The vacancy rate for office space in downtown Baltimore is at an all-time high -- and it's expected to rise even more before it falls.
New Class A space had a vacancy rate of 16 percent and older Class B space had a vacancy rate of 21 percent for a combined rate of 18.4 percent as of Sept. 30, according to CB Commercial.
FOR THE RECORD - The spelling of C. William Struever has been corrected for the archive database. See microfilm for original story.
The rate is expected to increase because two high-rise office buildings are nearing completion downtown that will add nearly another 850,000 square feet to the market, and most of it has not been leased.
They are 100 E. Pratt St., the 28-story addition to the 10-story IBM building at the same address, and the Commerce Place tower at Baltimore and South streets. The first tenant of the 390,000-square-foot Pratt Street tower, the law firm of Tydings and Rosenberg, is scheduled to move into it by Nov. 1, but approximately 200,000 square feet remains available for lease.
Commerce Place, with 450,000 square feet of space, will have a topping out ceremony Oct. 29. Its first tenants, RTKL Associates and the law firm of Shapiro and Olander, are scheduled to take occupancy by the fall of 1992.
Even with those tenants, the vacancy rate for downtown office space most likely will pass the 20 percent mark next year, according to Steve Gassaway of C. B. Commercial.
During a seminar at the Greater Baltimore Board of Realtors convention this month, Mr. Gassaway predicted that unleased space will gradually be absorbed and that the vacancy rate will fall to a healthier 13 percent by 1995.
So far this year downtown, there has been about 200,000 square feet of "negative absorption" -- office space that has been vacated and not leased again. Some office tenants have shrunken or disappeared entirely, such as the accounting firm of Laventhol & Horwath, while others have moved from downtown to one of the surrounding suburbs.
Some local real estate brokers predict the IBM and Commerce Place buildings will be the last speculative office towers to rise in downtown Baltimore for some time.
"You're not going to see a private [office] building built in downtown Baltimore for years. It's a case of supply and demand," said J. Joseph Casey, head of Casey and Associates and past president of the Greater Baltimore Board of Realtors. "I don't believe there is a lender in America or Europe who would lend money for a speculative office building in downtown Baltimore unless it was at least 50 percent leased, and even then they'd be leery."
Other signs of the weak real estate market range from an increase in the number of buildings taken over by lenders to a surge of interest by private sector developers in attracting governmental tenants. For example:
* The 28-story office tower known as 6 St. Paul Centre became the largest and tallest building downtown to be taken over by a lending institution when Chemical Banking Corp. took control of it this fall.
Other downtown buildings owned by lenders include the former Redwood Center buildings at Redwood and Calvert streets, now the property of Riggs National Bank of Washington, and the Brokerage at the Inner Harbor, a Bank of America property.
MP Investments Inc., a wholly-owned subsidiary of Boulton Hourigan Group Inc. of New York, has a contract to buy the Brokerage within the next several months and is currently conducting a feasibility study to determine whether to proceed with the acquisition.
* The Rouse Co. is seeking passage of City Council legislation that would allow it to use the former site of the McCormick spice plant as a parking lot for up to four more years. "Current market circumstances have tended to put a damper on our prospects" of finding tenants for a replacement project, Vice President TTC Robert Minutoli told the city Planning Commission last week.
* After meeting opposition to his plans to build a $90 million office tower at the southeast corner of Charles and Redwood streets, developer Leonard Attman now appears to be concentrating on leasing the three smaller buildings on that corner already.
Although he says he hasn't abandoned plans to build the office tower, Mr. Attman's brokerage company recently posted a sign on the corner building indicating it has space for lease.
Much of what real estate activity there is downtown involves government-related transactions or other projects that do not depend on the tenants who have typically filled up privately funded office buildings in Baltimore.
* A group headed by Otis Warren and Theo Rodgers finally obtained financing for a $39 million City Crescent office project at Baltimore and Howard streets, an 11-story building that will provide 250,000 square feet of office space for federal agencies. The financing came only after the city of Baltimore agreed to lease the building for 15 years if the federal government didn't renew its 10-year lease.