SOUTHEAST SNAPSHOT, AUGUST 2006

Huntsville Office Market

The office market in Huntsville has been dynamic with more office projects under construction than the area has seen in at least a decade. The strong development environment should remain robust for the next 2 to 3 years as several of the projects are being built to compliment the planned growth due the recent BRAC Realignment announcements.    

The Cummings Research Park area currently has more than 1 million square feet of planned or construction underway. The total office market in Cummings Research Park was around 9.2 million square feet, so this represents an 11 percent growth in a 2-year period. Raytheon began construction on a 140,000-square-foot facility in Cummings Research Park. Raytheon plans to occupy the building early next year.

A number of office projects are underway in Huntsville. A planned enhanced use lease project will be developed on 422 acres of land in Redstone Arsenal. This development will be a multi-use project to include the following uses: single or multi-tenant office, research and development, conference center and academic development.

Also, Lockheed Martin is scheduled to break ground in the fall on a planned 160,000-square-foot facility in Research Park. Westar completed its 84,000-square-foot facility and announced that it will begin construction on an additional 126,000-square-foot facility to house its growing workforce. Samples Properties will be the developing this project. Sparta broke ground on its 97,000-square-foot facility in Thornton Research Park. The building will be situated on 15 acres and will feature an expansion option for an additional 35,000 square feet. SAIC announced work on a new four-story, 100,000-square-foot facility that will be located next to its current address on Odyssey Drive. The building is being built to consolidate its workforce and plans call for a third building. Dynetics completed its 160,000-square-foot corporate headquarters in Cummings Research Park. The Hudson-Alpha Institute broke ground on its 120-acre campus. The four-story, 260,000-square-foot campus will house up to 900 employees that will be working on biotech research and development projects. Northrop Grumman has begun construction on the first 110,000-square-foot facility of its planned five-building campus in CRP. Colonial Properties is the developer on the project. Finally, O&S Holdings has started construction on the multi-use Bridge Street development. The development will have a retail, hotel, office and condo component.

SAIC, Raytheon, Lockheed, Boeing and Northrop Grumman have all absorbed a vast amount of office space in the market during the past 3 to 5 years. Many of the new developments have consolidated the workforces of these and other similar firms. Most of the new development is being built in the Research Park. Other projects, like the Bridge Street development and the EUL, were being built to compliment the growth in the Huntsville job market as the BRAC realignment brings more jobs to the area.

Currently, there are no new developers in the Huntsville office market at this time. However, several national and regional currently not in the market have made proposals on many of the existing and new projects.

Recent office leases in Huntsville include Northrop Grumman’s 110,000-square-foot lease on its build-to-suit; Lockheed’s lease on its 160,000-square-foot build-to-suit; Digital Fusion’s recently signed 25,000-square-foot lease at the Colonial Center; and First American Bank’s upcoming lease as the anchor tenant at Triad Properties’ Summit at Big Spring Park office development in downtown Huntsville.

 The rental range is $17.50 to $19.50 per square foot for Class A office space. This is the first time that rates have been more than $19 per square foot. The office vacancy rate is now at around 6.6 percent. The vacancy rate at the year-end 2005 was at 7 percent. This rate will continue to drop until some of the new construction helps ease some of the pressure on the market. 

The Cummings Research Park corridor will remain hot during the next 3 to 5 years. The market rate for Class A space has been flat but Huntsville is now seeing rates above the $19 range, which have not been typical.

— Bart Smith, CCIM, is managing broker for Graham & Company in Huntsville, Alabama.

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