At the tail end of an article by Larry Carson in yesterday’s Howard section of The Sun, I learned that County Council added a little caveat to the approval of the purchase of a full floor at the proposed Meridian Square office building in Oakland Mills Village Center in Columbia. The County Council is now requiring that Metroventures, the developer, must “sell or lease at least forty five percent of the 60,000 square foot building before the county makes a purchase.”
That is a very high hurdle for Metroventures. In today’s financing climate most lenders are looking for a significant preleasing or presales commitment on a speculative office project before they’ll release the funds for construction. This means that Metroventures will need to get someone, besides the county, to commit to the project before it comes out of the ground. The difficulty for Metroventures lies in the fact that there is plenty of existing or already under construction office projects that a prospective tenant or purchaser can consider without waiting for Meridian Square to get started. Columbia never has been a very strong preleasing/presales office market…it is more like “build it and they will come.”
I actually think this was a prudent move on the council’s part. As I wrote in a previous post, the Merdian Square office building is really too big for this location. Judging from prior history of office leasing and sales in the Oakland Mills Village Center area coupled with the ready availability of similar office space in other nearby locations in Columbia it will likely take more than two years (following shell building completion) to reach profitability. I have serious concerns as to whether the developer can wait out the length of time it will take to get there. A typical office building development pro forma in this market usually anticipates lease up to profitability in eighteen months.
And that’s in a good market. Right now, the office market in Columbia is somewhat sluggish which is causing existing landlords and developers to get very aggressive in making deals with the few office tenants that are actually in the market. That does not bode well for new development in marginal locations.
I’d give this project less than a 50% chance of starting in the next year…if at all.