Downtown buildings offering 'freebies'

FEASTING ON THE OFFICE GLUT

November 23, 1991|By Ellen James Martin

David Stahl remembers his surprise when he saw the proposal on paper.

If his employment agency signed a five-year lease at the swank Bank of Baltimore Building, it would get free rent the first two years. What's more, the building's owner would cover the cost of office improvements -- including Italian marble, mahogany columns, custom millwork, built-in cabinets and plush carpets.

"I felt as though I'd struck one of the best deals of my business career," said Mr. Stahl, a co-partner at Don Richard Associates of Baltimore Inc. The firm considered the decision to move to the fancy new quarters was easy, he recalls.

All over downtown, office tenants are discovering that they can strike deals that would have been unimaginable a few years ago. The explanation is classic economics: a growing glut of office space for too few tenants.

The situation makes office tenants like Mr. Stahl gleeful but landlords like Tom Ragno morose.

"If the market could talk, it would be crying," said Mr. Ragno, director of leasing for the Candler Building, a recently renovated downtown building aching under a load of excess space. The building -- with 534,000 square feet -- is 48 percent occupied. Three of the 12 floors in the office tower are vacant.

Leasing agents at the Bank of Baltimore, Candler and other downtown buildings are resorting to giveaways in hopes of signing on tenants.

For example, when tennis star Pam Shriver and other sponsors of a black-tie charity gala pull up their chairs to an eight-course dinner Monday, they'll have the satisfaction of knowing the hall they're using came at no cost.

In its search for tenants, Candler leasing agents are offering free use of the building. That way the gala's sponsors save the $7,500 to $10,000 they would have paid to rent a hotel ballroom, and Candler's owners get exposure they hope will lead to more signed leases.

"The more people who see the building, the more that will be impressed and surprised," Mr. Ragno said of Candler, at the corner of Market Place and Pratt Street.

Equitable Life Assurance Society is another beneficiary of the good deals being cut by landlords. The insurer will consolidate its downtown and Owings Mills offices and move into the USF&G Building near the Inner Harbor early next year.

Equitable will save $4 per square foot at the plush USF&G Building, compared with what it's paying at the World Trade Center at the Inner Harbor, said Edward Haesloop, Equitable's operations manager.

In addition, the USF&G Building will provide free office improvements for Equitable -- including ceilings, carpeting, partitions, upgraded wall coverings and other office fixtures, he said. Mr. Haesloop estimated the value at $600,000.

"I was a little surprised with what they gave us," Mr. Haesloop said of the terms provided by USF&G. "We couldn't turn them down."

Landlords aren't imagining things when they talk about the high level of vacant space. As of Sept. 30, the vacancy rate for Class A office space in newer buildings stood at 15.38 percent. The vacancy rate for older, Class B space was 22.09 percent, according to Steven Gassaway of Commercial Real Estate Group Inc. in Baltimore.

"Basically, you're going to see a buyer's market, the sky's the limit and desperate developers are going to buy deals to minimize their losses -- not to make money," said Robert Manekin, a senior vice president at the Manekin Corp., a major player in the downtown office market.

The Candler Building is hardly alone in offering free accommodations to business groups. Downtown's 28-story addition to the 10-story IBM Building, formally known as 100 E. Pratt St., has recently provided free use of its lobby to meetings of such groups as the American Institute of Architects and the Building Owners and Managers Association.

"You want to do things that bring the building into the public's eye," said Bruce Matthai, a vice president of W. C. Pinkard & Co. and broker for the new building.

The landlord for the IBM Building has incorporated several amenities for tenants that are setting a new standard for Class A space in Baltimore. Among those are a 7,000-square-foot athletic facility in the building, staffed with fitness trainers. The athletic club will be open exclusively to office tenants for $15 to $20 a month.

A theater-style conference room, capable of seating 80 or more, will also be available to tenants at a below-market rate. And tenants will be provided a concierge -- someone charged with doing anything from lining up a limousine to arranging for catering services.

"We wanted to create a building that was significantly different in the market place and to raise the level of occupancy," Mr. Matthai said.

Concierge services and low-cost health clubs may be appealing, but some downtown brokers believe that discounts on rent are more important in attracting and holding tenants.

"We're discounting our rates," said David E. Johnson, who represents the partnership that owns 201 N. Charles St., an office building at Charles and Lexington streets.

"For many owners, it's no longer a case of how much money they are going to make. It's a case of how much less can they lose," Mr. Manekin said.

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