It may be several months before evidence of any significant new trend in commercial construction becomes apparent, but a recent report by the Metropolitan Washington Council of Governments makes a point that isn't likely to be lost on the development community.
COG cited a shift in the growth of commercial construction in the second quarter of 1987, noting that building activity had surged in Prince George's County while declining in other areas in the region. Commercial construction activity remained strong in the second quarter, nonetheless, according to COG.
The implications of those shifts are fairly obvious from the report, however, and it's not so much that Prince George's County is in the midst of a sudden boom as it is that other areas appear to have been overbuilt. Construction not only slowed in the second quarter, but plans to build 30 projects that would have produced more than 3.4 million square feet of commercial space were either dropped or deferred, according to COG. The greatest impact of decisions to drop or defer projects was felt in Northern Virginia, where 18 projects were abandoned.
That suggests one of three things or a combination of the three is occurring. Either some submarkets in the area have been overbuilt, as some observers had warned; worsening traffic congestion is dampening enthusiasm for certain areas, or developer interest in the total area is greater.
Perhaps the shifts cited by COG are the next steps in what has been described as the "market snake dance."
Developers often "move in seeming lockstep from overbuilt areas to underbuilt ones, only to saturate the market, in turn instigating the search for new ones," wrote George Sternlieb and James W. Hughes of Rutgers University, in an article on suburban growth published last year by the National Council for Urban Economic Development.
"Once a major player makes a commitment to a market, the location secures certification -- it becomes a legitimate target for the national development community," Sternlieb and Hughes continued. "At the extreme, a market snake dance ensues, with trailing players, desperate to achieve market presence, chasing after the initiators."
That certainly has been the case wherever developers have built major office markets in the Washington area, from the K street corridor, to the West End and now to the East End in the District, and from the I-270 corridor in Montgomery County to Tysons Corner in Fairfax County.
To be sure, COG's reference to a "surge" in commercial construction activity in Prince George's County isn't the same as saying that developers are now chasing after the initiators of the building boom that's occurring there. Although largely ignored by many of the area's prominent developers until now, Prince George's emergence as a competitive market began at least five or six years ago. Indeed, there has been a gradual but steady increase in the amount of commercial development in the county since 1980, a COG official noted. The increase in the second quarter of 1987 was more than a million square feet, however -- nearly double the total for new starts a year ago, according to COG.
Still, Fairfax County continued to lead area jurisdictions in the number of commercial projects being developed and the amount of space, the COG report shows. Prince George's and Arlington counties ranked second and third, respectively.
In the meantime, Smithy Braedon officials recently reported that the absorption of prime new office space in suburban Maryland is up 25 percent over last year's rate, compared with a 10 percent drop in Northern Virginia. The vacancy rate for the entire area, meanwhile, is nearly 14 percent, compared with more than 17 percent in Fairfax and about 15 percent in Prince George's.
Statistics aside, there are significant signs that the phenomenon described by Sternlieb and Hughes may be at work in Prince George's County. A Prince George's County official recently confirmed privately that at least two prominent Washington-area developers met with county officials to explore development opportunities.
It's a well-known fact by now that Prince George's County is the last close-in Washington suburb with an abundance of relatively cheap developable land. But, as a COG official noted, it's the absence of major traffic problems in the county and concrete plans to improve an already excellent highway system that's attracting investors.
While projects are being deferred or abandoned elsewhere in the area, construction is scheduled to begin soon on several major commercial developments in Prince George's County. While the ambitious PortAmerica project is stalled in a political tug-of-war, construction is proceeding on mega developments such as the 2,000-acre Konterra development and the 300-acre planned residential and commercial Laurel Lakes project. In addition, construction is expected to begin soon on the Presidential Corporate Center on a 300-acre site on Pennsylvania Avenue, just outside the Beltway, and at Constellation Centre, a $75 million office and hotel complex on a 25-acre site overlooking the Beltway, just north of PortAmerica.
The combination of a surge in Prince George's County and the slowdown elsewhere in the area may not be a trend yet, but the pattern denotes a significant change in the market