Harbor thrives, downtown lags

Report: Jobs are being lost downtown, partly as office space shifts to waterfront locations in places such as Fells Point, Locust Point and Canton, a study says.

January 30, 2004|By June Arney | June Arney,SUN STAFF

Baltimore is fighting a two-front development war, struggling to rescue its aging downtown while encouraging construction in trendy, waterfront areas.

The waterfront is winning, according to a new report by the Downtown Partnership.

Downtown Baltimore lost 2.9 percent of its jobs, a total of about 2,600 jobs, in the 12 months that ended in August, in part because of a shift in office space from downtown to new locations on the waterfront in places such as Fells Point, Bond Street Wharf, Tide Point and Canton.

"You just have amazingly attractive real estate that's starting to develop," said Richard P. Clinch, director of economic research at the Jacob France Institute at the University of Baltimore. "But, it's pulling a lot of the life out of downtown. ... The locus of activity is moving east. It's easier, cheaper, no hassle, with a view."

Economists studying economic trends in the city say it's way too early to give up on the old downtown.

Experts point to lots of redevelopment under way or on the drawing boards that could set the stage for the aging downtown to blossom on its own with a little help from community leaders.

"The question is: How do we create a new use for an older building? How do you get tenants to look at space at some of these older, smaller buildings instead of the waterfront," said Michele L. Whelley, president of the Downtown Partnership.

More than half of the recent decrease in downtown employment was the result of companies shrinking or going out of business. With a few exceptions, there was no significant job loss from businesses moving to surrounding counties, according to the report.

The downtown area's competition from new waterfront space is a double-edged sword, said officials at Downtown Partnership. Although it means that tenants have new options that might pull them away from the downtown core, those options also might keep them from leaving the city and making their new homes in the nearby counties.

"We're seeing that these companies that might have thought about leaving the city can stay," said Marshall W. Snively, vice president of economic development and planning for partnership. "These companies are finding they can move to what they think are better digs and have a view of the water."

Almost 12 percent of downtown's employment decline came from companies moving jobs out of the city center, with its older buildings and aging infrastructure, into new or newly renovated Class A space elsewhere in the city.

Included in the decline was RTKL's move of more than 200 jobs from 1 South St. to Bond Street Wharf and Performax's relocation of 135 jobs from 111 S. Calvert St. to Tide Point.

For the purposes of its report, Downtown Partnership defined the city center as bounded by Martin Luther King Jr. Boulevard on the west, North Avenue on the north, the Jones Falls Expressway and Central Avenue on the east and Key Highway on the south.

The city as a whole lost 15,500 jobs, 4 percent of its work force.

Two key examples running counter to the trend of leaving aging city buildings for other Baltimore locations are the recent decisions by law firms Whiteford Taylor & Preston LLP and Miles & Stockbridge PC to renew their leases downtown.

Whiteford Taylor announced this month that that it had signed a long-term lease committing to an additional floor at 7 St. Paul St., with plans to increase that space to 89,000 square feet on five floors by 2006.

Miles & Stockbridge announced in October that it was signing a long-term lease and doing $4 million in renovations in the Bank of America building at 10 Light St.

But Clinch predicted that the owners of older commercial real estate will have a tough sell and will experience higher vacancies.

He expects that Class B and Class C space will continue to be converted to housing. "There's a huge pent-up demand for downtown living from the universities," he said. "What student wouldn't want to live closer?"

In many cases, the preference of business leaders has shifted through the years from the city to the suburbs, said Anirban Basu, chief executive officer of Optimal Solutions Group.

"Today the goal is to be in the trendiest, most happening areas in the metropolitan area," he said. "Why? Because they attract talent. And, there is nothing more magical than water."

Downtown promoters note today's downtown residential towers and the success of such projects at David Cordish's Power Plant Live entertainment complex, create alternative dimensions for downtown.

By the end of last year, 6,000 people were living downtown, a 50 percent increase since 1997, according to the report.

And despite the loss of some of its employment base last year, the level of capital investment in downtown remained a robust $2.5 billion, largely driven by educational and cultural institutions, which contributed $875 million to downtown's economy, the report said. About 110 projects were in various stages of completion.

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