Five Ways to Attract People to the CBD & One Warning
As Baltimore continues on its path to becoming a 24/7 city (we've been pouring Red Bull into the Chesapeake. Is it helping?), panelists at Bisnow’s Rejuvenating the CBD event last week revealed the key concepts that'll keep people and money coming to Baltimore.
1) Cap Rates
Forest City New East Baltimore Partnership’s Scott Levitan (flanked by Baltimore City Department of Transportation transit bureau chief Veronica McBeth and Bozzuto Development’s Jeff Kayce) represents a JV of Forest City and six local investors that in ’04 won an RFP to develop a massive section of East Baltimore. Despite the fact that the project will restart in November, he’s not sure Forest City would chase the RFP if it came out today. Forest City is in a lot fewer markets, he says. Of the seven in which it operates now, cap rates are low, attracting capital like his company's.
2) Parks, Retail, & Schools
The developers have already put up 550k SF of commercial space and 249 resi units already at the East Baltimore project. Then they used the downtime during the downturn to rethink the master plan. In November and through 2015, they'll break ground on 300 resi units, a lab building, a hotel, and a 10.5-acre park. The area is starting to feel like a community with Atwater’s opening in October at the project’s 855 N Wolfe St, he says, and the new Hopkins-Henderson school, Baltimore City’s first new school in 22 years. BCT Architects CEO Bryce Turner says the revived Patterson Park and the redo of Center Plaza at Charles Center are drawing people in; 75 to 100 people hang out in Center Plaza every night, and retail should pop up there soon.
The loss of CBD office tenants to other parts of Downtown isn’t the worst thing ever, according to Baltimore Development Corp’s Dan Taylor. Legg Mason’s move from 100 Light St to Harbor East and Transamerica’s move from 520 Park Ave to some of Legg Mason’s old space left behind a completely empty office building. But Time Group has transformed it into a super successful apartment building. Such projects are transforming the CBD from a 9-to-5 market to a 24/7 one, Dan says.
Time Group CEO Mark Caplan (with Downtown Partnership of Baltimore president Kirby Fowler) says the year-long conversion of 520 Park into 171 apartments, 165 parking spaces, and 18k SF of retail finished in June. 120 units already are committed, which puts leasing a year ahead of schedule. Retail is along for the ride, too. The 15k SF Mount Vernon Marketplace will open in the base this year, already half committed. Now Time Group is puzzling out what to do with the 1.5-acre parcel just to the south. It likely will become a mid-rise apartment building of 150 to 200 units, he says.
TRF Development Partners president Sean Closkey (with our moderator, DLA Piper Guy Flynn) says his company has invested $110M in the most distressed part of the city, west of EBDI, and reduced vacancy 88%. Now, in a JV with EBDI, it’s moving down Preston and doing 170 rehabs. In Oliver, the City Arts building's 69 apartments leased up in just six weeks (TRF expected it to take nine months). Median house prices in the area have risen from $25k in ’08, and transactions now are consistently hitting $180k to even $260k, he says, as reinvestment efforts eliminate pockets where 35% of the buildings are vacant.
Veronica works with MDOT and MTA on the Red Line and oversees the Charm City Circulator and the Harbor Connector. The Red Line, she says, is an opportunity to connect to non-Downtown areas like Highlandtown and Greektown and the U of M Biopark and to work with developers on mixed-use to beef up communities along the way (we mean that literally, as eliminating food deserts is one of the goals). She also is working on protected bike lanes and bike sharing, noting that in DC and Boston, local businesses near bike shares have experienced 19% growth. Fewer cars also pump up local businesses, Kirby says, as people walk or take the Circulator to go out to eat. Mark says Hopkins House, managed by WPM (of which he's chair), has a 172-space parking garage that was always packed 10 years ago and now is just 75% full.
18 months ago, Baltimore City apartment vacancy was 3.6%, says Jeff (snapped with Bryce), and now it’s crawled up to 8%. That doesn’t mean everyone’s buildings are going to empty, he says, but rents will flatten, something to remember when underwriting. For its part, Bozzuto, War Horse, and Solstice Partners will break ground by the end of the year on 900 E Fort Ave in Locust Point. Bozzuto battles less-than-perfect market conditions by doing projects that are different, Jeff says. This one will achieve that by blending the food and beverage into the lobby—hotel style—and opening its best real estate, a rooftop bar and lounge, to the public.