The vacancy rate for office space in Prince George's County has dipped to 12.2 percent, compared with 13.1 percent in the third quarter of 2003, according to CoStar Group, a real estate information services provider.
A slowdown in federal government contracting kept the county's office market from showing greater improvement, said Niel Beggy, a vice president at CB Richard Ellis, a commercial real estate brokerage.
Government contractors are among the largest tenants in Prince George's, and federal government spending often moves the local office market, he said.
"A lot of government contracts have been delayed [this quarter]," Beggy said. "When the government slows down, the ability of the contractors to sign leases is stymied."
Prince George's office construction and rental rates also reflect a slow but steady improvement. Nearly 389,000 square feet of office space is under construction, up about 47,000 square feet from last year. The average rent rose to $19.40 per square foot, from $18.73.
Beggy and others said they expect those numbers to increase next year.
Jeff Ludwig, a vice president at NAI Michael Cos., said his company is so bullish on the local office market that it is planning to build 8 million square feet of space in a couple of years. The office space would be part of a large mixed-use development in Upper Marlboro called Rosewood. The company is partnering with Kwame Jackson, who was the runner-up last year on Donald Trump's "The Apprentice," on the project.
About 5 million square feet of the office space would be marketed to homeland security contractors and built to new government specifications intended to guard against terrorist attacks, Ludwig said. The space must be set back 100 feet from roadways and other buildings, built of a hardened material to withstand an attack and have windows made of blast-resistant glass.
"At least one defense contractor has already said it wants to locate there," Ludwig said. "We're just moving ahead with our project . . . spending buckets of money."
Focusing on the homeland security sector could create a niche in Prince George's similar to Northern Virginia's hub of high-technology companies and the cluster of biotechnology companies in Montgomery, he said. That will attract more jobs to Prince George's.
"One particular agency did a study of where employees were coming from, and many were coming from or through Prince George's," Ludwig said. "The facilities managers and directors of various agencies also look at the convenience to the capital and also the fact that [Rosewood] is adjacent to Andrews Air Force base, which has airlift capabilities."
Ground is slated to be broken on Rosewood in 2006, but Ludwig said he expects the county's office market to begin expanding as soon as next year. "I know of three or four projects that are going to architects now," he said.
Meanwhile, in the third quarter Hazmed, an engineering consulting firm, closed a deal to acquire the 16,000-square-foot Coldwell Banker Building in Lanham. Jacqueline W. Sales, the company's president, said she bought the building because it is a landmark and she thought it was important to show other small and minority businesses that they can own their own space.
Sales is looking for another small business to fill the building.
"Real estate has always been a good investment if you hold on to it long enough," she said. "It is the right time to invest in Prince George's."