As head of a growing Odenton government contractor, Mary Perara is looking for more office space to accommodate her business, which provides research and development studies for federal agencies.

She needs about 5,000 square feet of space near Fort George G. Meade, but can't afford to be a tenant in the posh suburban business parks occupied by many larger government contractors.

"Of course, as a small business you're looking at something as cost effective as possible," said Ms. Perara, president and chief executive officer of The Perara Group Inc.

Local developers like Glen Burnie-based Chesapeake Real Estate Group LLC provide the inexpensive office space contractors like The Perara Group are seeking.

While some real estate developers provide highly secure, multi-storied buildings that large contractors are willing to pay top dollar for, Chesapeake offers small- to medium-size firms 30,000 square feet of renovated space in the former Mercedes-Benz parts distribution center in Hanover's Baltimore Commons Business Park. Including utilities and other expenses, rents there range from $16 to $18 per square foot. By contrast, large government contractors like Booz Allen Hamilton, Boeing and General Dynamics are shelling out more than $30 per square foot in the multi-storied buildings of National Business Park, a 200-acre site at the intersection of routes 295 and 32.

Chesapeake already has a "number of proposals" from government contractors looking to lease space in the former distribution center, said company partner Doug Schmidt.

Meanwhile, Corporate Office Properties Trust, the largest owner of office space in Anne Arundel County and developer of the high profile National Business Park, also has jumped into the low-cost office space arena.

In December, it formed a joint venture with Opportunity Invest LLC to acquire two warehouse properties, one of which is the former distribution facility for Michelin North America Inc. in Baltimore Commons Business Park. Located at 7468 Candlewood Road, the center will be converted into 325,000 square feet of office space marketed as a "low-cost alternative" to government contractors as well as communications companies and credit card operation centers.

"I think we're trying to cover all price points in the market," company President and Chief Executive Officer Rand Griffin said. "It's a totally different product type."

These developers have tapped into a market with a significant demand, especially in a county that will see a huge influx of government activity as part of the Base Realignment Closure plan, said Anirban Basu, chairman and chief executive officer of Sage Policy Group Inc.

Smaller contractors performing work for federal agencies like the Food and Drug Administration can opt for revamped warehouse space because they don't require high level security, he said.

"They simply need to get the work done and therefore opt for more humble space," he said.

Comparatively, larger contractors working on "missile research" need highly secure buildings and are willing to pay more for "offices with prestigious addresses and with amenities that allow them to successfully host client visitors," he said.

The need for low-cost space among government contractors seems to be growing in Anne Arundel, said Jerry Wit, vice president of marketing for St. John Properties, which has between 60 and 70 government contractor tenants that offices in properties such as the BWI Technology Park in Linthicum and the International Trade Center in Hanover. Tenants can lease space in those properties for less than $20 per square foot, he said.

"We are seeing an increase in the velocity of government contractors," he said. "They look for a straight forward economic business space. It's not high rise, brass and glass."

The trend in which government contractors are seeking low-cost space in former warehouses speaks to developers' ability to transform industrial sites into viable environments for companies that provide services for federal agencies, said Gregory Masi, senior vice president for Transwestern Commercial Services.

Part of the reason developers can offer government contractors a lower priced office space is because the cost of revamping a warehouse is significantly less than constructing a "five-story, 150,000-square-foot" facility from scratch, he said.

Developers "are able to pass that off to the consumer," he said. "It's all a matter of cost of land, cost of development, cost of construction."

Published 02/04/06, Copyright © 2006 Maryland Gazette, Glen Burnie, Md.