D.C. Report

Commercial Success

Despite a softening market, commercial and government clients keep contractors busy.

After years of a heated market, there’s a bit of a chill in the air these days around the District of Columbia as firms look to land new business.

Still, between the steady stream of federal work and continued push for commercial projects, contractors are keeping busy.

Patrick Caulfield, president of Coakley & Williams Construction of Gaithersburg, Md., says the District isn’t immune from the nationwide woes in the residential market with condo work getting scarce in the area. Despite slowdowns reported by the travel industry, the firm still sees demand for hotel renovations. And while the suburban office market is softening, commercial work near the heart of D.C. is moving ahead.

“The climate is still good and we expect it to remain strong, but not as robust as it has been,” Caulfield adds.

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Steve Smithgall, executive vice president of Balfour Beatty Construction of Fairfax, Va., agrees about the strength of the office market, particularly in the Central Business District and Southeast D.C. near the new Nationals Park. In the popular areas, vacancy rates are low and demand for space is high, he says.

Keeping it Private

Balfour Beatty is working on Station Place Building 3, a $98.4-million, 741,000-sq-ft office building adjacent to Union Station for Louis Dreyfus Property Group of Washington. The team aims for LEED silver certification and expects to finish the project in April. The company also is building a $51-million, 650,000-sq-ft office building at 700 Sixth St., near Penn Quarter, for Akridge of Washington, scheduled for completion in February. It also is tracking for LEED silver certification.

Lou Williams, senior regional vice president of the Mid-Atlantic region for Structure Tone in Arlington, Va., says the commercial office sector in D.C. remains healthy. Structure Tone has the contract to fit out 90,000 sq ft in the 700 Sixth St. project for the law firm of Cadwalader, Wickersham & Taft.

Grunley Construction Co. of Rockville, Md., is close to completing a modernization of the facade at 1401 New York Ave. for Wereldhave Management USA of Purchase, N.Y. The $9.1 million recladding of the brick and reglazing on the 12-story building include new stone panels and ornamental fins.

Clark Construction Group of Bethesda, Md., is building Lafayette Tower, a $182-million, 11-story, 328,000-sq-ft office building near the White House for Louis Dreyfus. The project team will seek LEED gold certification. Clark also is constructing the $130-million, 10-story 505 Ninth St., NW, project for Boston Properties of Washington and the $130-million, 12-story 901 K St., NW, for Carr Realty Partners of Washington.

The United States Institute of Peace, an independent, peace-building institution established by the U.S. Congress, secured a new headquarters site at the northwest corner of the National Mall, and Clark broke ground on the $100-million, 150,000-sq-ft, five-story building in June.

HITT Contracting of Fairfax, Va., will build out the lower lobby and 12 floors at 1999 K Street, NW for the law firm Mayer Brown. Construction start is scheduled for February. Vornado Realty Trust of New York and Charles E. Smith Residential, part of Archstone-Smith of Englewood, Colo., developed the $80-million, 243,000-sq-ft property, demolishing the existing Mercury building and constructing the planned LEED-silver structure.

Big Government

While several private commercial projects move forward, government clients continue to eye big jobs. The General Service Administration is keeping the sector healthy with megaprojects such as the $500-million, eight-phase renovation of the Herbert C. Hoover Department of Commerce building.

Gilbane Building Co. of Laurel, Md., and Grunley Construction Co. of Rockville, Md., partnered on the first phase of the 13-year Hoover project in 2007 and should wrap up that portion of the work in April. This phase includes cleaning and repointing the exterior facade; replacing cooling towers; adding a primary electric system; and making other safety and disability access upgrades to the 1.9-million-sq-ft, seven-story, 1932-era building.

For contractors focused on government and institutional clients, the D.C. market is booming, says Martin Sharpless, vice president of Gilbane. The company is seeing opportunities in federal, health care, higher education and some K-12 work. Sharpless credits a strong track record with executive branch agencies with helping it secure new business in that sector. Gilbane and Grunley are teaming up again to pursue a planned $120 million federal office building project.

“We believe there will be a pent-up domestic federal demand that will start to be felt in the economy over the next year or two as we, hopefully, wrap up a couple of wars,” Sharpless says. “Even with the economy going where it is going, I believe the feds will spend the money anyhow.”

Clark broke ground in April on the 1.6-million-sq-ft, first phase of Constitution Square in the NoMa District – short for North of Massachusetts Avenue – for developer StonebridgeCarras of Bethesda, Md. The GSA will lease 589,000 sq ft to the Department of Justice. The project also includes speculative office space, retail, a 440-unit apartment building and a Hilton Garden Inn.

The District of Columbia plans to award a construction contract early next year for a $218-million, 240,000-sq-ft Consolidated Forensics Laboratory to provide space for a public health laboratory, the medical examiner’s office and the crime lab. Jacobs Engineering of Pasadena, Calif., received an indefinite-delivery, indefinite-quantity contract to support project development and construction management of the HOK-designed building.

Given the climate, Structure Tone sees big opportunities in government and military work and is looking to make it a bigger piece of its portfolio, Williams says. Structure Tone recently completed a two-level build-out of offices for the Voice of America, a federally funded broadcast service.

Also in the District

While government and commercial projects make up a large portion of work in the District, other sectors continue to show signs of strength. Gilbane’s Sharpless says that outside of federal work, health care has some of the biggest upsides.

Gilbane is currently working on a $100 million, multiphase rebuilding project at Children’s National Medical Center. It is also bidding on a $300 million expansion at Washington Hospital Center and a $100 million project at Washington Adventist Hospital.

Despite problems in the condo market, some residential builders are finding work. A joint venture of Hamel Builders of Elkridge, Md., and Gilford Corp. of Beltsville, Md., has begun construction on Solea, a $23.4-million, 78,000-sq-ft condominium project, with live-work units, for The Jair Lynch Cos. of Washington. The project is at 14th Street and Florida Avenue, N.W.

JPI of McLean, Va., continues work on its $470 million, four-building Capitol Yards rental project in the Capitol Riverfront District. Two buildings have opened, one is under way and another will break ground in September. When finished in 2010, developers plan for Capital Yards to include 1,350 apartments, offices, shops and hotel rooms.

Clark Realty Capital of Arlington, Va., hopes to develop Poplar Point, a $2.5-billion, 6.3 million-sq-ft project along the east side of the Anacostia River that would include residential, commercial and a new stadium for the D.C. United soccer team. The project is scheduled for a 2011 start.

Hospitality jobs are also keeping some contractors busy. Balfour Beatty’s Smithgall says his firm is providing preconstruction services to two, unannounced hospitality projects. Structure Tone recently completed a 25,000-sq-ft project at the J.W. Marriott.

Heading into 2009, Structure Tone’s Williams says that despite a bit of a slowdown in the summer, the company’s bid list is still strong.

“I’ve been in D.C. for 15 years, and it’s a relatively stable market with a diverse group of sectors,” he says. “I’m optimistic we will stay busy here.”

Useful sources:

Station Place
http://www.stationplacedc.com/

700 Sixth Street
http://www.700sixthstreet.com/

Consolidated Forensic Laboratory
http://cfl.opm.dc.gov/cfl/site/default.asp

U.S. Institute of Peace
http://www.usip.org/building/index.html