DATE: Thursday, July 31, 1997               TAG: 9707310357

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY MEREDITH COHN, STAFF WRITER 

DATELINE: VIRGINIA BEACH                    LENGTH:   77 lines

SPECULATIVE OFFICE BUILDING NOW OPEN, AND FILLING FAST

While new structures often draw attention to their fountains, marble foyers and forested vistas, a new office building near Mount Trashmore may set a standard for something other than aesthetics.

Southport Centre, a Class A office building that had an open house Wednesday, was privately financed and constructed without having a single tenant committed to it - something that hasn't happened recently, according to industry watchers.

Top-of-the-line Class A space typically commands higher rents.

Southport Centre was developed as a speculative project by Gee's Group and financed through Central Fidelity National Bank.

Two months after completion, close to half of the building's 60,000 square feet is leased. An international shipping company, Atlantic Container Line, moved its office from Portsmouth to the building on July 1. Ramsey, N.J.-based J.D.R. Recovery Corporation, a national collections agency, plans to move in this week.

Patrick K. Mugler of Robinson Sigma Commercial Real Estate, which is marketing the space, said Wednesday during the open house that he expects the building to be fully occupied by October.

And that's at $17.50 a square foot, about a dollar above the average Class A office space in suburban South Hampton Roads, Mugler said.

Joe Gianascoli of Gee's Group, which developed and owns the building, said once Southport Centre is fully leased, he plans to build two more speculative buildings, although smaller in size. He owns three other buildings in Virginia Beach and Newport News.

``When I was first talking, I said I could have it up and running in two years,'' he said of Southport. ``It looks like it will be full in one. I consider that success.''

It's the right time, said Gianascoli, who runs the company with sons Michael and David.

Office space is tight. Vacancy rates in office buildings have been dropping - to about 6 percent in June for Class A buildings in South Hampton Roads, according to a Goodman Segar Hogan Hoffler/Old Dominion University survey.

Also, the Pembroke/Central Business District is a hot spot for office development, said Donald R. Crigger, director of office leasing for Goodman Segar Hogan Hoffler commercial real estate. The others are Lynnhaven and Newtown in Virginia Beach, and Greenbrier in Chesapeake, he said.

Crigger said he expects others will follow in Gianascoli's footsteps.

``At least we're probably going to see building with a significant speculative component,'' he said. ``I'm not ready to say we'll see more 100 percent spec buildings. But I've heard rumblings from developers that if they could get a building pre-leased on the order of 50 percent, they would go ahead.''

Crigger said there has been very little speculative building in the past seven years. A building boom in the 1980s and recession in the early '90s created an oversupply of office space and skittish lenders. But recent demand has been outpacing supply, ``so it's very good timing,'' he said.

The only other purely speculative buildings in Hampton Roads have been on the Peninsula. But those buildings - five in Newport News and one each in Hampton, James City County and York County - have been publicly financed and used as industrial space.

Bud Denton, president of the Virginia Peninsula Economic Development Council, said private developers have filled the need for office space, but the shell buildings constructed by municipalities have aided them in drawing large manufacturers and distributors.

Southside economic development departments have shied away from publicly financed office or industrial buildings. Donald Maxwell, Virginia Beach economic development director, said the city prefers to stay in the marketing arena and leave building to the private sector.

And with Southport Centre's success, he said, he expects to see more private speculative building.

``This is our first opportunity to test the market,'' he said. ``There is a definite shortage of space, and there seems to be an opportunity for those willing to take a reasonable risk.'' ILLUSTRATION: [Color Photo]

STEVE EARLEY/The Virginian-Pilot

Joe Gianascoli, center, and sons Michael, left, and David, right,

are the developers of Southport Centre in Virginia Beach.

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