According to a new report from Reis Inc. (no, not a TPS report), the national vacancy rate for office buildings is 15.9 percent, a four-year high.

“It’s bad,” Reis director of research Victor Calanog said. “It’s decaying and getting worse. Given the depth and magnitude of the recession, you can argue that we are facing a storm of epic proportions and we’re only at the beginning.”

Check out The Daily Record’s focus section on commercial real estate this Friday. In it you’ll find an analysis of the reportage on office vacancy rates in the region, which range from around 12 percent (probably low) to 15.05 percent at the highest. Most business boosters in the region will tell you that this is because of Maryland’s “soft landing” in times of recession — a popular theory that proposes that because of the state’s proximity to the federal government’s nourishing economic development teat, certain industries (defense contracting, federal employment, etc) will keep the state’s economy afloat and office buildings full.

But most of the brokers and market observers that I spoke to seemed to suggest that the local office market is actually not even doing as bad as nearly a  whole percentage point under the national average. You see,  Baltimore’s vacant space, particularly in downtown, is concentrated into a few large chunks: 100 Light Street (being vacated by Legg Mason in favor of Harbor East), 2 Hopkins Plaza (vacated by the law firm Venable in favor of the Constellation HQ building), 225 N. Calvert Street (vacated by Bank of America for cost-saving reasons) and the state-owned World Trade Center (a patchwork of small, empty spaces throughout the building).

The recession hit this town in the middle, or perhaps near the end, of a boom in the construction of Class-A office space. The bulk of the vacant space, rosy-eyed observors would agree, is in the old spaces left behind by moves, rather than by the loss or closure of businesses, which are the really nefarious symptoms of a recession.

But space that is not re-filled once its tenants leave is comparable to those jobs that don’t get filled when employees move to bigger and better things. In a perfect world, both would be counted as negative growth. And it’ll take more than just rumors of imminent tenants to convince me otherwise.

Powered by Bookmarkify™

An e-mail exchange posted on the Friends of the Senator Theatre blog site caught my attention this morning. On Monday, theater owner Tom Kiefaber wrote an open letter to Councilman Bill Henry and posted it on the site as well. Tuesday, Henry wrote back and his response follows Kiefaber’s letter on the site.

Going on seven months into my coverage of the theater, this exchange seems to get at the heart of the differing points of view here. Kiefaber, whose family built the theater in 1939, has been unable to keep it profitable for any real length of time since he took over operation in 1989.

He strongly feels this is not because of his management but because he went into debt keeping it running while the rest of Belevedere Square remained relatively desolate. Kiefaber has also told me on several occasions he believes the city left the Senator dangling when it invested millions in revitalizing Belvedere Square and he thinks it was unfair that none of that money was allocated for the theater.

On the other hand, the city and state have given at least than $500,000 in loans, and Baltimore backed $600,000 of the the Senator’s $950,000 loan from First Mariner Bank. And when the bank issued a foreclosure notice to Kiefaber after he was in default for five months, city officials moved to buy the deed so the theater wouldn’t be subject to a bank auction in which pretty much anyone can bid on the building. (At this month’s auction, the city has the right to be more selective about the winning bidder.)

I’ll also point out here that being a beloved city institution doesn’t guarantee salvation, as was the case with the Baltimore Opera Company when it filed for bankruptcy this year.

Kiefaber has also singled out Councilman Henry (who represents the district the theater is in) as being unwilling to help or listen to theater supporters.

As such, Kiefaber has posted the following on the theater’s marquee: “Councilman Henry won’t meet with the community about the auction.”

It seems in the 11th hour, we’re turning to character assassination. I suggest you read both letters but here are some excerpts.

Read the rest of this entry »

Powered by Bookmarkify™

st1\:*{behavior:url(#ieooui) }

/* Style Definitions */ table.MsoNormalTable {mso-style-name:”Table Normal”; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:”"; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:”Times New Roman”; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;}

It’s getting to be the dog days of summer, folks, when business-y types would rather hit the beach than sit down with their CPAs for mid-year reports, but here at TDR we’re trying to keep things interesting for the easily distracted. So next Friday, when you return from your July 4th weekend loafing, look out for our Commercial Real Estate focus section, which will appear in the July 10 edition of the paper. In the meantime, here’s what happened in the last 2 weeks

* Opus East, the Rockville-based developer that was going to build a massive complex at Aberdeen Proving Ground, first backed out of that project, then filed for Chapter 7 bankruptcy.

* Baltimore sold 98 acres it owned in Anne Arundel County to Steve McAllister, a former national head of Greenpeace, so he can build 1,500 condos, apartments and town homes near Curtis Bay Industrial Area. Nearby business owners aren’t happy.

*  Venerable Baltimore restaurant the Brass Elephant is for sale. This news comes just a week after the closing of Ixia, a pricey, artsy restaurant in Mt. Vernon, and the news that nearby Neo Veccino will become a sports bar.

* The Real Estate Wonk reminds us that Monday was the first day to apply for the Newly Constructed Dwelling Tax Credit, an incentive for Baltimore City homeowners who want to move into some brand-spankin’ new digs.

* Rumors abound in the downtown commercial brokerage community about upcoming deals and space-hungry tenants. The BBJ’s got accounting firm RSM McGladrey scouting some space, although one broker told On The Record that they’ve been looking for over a year.

http://baltimore.bizjournals.com/baltimore/stories/2009/06/29/story5.html

* The MTA got $3 million in stimulus bucks to knock down a portion of West Baltimore’s infamous “Highway to Nowhere” and remake it as a parking lot for the to-be-redeveloped West Baltimore MARC train stop, while the city got $17.5 million to weatherize city homes.

* A city judge heard arguments about why he should or should not throw out the city’s reverse-redlining suit against mortgage lender Wells Fargo. A decision on the motion to dimiss is expected shortly. Like, any minute now, actually.

* Sun architecture critic Ed Gunts gets excited about what might become the “Highlandtown Loft District,” a bunch of inter-related development activity in Southeast Baltimore that includes the Highlandtown Middle School conversion, which Montel Williams was this close to spearheading.

Powered by Bookmarkify™

News reports indicate that one of the highest-profile eminent domain lawsuits in the country will go all the way to New York’s highest court, where it will be argued in October.

Developer Bruce Ratner, of Forest City Ratner, wants the Empire State Development Corp.  to condemn and seize dozens of properties in a low-density neighborhood near an old rail yard in Prospect Heights, Brooklyn, so that he can build a new arena for the  relocation of the New Jersey Nets basketball team, plus 16 high-rise apartment towers. He already has a $200 million-a-year sponsorship deal for the arena with investment bank Barclays. The project is called Atlantic Yards (and Barclays Arena), named for the disused rail yards on the western edge of Brooklyn where it is proposed.

Although about half of the buildings needed for the more-than-$1-billion project have already been demolished, in August of last year, nine property owners sued the ESDC, saying that the grounds for eminent domain were not valid. That suit was dismissed, then appealed, which brings us to today.

Forest City Enterprises, the developer’s parent company, is controlled by the Ratner family, and is also running the show over in East Baltimore, where so far more than 800 families have been displaced by Forest City Science + Technology Group’s East Baltimore Science + Technology Park. In this case, Forest City has leveraged the support of Baltimore’s housing department to condemn and seize hundreds of properties, many of them using the controversial “quick-take” method of eminent domain. We published a series about this type of thing last year.

One of the main arguments made by the anti-Ratner camp is that the benefits of the whatever Ratner could bring to Atlantic Yards are negligible compared to the destruction of the neighborhood. A number of similar cases (.pdf), even in Maryland, have used the same rationale, and it really gets to the heart of the matter as far as eminent domain is concerned: According the landmark Kelo vs. City of New London, if the economic benefits of a project are not so great that they’re in the “public interest,” then an eminent domain taking is unconstitutional.

Every developer has a business model, I guess, but when you really think about it, I wonder just how many companies there are in the country, aside from Forest City, that make a living out of seizing large swaths of property that they’ve convinced local authorities are “blighted” and redeveloping them as mega-projects like this. Are they so few and far between that there’s no consensus on the pros and cons of such a model? A cost-benefit analysis of property taxes versus incentives dangled? A comprehensive look into the profitability of the sorts of projects that come and replace the so-called blight?

Yeah, it sounds like a book idea, I know, but I’m going to look into this.

Powered by Bookmarkify™

True to the times, development news in Baltimore has been fairly quiet, in the sense that there haven’t been a lot of marquee groundbreakings or huge deals financed. But that doesn’t mean there hasn’t been tons to write about.

So I thought I’d provide you all with a sort of digest of the past week’s development-related news, a feature that I hope will recur on Fridays to come. Without further ado…

• The city doesn’t seem to have a plan to protect its conduit system, which allows for most downtown businesses to make use of fiber optics. Read my Friday cover feature about it.

• Debate is heating up over the city’s proposed Land Bank Authority.

• The BBJ has a great story about the University of Maryland’s plans to triple the size of its Biopark, to swing some weight around and compete with the Johns Hopkins-related East Side Science + Technology Park.

• The Sun says that the city’s architectural panel approving the “conceptual design” for City Center, Mark Sapperstein’s $80 million downtown hotel project is overcoming a “key hurdle.”

• This week’s Board of Estimates meeting was busy, including the approval of the Charles Village Benefits District’s new budget, a funds transfer to demolish part of the Superblock, and an agreement with developer David Holmes to pay $470,000 into the Inclusionary Housing Fund instead of building inclusionary housing at his Gateway at Washington Hill project in upper Fells Point.

• CSG Partners, a mid-sized commercial real estate investment company, moved its headquarters from White Marsh into the Sun Life building downtown, which it bought in December for $9.2 million.

• It’s the great flight from White Marsh, apparently. Dutch credit insurance firm Atradius shifted from a small flex space near the beltway to Schilling Green, a fancy green building owned by Merritt Properties, in Hunt Valley. This marks the second big signing for Merritt this month — the other is venture capital firm NEA, which left Baltimore for Timonium because they felt Mt. Vernon was too dodgy.

• A wine bar called “13.5%” is set to open in Hampden, as part of this development that we reported on in March.

Powered by Bookmarkify™

When you think of explorers, your mind may drift to Harrison Ford in a pit of snakes or a troop of treasure hunters plundering King Tut’s tomb.

You’ve got the right idea, but you probably wouldn’t group photographers exploring abandoned Baltimore buildings with the likes of Indiana Jones — until now.

Locals Chris Folsom and Chris Piergalline have been poking around (and trespassing in) long forgotten  buildings in the greater Baltimore area and stirring up interest in the photos they take of dust-shrouded asylums and moth-eaten factories.

Folsom tells The (Baltimore) Sun, however, that they aren’t interested in disturbing these buildings or carting away any goods. “We leave the place the way we found it,” said Folsom. “I feel the need to document there buildings just as they were left and before they are renovated or torn down.”

For an interesting perspective in the midst of new development and demolition, check out Chris Folsom’s Flickr page.

Powered by Bookmarkify™

Think about it:

1) Baltimore’s historic Senator Theatre is going up for auction next month and the asking price is about $1 million.
2) Councilman Bill Henry, who represents the theater’s district, told me this week he expects that whoever buys it would need another $500,000 just for renovations and upgrades.
3) And who in this economy has that kind of capital AND could use a large, auditorium-like building with ample seating and who can’t make a lot of changes to the interior (thanks to the Commission for Historical and Architectural Preservation’s recent restrictions)?

If you’re thinking “Another theater operator, dummy!” well, you’re right. According to Kim Clark at the Baltimore Development Corp., she has been approached by people in historic preservation and by some in the theater business about the building’s auction on July 21. (Baltimore took over the theater’s $950,000 mortgage from owner Tom Kiefaber in May.)

But when asked if a religious group could be eying the theater, Clark said it’s not out of the realm of possibilities.

“That was one of our concerns,” she said. But she and Henry noted a deterrent to a congregation could be an existing agreement that allows for use of the parking lot across the street from the Senator only if the property remains in use as a theater.

I imagine the adjacent Belvedere Square businesses can’t be too thrilled with the prospect of losing its anchor to a non-business entity, although the nearby restaurants might be secretly excited to get the post-worship crowd.

What do you think about this? Is it completely unlikely or do you think it’s something to look for?

Powered by Bookmarkify™

D.C. United co-owner Victor MacFarlane announced today that he has sold his interest in the soccer club to his partner Will Chang, chairman of the global investment firm Westlake International Group.

The MacFarlane-Chang D.C. Soccer LLC venture still includes one of the owners of the San Francisco Giants, and no other changes in management have been made, a club news release states.

MacFarlane has long made it known that when a new stadium site was selected for the team, he would like his real estate investment firm, MacFarlane Partners, to develop the area around it. But that site selection process has been a two-year ordeal of burned bridges from D.C.’s Poplar Point to Prince George’s County this year.

The team is looking at surrounding counties and is still very much interested in moving out of RFK Stadium in the District (who wouldn’t be?), but the search for the right land and community to support a stadium development complete with retail, residential and office space has been an arduous journey for United’s ownership team.

I wonder if MacFarlane, who purchased the team with Chang from the Anschutz Entertainment Group in 2007, just got tired of waiting. Was United just a real estate opportunity that didn’t pan out, and he’s cutting his losses? If and when the team finally moves, who will MacFarlane Partners have to compete with to develop the surrounding land and do you think he made the right call here?

Powered by Bookmarkify™

This comes via a new website called Baltimorphosis, which is run by Peter Tocco and a man who has become a ubiquitous Internet presence on any forum or site that  discusses urban planning or transportation issues, Gerald Neily. Neily is a former Baltimore traffic planner and the author or the urban planning blog Baltimore Inner Space, where wonks and activists alike get together to discuss the Red Line, the redevelopment of Owings Mills Mall, and other issues.

The video here, however, is a neatly-produced activist video about West Baltimore’s infamous Highway to Nowhere, a failed road project that literally destroyed large portions of several low-income neighborhoods before petering out somewhere near Edmondson Village. What remains is 50-some acres of depressed roadway that serves just a few miles of the commuter route between Woodlawn and downtown. Driving the length of the Highway to Nowhere, as the video notes, takes just a few minutes, and completely cuts the motorist off from the surrounding neighborhoods.

One of the main messages of this little item is that the highway ought not to be destroyed or built-over, but rather re-made as a sort of a mass community art project by and for people of color. The video gets a tad ridiculous when “art-maker” and Open Society Institute grantee Ashley Milburn, who is championing the project, compares overhead views of the site surrounding the highway to diagrams of a slave ship, and we don’t hear much about the extent of the project (sure, having lots of huge murals would be nice, but would that really change the area or its use, or make up for the loss of community caused by this project?), but overall it’s interesting. It’s a bit of fresh air to hear people proposing low-cost, grassroots development to remedy what is effectively state-engineered blight, rather than expensive, entitlement-ridden panacea that are sure to get lost in years of community disputes or even lawsuits.

Please enable Javascript and Flash to view this Flash video.

Powered by Bookmarkify™

Please enable Javascript and Flash to view this Flash video.

This comes via the finance blog Calcutated Risk. A developer in Victorville, an eastern suburb of Los Angeles, has paid to demolish a bunch of model homes that were all built, or at least almost-built, but never occupied. The city of Victorville was fining the builder, apparently, for leaving the structures vacant.

The video is pretty shocking (although it would be nice if the cameraman wasn’t talking the whole time about how shocking it is) at face value, but most interesting, I think, as a physical representation of how little demand there is, at least in a place like suburban southern California, for new housing stock. It’s really gotten this bad.

Powered by Bookmarkify™