A Philadelphia real estate company intends to buy the former Luskin's Inc. headquarters and warehouse in Columbia and convert it to premier office space, a move that could flood the ever-competitive Howard County market.
O'Neill Properties Inc.'s plan to invest roughly $35 million to buy and renovate the building into so-called Class A space comes as numerous developers are preparing to build new offices there.
In all, about 2 million square feet of new office space is being planned in Columbia, which currently has 5.5 million square feet of office space. The Luskin's space alone will add 325,000 square feet.
"There's going to be nothing like this," said Thomas Coyne, a principal at Fidelity Commercial, a Philadelphia-based real estate firm that is representing O'Neill in the purchase.
The Luskin's project in the Columbia Gateway office park, a 600-acre project off Route 175, would represent the latest redevelopment endeavor for O'Neill, which is slated to acquire the building from the retailer by the end of July.
"It's in a study period," said Cary Luskin. "We used to have the Luskin's offices and warehouses there, and now we no longer have the need for the warehouse space. It's a lot of space that is no longer being used."
In the past two years, O'Neill has acquired and redeveloped more than 5 million square feet of commercial space, much of which has been sold to building-hungry real estate investment trusts such as Brandywine Realty Trust, Liberty Property Trust and Meditrust Corp.
"O'Neill's whole goal is to buy, redevelop, lease and sell," Coyne said. "They are not long-term holders of buildings."
But in turning the Luskin's building from distribution to office space, O'Neill may face an uphill and fiercely competitive battle. In addition to O'Neill, developers Trammell Crow Co., Rouse Co., Merritt and Constellation Real Estate Group Inc. have either begun construction or are in the final stages of designing new buildings.
"In a market that typically absorbs 300,000 square feet of office space a year, adding 300,000 square feet is a lot," said a Columbia office broker, who asked not to be identified. "So on the surface, it would appear that the market can't support it. The challenge for them is going to be that they will need large users. In a building that size, the leasing period could be extensive."
"The key to their success has been their ability to acquire properties and get them ready for tenants within six months," said Coyne, who worked locally with Corridor Commercial Real Estate on the Luskin's building. "Developers of new buildings obviously need much more time than that."
Pub Date: 5/14/98