“Just listen to the music of the traffic in the city/Linger on the sidewalk where the neon signs are pretty.”
– Petula Clark, “Downtown” (1964)
If you’d asked someone 20 years ago whether there was a place in Fort Wayne finer than downtown, they might’ve laughed in your face or, at the very least, given you a quizzical look.
Today, the cultural, restaurant and retail sectors have turned downtown Fort Wayne into a destination rather than an area to flee, particularly after work.
The Zacher Company’s recent analysis of the Fort Wayne market provides a fascinating look at where we are as a city compared to other metros. For example, downtown office space is 42% of Fort Wayne’s total square footage, according to Zacher.
Last year, the vacancy rate for downtown space was 10.93%, just under the city’s overall rate of 10.95%. That’s an increase from 9.21% from the year before due to additional space becoming available at Electric Works and the Frontier building on West Jefferson Boulevard, Zacher reported. Still, as Zacher pointed out, Electric Works impressively opened with 70% of its available space pre-leased.
When viewed against larger cities, including Indianapolis, Fort Wayne’s vacancy rate is a bright spot in an otherwise lagging national sector. Due to remote working and companies reducing physical space, the average office vacancy rate in the U.S. market stood at 18.6% in the first quarter of 2023, according to Cushman & Wakefield, a leading commercial real estate services firm. That’s six-basis points higher than at the end of 2019.
In its first quarter projections, Cushman & Wakefield calculates that Indianapolis’ vacancy rate is 20.4%, Chicago is at 23.7% and Columbus is 26.7%.
Blame it on inflation fears, recession fears and the world trying to adjust itself to the new normal of working away from the office during the pandemic. There are other fears, too.
“In Q1 2023, another concern cropped up when several banks failed. Occupiers have grown cautious, looking for cost-cutting opportunities,” Cushman & Wakefield said in its MarketBeat report. “This is beginning to play out in the labor market, as layoff and hiring freeze announcements have grown and office-using employment growth has cooled.”
The failures of Silicon Valley, Signature and First Republic led to concerns that a massive commercial real estate balloon was about to burst. So far, it hasn’t, but that doesn’t mean anxiety has diminished. Earlier this month, the Federal Reserve announced it has “increased monitoring of the performance of (commercial real estate) loans and expanded examination procedures for banks with significant (commercial real estate) concentration risk.”
Reuters reported banks represent 54% of the overall $5.7 trillion commercial real estate market, with the small lenders holding 70% of such loans in April.
According to Steve Zacher, there is no reason for concern in Fort Wayne.
“Let’s be clear: Fort Wayne does not have the problem,” Zacher told The Journal Gazette this week. “Many other places have a much higher office vacancy rate, either in the whole market or downtown. The unique thing about Fort Wayne is that office users growing here are growing downtown and still want to be downtown.”
Convenience is a big part of the equation, Zacher said, when comparing downtown growth here to abandonment in larger cities.
“(Elsewhere) there isn’t the desire to come downtown because mostly it’s a long commute,” he said. “In Fort Wayne, they are willing to do that. And employers here really regard it as a recruitment and retention tool, which is why we’ve had so many companies choose to locate downtown.”
Another interesting statistic is how well certain quadrants are doing, particularly when viewing the data over 10 years.
For example, in 2012, as the country was recovering from the Great Recession, the city’s northeast had a 35% office vacancy rate. It was down to 10.5% in 2021 before ticking up 3-basis points.
Northeast’s 1.7 million square footage accounts for 12% of the market.
The office vacancy rate in northwest Fort Wayne – 18% of the total space – spiked to nearly 22% in 2017. It was at 6.2% in 2022.
And despite its relative lack of office space compared to other quadrants, southeast Fort Wayne’s rate has moved from just under 17% in 2012 to 4.4% in 2022.
“I think it’s just reflective of the whole market coming back,” Zacher said before adding that prudence, which some see as hesitancy, may have saved Fort Wayne from the plight other cities are experiencing.
“We never overbuilt,” Zacher said. “We haven’t gone out and built a bunch of space we don’t need. And then we weathered COVID, all those companies (in other cities) said, ‘We don’t need nearly as much space, and employees want to work from home.’ We go through it.”
In its forecast, Zacher said remote work is declining as a result of employer reluctance; however, the hybrid work environment – a mix of remote and in-office locations – is a “reality in the foreseeable future.”
Space needs to be more productive, Zacher said. Rather than the unused palatial corner offices and the cubicle farms that silo people, the future is the creation of collaborative atmospheres to increase efficiency but not at the sacrifice of humanity, Zacher said.
This is reflected at Electric Works, where the pitch for an evolutionary space helped it land Do it Best, the New Millennium Steel division of SDI, Parkview Health, Medical Informatics, CARR Workplaces and Fort Wayne Community Schools’ Amp Lab.
For Do it Best, a privately held hardware co-op with thousands of member-owned stores in 50 countries, is Electric Works more indicative of its culture than its old headquarters on Nelson Road?
“In many cases, the office reflects a company’s culture,” Zacher said without alluding to Do it Best. “And people want to take pride in where they work and be taken care of where they work.”
I’ve got to admit that Do it Best’s neon sign is very pretty over Building 26.
Fred McKissack is editorial page editor of The Journal Gazette.
