, they segregated the land they needed for their new facility, then sold the remaining, newly entitled piece of property. In effect, the proceeds of that sale paid for their site and significantly reduced their total project cost.

"None of that would have happened without the collective effort of the team. You have to be able to think outside the traditional box of architectural services. That's what clients want."

Eleanor Walker is director of marketing for CNA Architecture in Kirkland.

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