Why did major developer The Sundance Company begin construction of the 124,000-square-foot Silverstone Corporate Plaza in a down economy now producing lower overall demand for lease and office-condo space?
Construction is under way at 3421 E. Overland Road, Meridian, Idaho. The site lies in Silverstone complex in the southeast quadrant of Overland and Eagle roads. Sundance Chief Operating Officer Travis Anderson said he expects the first tenant build-outs – for Home Federal Bank, a Silverstone concierge service and 8,500 square feet of meeting space – to conclude by September.
Staying “extremely low-leverage” means Sundance does not depend on bank financing for building construction or tenant improvements, he said. The developer that largely self-funds projects can take advantage of an economic slowdown when materials costs are lower and labor availability is higher, he added.
Silverstone Corporate Plaza’s exterior configuration – reflective glass and granite façade over a structural steel frame – costs more than some alternatives but enables crews to work more efficiently through winter, Anderson said. For example, workers avoid the long curing times associated with some other materials, he said.
“We’re also confident that any recession would be over by the time construction is complete,” Sundance Asset Manager Michael Reich said.
Sundance likes to keep about 100,000 square feet of new shell-and-core office space available for corporate users to evaluate, plus or minus 20,000, Anderson said. Power Engineers recently occupied more than three quarters of the space in the 70,000-square foot Diamond Point Building, on which construction began in Silverstone just less than a year ago. That deal at Diamond Point and Home Federal’s deal to occupy part of Silverstone Corporate Plaza (IBR, 11-24-08) prompted Sundance to start the Corporate Plaza, he said.
Sundance continues to receive inquiries from medical and large corporate entities, he said. Continued interest from corporate, large-space occupants continues partly because they see an increase in available workers, he said.
A developer who uses little or no financing can afford to “carry” a vacant building during economic slowdowns, Anderson said.
“We can be flexible and work with tenants,” he added. For example, a developer who is largely self-funded can accommodate a tenant’s request to move to a smaller space – which may not meet a lender’s requirements at a given time, he said.
Silverstone benefits from having El Dorado Business Campus next door, in the southwest quadrant of Overland and Eagle roads, Anderson said. Both parks benefit from a location-driven identity that boosts demand, he said.
Reich said big office parks often attract similar or cross-reliant businesses that benefit from being close to one another. The risk is that if a large-space occupant closes, downsizes or moves, a nearby business that caters to it may do the same, he said.
Some big, corporate spaces could be divided to suit smaller tenants, but the developer may have to offer rent discounts if the spaces aren’t ideal, he said.
Rectangular buildings with numerous entrances and ample storefront glass offer the most flexibility, Anderson said.
About The Sundance Company
It’s no surprise that The Sundance Company is a commercial real estate leader as well as a strategic link in providing quality and desirable office and industrial space in the Boise metropolitan area.
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