BIG PICTURE: Experts Split on Future High-Rise Office Construction

ORLANDO-Developers, investors and lenders nationwide are in a quandary these days, trying to determine if the next wave of big office projects should be in low-rise, campus-style communities where adequate land is usually available, or continue to be built in central business districts where dirt is at a premium, if it is available at all.

In Central Florida, however, where the tallest high-rise office structure is the 35-story, 750,000-sf Sun Trust Tower in Downtown Orlando, debating the construction of 100-story buildings is moot.

Reason: The Federal Aviation Administration controls the height of new construction which may be in the path of commercial and military air space at Orlando International Airport.

“There is a growing trend toward low-rise campus headquarters buildings versus high or mid-rise structures,” George D. Livingston, founder/chairman, Realvest Partners Inc., Maitland, FL, tells GlobeSt.com. “That trend was in place before 9-11 but it is likely to accelerate now.”

He says “new economy companies are more likely to choose low-rise buildings than old-guard companies.” Security is a major factor in deciding whether to remain Downtown or move to the suburbs.

“Security is a plus for sure because you can control access,” Livingston says. Back offices would also fit in well on campus layouts.

“High-growth companies can control their own destiny better on a campus,” the developer says. A suburban setting “enhances the work-place quality,” Livingston says. “It’s also less expensive.”

Better and more affordable housing for employees is always more abundant in the suburbs than Downtown, the developer says. “We may also see some companies splitting locations–some in the CBDs; some in the ‘burbs.”

But he says splitting locations may only be a temporary solution. On the negative side, permitting for campus-style office buildings could be difficult in some municipalities concerned with urban sprawl. He cites Austin, TX and the Silicon Valley in California as areas where permitting for new low-rise projects are often challenged by local authorities.

However, mid-market cities and smaller towns could benefit handsomely from the creation of campus office communities, Livingston says. Good road networks, telecommunications access, colleges and nearby airports are factors that would drive corporations to relocation from Downtown to the suburbs.

But David Lecky, vice president, marketing, Tribble & Stephens Inc., Orlando and Houston general contractors, isn’t sure about that forecast. “If another terrorist event were to happen, then you would start to see moves in design to suburban campus locations instead of Downtown towers,” Lecky tells GlobeSt.com.

“However, what will eventually impact design more will be what requirements the insurance and bonding companies force down to corporations and developers,” the construction company executive says. “The increases in insurance (premiums) and bonding, or in some cases, the lack of ability to obtain insurance and bonding will drastically affect the market.”

From a constructor’s perspective, Ron Smith, vice president, Edwards Construction Services Inc., Orlando, doesn’t expect to see a noticeable change in new office development location.

“My own opinion is that 9/11 will not affect company decisions to be in Downtown districts where, in most cases, class A space is in high-rise buildings,” Smith tells GlobeSt.com. “High-rise product is typically in Downtown districts due to the high cost of land and (developers/owners) needing to get more square footage on a smaller footprint.”

Smith says “most organizations that are renting in a Downtown market are there for a reason and I do not believe businesses are going to start abandoning Downtowns and high-rise building across America because of what happened with the World Trade Centers” in Manhattan.

Still, the Edwards Construction executive says, suburban office construction’s rapid pace in metro Orlando shows no sign of flagging.

“We have all seen a tremendous amount of suburban office that is either single story, low or mid-rise construction,” Smith tells GlobeSt.com. “This product is more affordable because of the lower land and development costs associated with outlying areas and less sophisticated structures.”

Smith says that even before 9-11, companies considered “whether they wanted Downtown or suburban office space based on logistical/business reasons and I do not think that will ever change.” He is confident “the designs of high-rises and the cost to build, and subsequently, the cost to rent will probably go up” in the near future. “That could start businesses to re-evaluate suburban vs. Downtown.”

In South Florida, Douglas G. Campbell, executive director, Cushman & Wakefield of Florida Inc., agrees with Smith that office tenants won’t be rushing to the suburbs because of the 9-11 catastrophe.

“The sophisticated, intelligent terrorist is going to concentrate upon targets that create the most psychological and infrastructure damage possible, with the least effort,” Campbell tells GlobeSt.com. “Tall buildings and campus environments which provide a dense consolidation of humanity, and critical infrastructure such as nuclear plants and airlines, serve that purpose.”

For that reason, campus-style office communities won’t provide any more security from terrorist attacks than existing Downtown structures, says Campbell. He served in the Army’s Special Forces (Green Berets) for six years. His team specialized in counter insurgency measures and counter terrorism initiatives.

“The dense massing of humanity is the future of commercial real estate in the United States, be it horizontally in a campus environment or vertically as high-rises,” the Cushman & Wakefield executive tells GlobeSt.com. “Our European and Asian counterparts are leading the way in creating ultra efficient workplaces from a spatial perspective and the U.S. marketplace is following suit.”

Campbell says “densely massed populations have been and always will be military targets, regardless of whether any offensive operation is overt or covert.