Opportunity in Legg move

When money manager leaves downtown building, prime office space will open up

February 20, 2007|By June Arney | June Arney,Sun reporter

The high-profile office space that will come available at 100 Light Street when money manager Legg Mason Inc. moves to Harbor East in 2009 presents an unusual chance to lure new companies to Baltimore. But it also could put pressure on downtown's traditional core as it competes with newer areas such as Harbor East, experts say.

Legg announced last week that it would leave the landmark 1970s skyscraper - the first private office tower built in the Inner Harbor - and consolidate nearly all its 1,000 Baltimore area employees in a new 24-story office tower that will bear its name in the H&S Properties Development Corp. waterfront project at Harbor East. Legg currently leases 23 floors in the 35-story Light Street building.

It's not often that such a large amount of prime real estate becomes available in a signature building in a downtown setting.

"It's an opportunity," said M.J. "Jay" Brodie, president of the Baltimore Development Corp., the city's economic development arm. "It's some nice space in an excellent building to offer that would not otherwise be available."

But Richard P. Clinch, director of economic research with the University of Baltimore's Jacob France Institute, said that even as the traditional business district is expanding with the development at Harbor East, there is a downside.

"You're hollowing out what is the traditional downtown," he said. "It's hard for the owners of the existing building, because it's always harder to fill yesterday's space than today's space. In many ways, Harbor East has built up a better downtown than downtown."

Given the new commercial space in Harbor East and the 2.5 million square feet of office and retail space that developer Patrick Turner plans for Westport, downtown space has competition, he said.

"The price of the Legg Mason space is going to have to fall," Clinch said. "Your old, traditional downtown office space is no longer the top address. That might be good for the city. As the price falls, people will move in who might have been in Columbia."

David Gillece, president of Colliers Pinkard, which manages the Legg property, said downtown is in far better shape to absorb the space than it was a decade ago, especially as older Class B buildings have been converted to other uses.

"I'm way less concerned than I would have been 10 years ago," Gillece said. "The answer now is that the properties that are being left are being converted to other uses."

A number of older downtown buildings have been turned into hotels or residences, including the Hampton Inn in the old USF&G Insurance Building at Redwood and Calvert streets and the conversion of the Jefferson Building on North Charles Street into apartments. Baltimore Gas and Electric Co.'s former Charles Center building is being converted to apartments.

"The best news for Baltimore is the signal from Legg to not just stick around for the next 18 years but to make an investment and a visible investment in Baltimore," Gillece said. "Those are the kinds of moments that cities dream about."

In addition, two other former parts of Legg that sublet from their former parent also are moving. Stockbroker Smith Barney, which Citigroup acquired from Legg as part of a swap, will depart for Harbor East in May. The financial institution has signed a lease for 42,000 square feet, said Michael S. Beatty, president of H&S Properties. That office, at 800 Aliceanna St., will occupy the same block as a seven-screen multiplex cinema and a health club.

And a division bought by Stifel Nicolaus & Co. of St. Louis said in November that it would move to the 1 South Street building.

The types of companies that might find the Legg Mason building appealing range from Internet software developers to advertising and marketing companies, law firms and sports products companies, said Richard Kadzis, a corporate real estate industry analyst in Atlanta with CoreNet Global, an association for corporate real estate and related professionals.

"These are the type of companies that are attracting young, creative people," he said. "That young and restless generation likes the creative environment downtown."

And the space offers appealing infrastructure with public transit and nearby airport access, along with ballparks, hospitals and cultural attractions, he said.

With vacancy rates low nationally - in the 13 percent range for the first time since 2000 - Baltimore could benefit from having space in a prime location available, Kadzis said.

The Legg building, which opened in 1973, has floor plans that are smaller than those typical in offices being built today, Brodie said. Its floors are about 14,500 square feet rather than the 20,000 to 25,000 square feet that have become standard.

The space might therefore lend itself to multiple users rather than a single user who might not want to have employees on more than one floor, Brodie said.

Christian S. Johansson, president and chief executive of the Economic Alliance of Greater Baltimore, a public-private partnership that markets the region, said a delicate balance exists between having too much space and having enough to absorb the opportunities that come along.

"It's a premier property," he said. "It's going to attract a lot of excitement. I think there will be a number of companies that will put it on their list for consideration."

june.arney@baltsun.com

Rental rates

Here's how Baltimore rental rates for top-tier office space compare with some other major cities:

Class A rents per square foot

Baltimore $21.06

Boston $39.78

Los Angeles $31.44

New York $54.62

Philadelphia $24.50

San Francisco $32.76

Washington $48.08

[Source: CB Richard Ellis]

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