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Bart Smith


The total Huntsville office market comprises 17 million square feet. Seventy-one percent of the total office market is located within the Cummings Research Park (CRP) boundary. CRP is the second largest research park in the United States, encompassing more than 3,800 acres with only 450 acres left for future development. Major office users in the Huntsville market include Boeing, SAIC, Northrop Grumman, Lockheed Martin and Raytheon. These companies support the various demands of the military installations on Redstone Arsenal.

In fact, the Huntsville office market depends heavily on the defense industry as well as research and development industries for job growth. The current federal budget climate has many companies taking a wait-and-see approach when it comes to planning expansions. This attitude has affected Huntsville’s office vacancy rate and planned construction.

The 2012 mid-year office vacancy rate for Huntsville is tracking at more than 12 percent, a substantial increase from the 8.1 percent average vacancy during the last five years. Although the Huntsville office market has experienced a decrease in activity, it continues to exceed the national standard for vacancy rates.

The recent slow down in defense spending and the lack of funding for several projects within NASA have adversely affected Huntsville occupancy and new projects. Although new office construction has been slow, some new product is being developed. In 2011, Corporate Office Properties Trust began construction on Redstone Gateway, a multi-use, multi-building enhanced-use lease project, located at the entrance to Redstone Arsenal. The first building was completed in the first quarter of 2012 and offers 130,000 square feet of Class A office space.

Despite the slow down in overall new construction, there is a lot of activity taking place on Redstone Arsenal. Turner Universal was recently awarded a contract to build a five-story, 225,000-square-foot building for the Missile Defense Agency. Since the 2005 Base Realignment and Closure (BRAC) announcement, Redstone Arsenal has added more than 1.5 million square feet of new office space. The 2005 BRAC project, which was completed in 2011, added thousands of new jobs to Redstone Arsenal and the Huntsville market. The total workforce on the Arsenal now exceeds 36,000 employees, including more than 18,000 government civilian workers. Built in 1941, Redstone Arsenal was originally constructed to produce conventional chemical ammunition for World War II. In later years, Wernher von Braun and his team of German scientists developed the first ballistic missile on the Arsenal. This development led to the establishment of NASA’s Marshall Space Flight Center in 1960. Redstone Arsenal is now home to U.S. Army Aviation and Missile Command, the Space and Missile Defense Command, Army Material Command, numerous Program Executive Offices and major components of the Defense Intelligence Agency and the Missile Defense Agency.

One economic driver seeing positive momentum in the Huntsville area is the growth in the biotech industry. The Hudson Alpha Institute for Biotechnology broke ground in 2006 and now encompasses 270,000 square feet of lab, office and common area space. Twenty-two companies are located at the facility. A 22,000-square-foot conference building has been added to the Institute, and construction has begun on an additional 88,000-square-foot multi-tenant building.

In addition to growth in the biotech field, the defense industry has seen some growth as well. Boeing will continue development of the Ground-Based Midcourse Defense System due to its grant of a $3.8 billion, seven-year contract. The Huntsville team, led by Boeing and its partner Northrop Grumman, is in charge of operating the country’s only operational defense system against long-range ballistic missiles. Although the project will not grow the current office need in Huntsville, it does preclude the potential negative impact of losing the contract.

NASA is optimistic about the future of the Space Launch System (SLS). The plans and design for the heavy-lift launch vehicle system were disclosed in mid-2010 with a target launch date of 2017. NASA is soliciting proposals from industry leaders on the affordability and sustainability of the SLS as it evolves from a 70-metric-ton vehicle to a 130-metric-ton vehicle. NASA’s office requirements in the Huntsville area have declined during the last five years, however the SLS project could provide a much-needed boost to NASA and the visibility of the agency.

— Bart Smith, CCIM, SIOR, is a managing broker in Graham & Co.’s Huntsville office.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]