Skanska Looks To Start New Developments, Including Potential Spec Office
The head of U.S. development for global real estate giant Skanska says the firm is looking to break ground on multiple new projects in the coming months amid the pandemic and economic downturn, including two in Northern Virginia.
Skanska's strategy of self-financing its projects gives it more flexibility to decide its groundbreaking schedule, as it doesn't need to secure construction loans. The developer is planning multifamily buildings and office projects, which it may choose to begin on a speculative basis, Skanska USA Commercial Development CEO Robert Ward said.
The developer does not have any active projects under construction, but Ward said it is looking to start multiple projects soon.
"We're ready to start a couple, but we're in this window where we didn't have any ongoing, so from a development perspective, as it relates to construction exposure, we've been fortunate," Ward said on a Bisnow Town Hall webinar Thursday. "That said, we're eager to get things started and get back to that."
Ward, in an interview with Bisnow following the webinar, said two of the projects he hopes to break ground on in the near-term are in Northern Virginia. He emphasized that the decision to break ground has not yet been finalized.
The first project would be a 410-unit apartment building in Tysons. Skanska in 2018 acquired a portion of Scotts Run, a development site near the McLean Metro station planned for 8M SF, and it is now preparing to break ground on its project, branded as The Heming.
Ward said the $221M Tysons project is ready for construction, and he said it would be fully funded from Skanska's balance sheet. The company's investment committee must approve it before the groundbreaking.
"You're talking about a two- to three-year window before you're actually delivering," Ward said. "It's right on a Metro, and there's some other development coming in around it. We see good momentum and feel good about the location."
Skanska is also looking to break ground on a new office building in Northern Virginia. The developer in September acquired the 1-acre site at 3901 Fairfax Drive in Arlington, where it plans to build a 200K SF office building.
The developer has not made a final decision on the construction timeline, but Ward said it is among the next four U.S. projects Skanska hopes to begin. He said it is considering breaking ground on spec, potentially a risky move during an economic downturn. He said Skanska always considers building on spec, and it is bullish on the Northern Virginia office market.
"There is already a reasonable amount of interest from tenants in Arlington in that site. There are not deals done, but we feel good about the level of interest we've already received," Ward said.
The developer broke ground on D.C.-area spec office projects during the Great Recession, including 733 10th St. and 1776 Wilson Blvd. in Arlington. Ward said both projects leased up shortly after delivery.
The advantage Skanska had during the Great Recession that it also has today, Ward said, is its ability to fully fund projects from its own balance sheet, not relying on outside financing.
"Certainly the fact that we don't need external financing gives us a lot of flexibility," Ward said. "At times, liquidity or credit markets aren't as open, and it can be an advantage for sure."
Skanska is also considering breaking ground speculatively on a planned office project on Wilshire Boulevard in Los Angeles, Ward said. Additionally, it has an office project planned in Bellevue, Washington, where he said it is considering beginning construction on spec later this year or in early 2021.