Market for offices downtown thriving
Vacancy rate cut by over half since 2002
Don’t light up the “No Vacancy” neon just yet, but competition for office space in downtown Fort Wayne has gotten markedly tougher.
In 2002, about 24 percent of the office space in downtown was vacant, among the highest office-space vacancy rates in the nation.
By the summer of 2009, that vacancy rate had dropped to 18.8 percent, better than Cincinnati’s.
But the sea change wasn’t over yet: When the city of Fort Wayne bought Renaissance Square at 200 E. Berry St., it took 267,137 square feet off the market.
Steven Zacher, president of The Zacher Co., which calculated the vacancy rate, said that if nothing else in the market changed since the rate was calculated in July, the vacancy rate would have dropped to 10.9 percent after the purchase of Renaissance Square.
“We know that just taking that space off the market itself will have a dramatic impact,” Zacher said. “Because of that, the downtown vacancy rate will be significantly lower than the suburban vacancy rate.”
That is a dramatic reversal of fortune for downtown, which for decades has struggled to compete with the lure of the suburbs.
“That is phenomenal,” said Greg Leatherman, the city of Fort Wayne’s director of development. “That should turn people’s heads a bit.”
Zacher said that although the change has been gradual over the last 10 years, the combined effect of those incremental changes has been dramatic. He cited large banks choosing either to stay downtown or to relocate there, plus the growth of law firms and government.
Also important was something that didn’t happen – Lincoln National Corp. did not move its offices when its 25-year lease ran out, instead choosing to renew the lease and stay put. Had Lincoln left, it would have dumped 800,000 square feet of office space on the market.
Instead, downtown has seen a renewal, with an essentially new library, an expanded Grand Wayne Center and most recently Harrison Square.
Moving the city’s minor league baseball stadium downtown has added to the perception that downtown is the place to be, Zacher said.
“I think that Parkview Field is a definite plus,” he said.
Changed landscape
The one part of the Harrison Square development that has yet to succeed has been The Harrison, a proposed three-story building next to Parkview Field that was originally planned as restaurants and shops below two floors of condos.
Late last summer – as the nation’s housing market seemed to be hitting bottom – city officials said they would consider making one of the upper floors office space if there was a market for it.
That market might be more viable today, but adding office space to The Harrison would have little effect on an 11 percent vacancy rate. An entire 24,000-square-foot floor of offices in The Harrison would increase the available space downtown by only 0.7 percent.
“A successful downtown mixes the business workers with the services they need,” Leatherman said, noting that several restaurants downtown have opened in recent years and are thriving. “Then the last component is the residential, and that’s the biggest challenge before us.”
Karl Bandemer, who oversees downtown development projects for the Fort Wayne-Allen County Economic Development Alliance, said most changes in the market will be much less dramatic than the one caused by the city’s purchase of Renaissance Square.
“You take 250,000 square feet out, it’s gonna affect (the market),” Bandemer said. “We don’t have many buildings downtown of that size.”
When promoting economic development, Bandemer agrees it’s nice to be able to tell companies considering a move to Fort Wayne that there is office space readily available, but it’s much better to be marketing a booming market.
“Nobody wants a high vacancy rate,” he said. “It’s a question of which side of the equation do you want to be on?”
And there are already signs the market is moving in the right direction, Bandemer said, citing recent inquiries for 5,000 and 7,000 square feet of office space.
“We’ve had a number of inquiries in just the last couple of weeks,” he said, “and the space inquired about has been available.”
Renewed, different
Eight years ago, large buildings such as Standard Federal Plaza – now called 1st Source Center – were half empty. Lincoln Tower was 28 percent vacant; so was One Summit Square.
No more.
Today, all three buildings have cut their vacancies at least in half. Lincoln Tower is almost 90 percent rented.
How dramatic is the turnaround?
Downtown Chicago’s vacancy rate for office space is 13.8 percent, according to national real estate firm CB Richard Ellis research. The firm said downtown Indianapolis office space is 18 percent vacant; Cincinnati is at 19.4 percent.
Unlike large, visible projects like Harrison Square, a thriving office-space market is difficult to see. But Leatherman said it has become noticeable recently in examples such as the new restaurants that have opened and done well – services tend to follow large populations of workers.
But vacancy rates are not perfect, either, because they’re based on the space on the market and available for rent. For example, the most recent report from the alliance has 34 percent of the Anthony Wayne Building available for rent, but several officials said the building is “essentially empty” because the tenants have left but still hold leases on the space.
Leatherman said people also need to understand that even a healthy, vibrant downtown will not look like the downtown they remember.
“As someone who’s lived in Fort Wayne most of his life, we all think back to the Wolf & Dessauer days, and the cable cars,” he said. “But our whole retail market has changed. You’re not going to see a Home Depot downtown, stacked up on four floors, nor should you. But we’re starting to fill in the holes. We’re getting there.
“And I think we should take a pause every once in a while and say we’ve made progress.”
Kathryn Mbwelera stands in her front yard, despite the blazing heat, pointing across the street to where the ground is filled with poison.