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As downtown Baltimore struggles, leaders eagerly await relocation of state workers

Last April, Gov. Larry Hogan announced a plan to move 3,300 state workers across 12 agencies into downtown Baltimore as an economic boost to the city’s central business district.

It can’t come soon enough, city officials and business leaders say.

The central business district has seen an increase in the already high commercial vacancy rate. While the rate was just under 20% in 2020, last year saw a jump to 23.7%, or to more than half a million square feet of negative absorption. Nationally, the vacancy rate across the top 50 office markets averaged 15.7% this January, according to CommercialEdge.

The COVID-19 pandemic has played a role in the increased commercial vacancy rate. Meanwhile, some large downtown businesses announced deals last year to move to newer areas of the city such as Harbor East and Canton.

Most of the state agencies scheduled to move to downtown Baltimore are currently housed in the State Center complex near Bolton Hill. The Department of Assessments and Taxation is looking over proposals from prospective landlords, while the Comptroller of Maryland has proposals due in the coming weeks.

The Maryland Department of Health is the largest of the deals on the market right now, with 460,000 to 470,000 square feet needed.

“This deal, because of the size, could go into a couple of buildings  — two buildings could combine together for a proposal as opposed to just one,” said Jim Grieves, a vice president at MacKenzie Commercial Real Estate Services. “There are not a lot of buildings that have 500,000 square feet available.”

Proposals are due on March 17.

In addition, the Office of the Public Defender, now on St. Paul Street, and the Department of Human Services, now on West Saratoga Street, have deals awarded pending approval from the Maryland Board of Public Works.

The most recent deal to come on the market is the Department of Planning, which is looking for just under 20,000 square feet.

Combining the six deals now on the market, the state is looking for almost 775,000 square feet of office space. The Board of Public Works has not formally approved any agreement yet.

“You have a negative half a million square feet of absorption last year, so this would make up for all of that plus some,” Grieves said, adding that the state agencies are likely to move to downtown Baltimore over the next year or two.

Donald C. Fry, president and CEO of the Greater Baltimore Committee, said the moves will have a significant impact on the central business district and beyond.

“It is an economic win for the city,” Fry said. “It (also) opens up the State Center property for future development that can help revive that portion of the city economically and socially with needed new housing, retail and cultural activity depending upon whatever redevelopment vision moves forward. That still has to be planned out, but that is something that is really a great opportunity for that area of the city.”
Continued Fry: “There will be some long-term leases with obviously stable state agencies, and that is certainly going to help stabilize the central business district and improve the vacancy rate down in the city.

“You have the potential of having many more workers in the downtown area. By relocating those workers downtown, that is going to trigger some much-needed economic activity for existing retail shops, restaurants, other services that office workers typically support.”

It is anticipated that a majority of those relocated employees will work from their offices, not remotely.

Fry said the relocations will help bring companies downtown: “Other employers (will) see that the central business district, the downtown area, is an attractive place for employees to work.”

Fry also noted that housing construction, such as the conversion of offices to apartments, could result as more people look to live in the downtown area.

“I think the fact that you are going to be having thousands of people work downtown — that may open up their eyes to see the opportunity that exists to live (near) their work and possibly assist in additional housing opportunities for state workers,” he said.

Grieves said he hopes the spaces that closed during the pandemic, such as cafes and restaurants, will see new tenants thanks to the influx of workers. The influx will also help landlords who have been offering concessions to tenants to keep them, as well as garages that lost business when employees were working from home.