Beltway Business Park revises plans due to building costs
BY TONY ILLIA
BUSINESS PRESS
March 06, 2006
The Beltway Business Park, the mammoth mixed-use development in the southwest valley, is redrafting plans for its next phase because of escalating construction costs. The 400-acre complex, a joint-venture project between Thomas & Mack Development Co. and Majestic Realty Co., recently added 550,000 square feet to its original scheme.
Low-rise structures are being replaced with six- to eight-story buildings and four-level garages are being substituted for surface parking. Although the revisions will add about $100 million to the project's final price tag, the increased densities are necessary to generate the rent revenue needed to offset spiraling construction expenses, said the developer.
The Beltway Business Park, located along Interstate-215, between Decatur and Jones boulevards, has $60 million in construction plans this year, including 737,400 square feet of office, industrial and retail space. It currently has a three-story, 72,302-square-foot Suburban Class A office building underway at the southwest corner of I-215 and Edmond Street. The building, the second of four planned in the Park's "Corporate Gateway," is 14 percent more expensive to construct than first priced 10 months ago. "We're using the same contractor and same design, but it's now $65 per foot to build the shell," said Robert "Tim" Snow, president of Thomas & Mack Development Group.
STEEL SKYROCKETING
The developer, as a result, now buys select building materials in advance including steel, which has seen monthly price hikes. The purchase order helps the project avoid unexpected cost spikes or spot shortages while also keeping construction on schedule.
Martin-Harris Construction, Corporate Gateway's general contractor, is seeing 1 to 2 percent price increases across the board, said company president Frank Martin. The Beltway Business Park is ramping up building activity with plans to triple its current size by the end of 2007. The complex, which began construction in 2002, currently has six buildings totaling 1 million square feet of office and industrial space. It will add 21 more buildings (2 million square feet) during the next two years.
The Beltway Business Park is located on federal land managed by the Clark County Dept. of Aviation. Thomas & Mack and Majestic are developing the site under a 50-year ground lease in exchange for sharing rent revenue.
EXCELLENT LOCATION
Office-using employment growth, a robust economy and the project's location, with two full freeway interchanges at Decatur and Jones, has ratcheted up demand, Snow said, leading to accelerated building plans. Fast-tracking development additionally helps mitigate construction inflation that outpaced the consumer index last year.
The park's major tenants at present include GES, KB Home, the Metropolitan Police Dept., American Family Insurance, InfoGenesis and Hilton Grand Vacations, which together account for 1 million square feet of office and industrial space. Five new buildings (two industrial and three office) will come online later this year. Asking rents will be 54 cents per square foot triple-net for industrial space, and $1.40-$1.45 per square foot triple-net for office.
Valley-wide rents climbed sharply during the past year in response to increased construction costs. Average office rents were $2.14 per square foot in the fourth quarter or 11 percent higher than in 2004 and 26 cents more than two years ago, reported Applied Analysis, a Las Vegas economic research firm. Industrial rents, meanwhile, averaged 70 cents per square foot in fourth quarter or 25 percent more than a year ago and 18 cents higher than in 2003.
"Asking rents are going to continue rising in 2006 and beyond due to the increased cost of development," said Brian Gordon, principal of Applied Analysis. "This is another example of a developer being required to shift design plans to meet the current economic conditions of the construction industry."
The Beltway Business Park will eventually contain 55 buildings, totaling 5.86 million square feet, which is nearly three times the enclosed space of the Empire State Building. Industrial space will make up 54.6 percent of the project total, with 3.19 million square feet in 14 buildings; office space will account for 33.2 percent; technology will take up 7.8 percent; and retail space will comprise 4.4 percent with 12 buildings combining for 260,500 square feet. The Beltway Business Park is estimated to reach build-out in 2012.
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