2008/2009. Baltimore

Transcription

1 28/29 STATE OF DOWNTOWN Baltimore

2 28 On e - Mi l e Ra d i u s To t a l s Employment 113,5 Residents 39,983 Students 17,6 Hotel Rooms 7,639 Office Space 21M SF Indicates Downtown Management District

3 EXECUTIVE SUMMARY The tremendous development and investment driving Downtown s economy in recent years slowed gently in 28 as developers paused to consider the effect that new and different types of inventory would have on the marketplace. By the end of 28, there was $1.4 billion in completed projects, but plans for new growth were scaled back or put on hold as concerns about the national economy and an overly cautious credit market slowed the pace of development. Research by Grubb & Ellis showed Baltimore among the top 15 U.S. office markets because of its low vacancy rate. Class A office buildings performed relatively well while older buildings struggled slightly, leading to a modest two percent increase in overall vacancy. Housing demand continued to be strong with 28 activity favoring rentals over for-sale units. Employment was also steady with only small declines in a few sectors. Investment slowed, but several projects under development, particularly hospital and life sciences expansions, kept investment totals up. Gains in retail were tempered by concerns about the health of national chains. The potential sale of two premier properties, Harborplace and The Gallery, played into these concerns. New hotel inventory, including a flagship hotel for the Baltimore Convention Center and several boutique hotels, awakened previously under-utilized areas of Downtown. Unlike the previous recession in the early 199s, Downtown Baltimore headed into the current economic downturn with a diverse economy, and very solid fundamentals. While we expect 29 to be a more difficult year as global economic factors trickle into local sectors, Downtown s economy emerged from 28 strong and well-positioned to take off as soon as credit markets and global investment stabilize. Both Forbes and BusinessWeek named Baltimore as a top city to ride out the recession. TABLE OF CONTENTS 4 Office Market 5 Employment 7 Development & Investment 7 Land Use & Construction 8 Housing & Population 9 Life Sciences 9 Education 1 Retail 1 Hospitality 11 Acknowledgements 12 Sponsors Top 25 Largest US Metro Areas - One-Mile Radius Statistics Population Median Income Households over $75, annual income Employment 1 New York 171,657 2 San Francisco 15,194 3 Chicago 74,59 4 Philadelphia 63,569 5 Los Angeles 58,812 6 Seattle 52,336 7 Baltimore (7) 39,983 8 Boston 38,4 9 San Diego 32,948 1 Denver 32,4 11 Washington, DC 29,53 12 Minneapolis 28, Atlanta 21, Portland 2,26 15 Houston 18, Miami 18, Pittsburgh 16, Phoenix 16, Cincinnati 15,663 2 Dallas 13, Cleveland 9, St. Louis 8, Kansas City 8, Tampa 7, Detroit 7,549 1 New York $85,76 2 Dallas $72,756 3 Chicago $69,741 4 Boston $68,51 5 Philadelphia $43,925 6 Washington, DC $42,755 7 Houston $41,19 8 Portland $4,884 9 San Francisco $36,43 1 Kansas City $34, Baltimore (15) $34, Seattle $34, Minneapolis $34,92 14 Detroit $32,5 15 Denver $31, San Diego $31,46 17 Tampa $3, Miami $27, St. Louis $25,745 2 Pittsburgh $24, Cleveland $24,54 22 Atlanta $22,68 23 Cincinnati $22,17 24 Phoenix $19, Los Angeles $16,6 1 New York 57,61 2 Chicago 22,518 3 San Francisco 13,44 4 Philadelphia 1,624 5 Boston 9,664 6 Seattle 6,84 7 Washington, DC 4,54 8 Baltimore (9) 4,116 9 San Diego 3,925 1 Denver 3, Minneapolis 3, Portland 2, Dallas 2,29 14 Los Angeles 2,24 15 Miami 1, Atlanta 1, Houston 1, Cincinnati 1, Pittsburgh Tampa 8 21 Cleveland Kansas City Detroit St. Louis Phoenix New York 1,178,136 2 Washington, DC 347,256 3 Chicago 342,324 4 Boston 279,88 5 Philadelphia 226,33 6 San Francisco 226,162 7 Seattle 196,269 8 Los Angeles 195,441 9 Minneapolis 152,426 1 Cleveland 15, Houston 148, Denver 14, Pittsburgh 127,83 14 Atlanta 126, Cincinnati 114, Baltimore (15)* 113,5 17 Dallas 12,76 18 Kansas City 91, Detroit 85,887 2 San Diego 79, St. Louis 78, Miami 67, Phoenix 56, Tampa 48, Portland 38,834 ( ) - last year s ranking Source Data - Claritas * - Source - Downtown Partnership of Baltimore, Inc. 3

4 Office Market The conventional wisdom in 28 was that Downtown s office vacancy rate was dramatically off from the year prior because of new inventory and downsizing at white collar firms. Anxiety about the regional market, and the national economy in general, also added to this impression. But, in reality, things weren t so bad. City Center In fact, overall vacancy, rent growth, and absorption were largely unchanged from 27. Downtown Partnership calculates the overall vacancy rate for 28 at 13%, two points higher than 27. We arrive at this figure by averaging the rates calculated by commercial brokerages (CB Richard Ellis, Colliers Pinkard, Cushman and Wakefield of Maryland, MacKenzie Commercial, and Transwestern). Nationally, the downtown vacancy rate was 14.5 percent. Downtown Baltimore s rate of 13 percent ranked in the top third nationally (12th out of the 35 largest downtowns) for lowest vacancy, according to Grubb & Ellis. Class A buildings held their own with highest occupancy and steady rents. Older buildings were not as in demand as office space, but received interest for conversion to hotel and residential uses. 28 Office Market Statistics Year End 27 Year End 28 Vacancy - Overall 11% 13% Rents - Class A $26-$33 $24-$33 Rents - Class B $19-$23 $17-$23 Notable Lease Transactions 28 Company Building Sq. Ft. Action Neighborhood Cubellis, Inc. 5 E. Pratt Street 5, New City Center Gross Mendelsohn 36 S. Charles Street 14, Renewal City Center Hogan and Hartson Harbor East 38, Relocation Inner Harbor Key Risk 7 St. Paul Street 9,183 New City Center KPMG 1 E. Pratt Street 33,578 Relocation City Center Maryland Insurance Administration 2 St. Paul Place 69,151 Relocation City Center 4

5 Employment In the 27 State of Downtown Report, we asked business leaders to predict how a national recession would impact their business hiring in 28. Most said it would barely affect their staffing, if at all. It turns out they were prescient, as Downtown lost only 1, jobs, mostly in the communication and finance industries. We reported 4,288 employers and 114,5 jobs in 27, and those numbers came in at 4,231 employers and 113,5 jobs for 28 with a +/- two percent variance. Up sectors included retail, hotels, restaurants, and construction. In terms of professional services, accounting and engineering firms added jobs, while financial companies and publishers (including newspapers) reduced their staffs through mergers, moves, and layoffs. Educational jobs were down slightly as State budget cuts and a hiring freeze adversely affected employment. While generally accepted that the latest national recession would not hit Downtown Baltimore as hard as the downturn of the early 199s, staff reductions are expected to continue in Light Street Garage Large to Small Business Ratio 1% 6% 76% 8% 6% 4% 2% 94% 24% Employers 1 to 49 Employees 5 + Employees Employees 5

6 27 to 28 Employment Changes by Sector Government 27, Healthcare 15,5 Finance and Insurance Professional Services Education Services Hotels and Restuarants Retail Trade Information and Communications Real Estate Non Profits Arts and Entertainment Administrative Support Manufacturing Utilities (1,) (1) (2) 2 4,1 3 3,1 (1,1) 2,3 3, (1) 2,3 1,9 1,7 2 1,2 14,1 12, 11,1 1,9 Transportation and Warehousing Construction Wholesale Trade Mining, Petroleum, Other 1,2 1, Total Change 6

7 Development & Investment Going into 28, Downtown Partnership predicted that development and investment activity would slow for the year relative to previous years. Downtown Baltimore was coming off a very aggressive development cycle that saw record investment over a five-year period, ending in 27, that reshaped areas such as Harbor East and the Westside. In the 27 State of Downtown Report, we wrote that the second half of 28 would be similar to 24, when there was a pause after years of intense building as developers surveyed the marketplace and determined what types of future projects to initiate. We also pointed to concerns about tightening credit markets (concerns that turned out to be well-founded) as possibly dampening growth. But major projects, such as the completion of the Hilton Baltimore Convention Center Hotel, the new building at Mercy Medical Center, and mixed-use space in Harbor East, actually raised the investment total for completed projects in 28 to $1.4 billion, up from $8 million in 27. Looking forward, there are approximately $4 billion in additional projects under construction or planned for 29 and beyond. Land Use & Construction Land Use Land Use Completed Completed Completed Under Construction Planned SPring 29 spring 29 through 219 DOWNTOWN (ONE-MILE RADIUS) Cultural & Public Space $13,, $1,6, $ $25,9, $83,55, Hotel $17,, $377,8, $95,479, $74,3, $231,, Infrastructure $27,15, $5,284, $4, $145,515, $2,65, Institutional $13,55, $78,, $4,4, $625,9, $531,, Mixed Use $7,5, $232,6, $2,4, $5,, $1,194,25, Office $3,369, $136,166, $1,677,163 $37,, $38,4, Parking $24,, $38,, $ $18,, $81,, Residential $128,8, $55,, $25,, $12,5, $288,, Retail $ $11,5, $2,585, $24,7, $ TOTAL $261,369, $1,385,95, $131,941,163 $1,463,815, $2,449,85, Major Projects mapped area (Outside One-mile Radius) Cultural & Public Space $ $ $ $ $15,5, Hotel $ $ $ $4,, $56,, Infrastructure $ $ $ $2,, $ Institutional $34,, $146,, $4,, $1,272,, $281,, Mixed Use $11,, $36,, $ $28,, $393,, Office $ $ $ $ $ Parking $ $ $ $ $42,, Residential $42,4, $6,6,6 $ $14,7, $75,, Retail $ $ $ $ $ TOTAL $87,4, $188,6,6 $4,, $1,59,7, $862,5, Construction Activity Completed 8-Spring 9 $228,6,6 / $1,517,891,163 Under Construction, Spring 9 $1,59,7, / $1,463,815, Planned Through 19 $862,5, / $2,449,85, $ $5M $1.B $1.5B $2.B $2.5B $3.B $3.5B $4.B $4.5B $5.B One mile radius Mapped area outside of one mile radius 7

8 Housing & Population Downtown s population grew by nearly 2, residents, to almost 4, people, and demand for new housing continued to be healthy in spite of the slowdown in the national real estate market. Housing shoppers opted more to rent than own due, in large part, to tighter credit. As a result, condo sales were sluggish while Downtown apartment buildings reported occupancies above 9 percent throughout 28. All rents increased by 3 percent, and absorption of new units was strong. More than 1,1 new housing units were delivered in 28, bringing the total number of Downtown units to approximately 9,. Of the new units, 4 were rental and 749 were for-sale. A large portion of new buildings were delivered in City Center and on the Westside, including 39 W. Lexington and St. James Place. Mount Vernon added 1 W. Chase and The Rows, while the Waterfront added the Ritz Carlton Residences and Pier Homes at Harborview. An additional 1 rental (and zero for-sale) units were delivered in the Spring of 29 but, otherwise, there is very little scheduled for delivery until at least 21, even as demand for rental housing stays strong. 39 W. Lexington Apartments Units Completed 8 4 Units Completed, Spring 9 Under Construction, Spring Planned Through 19 3,47 2, , 1,5 2, 2,5 3, 3,5 One mile radius Mapped area outside of one mile radius For-Sale Units Units Completed Units Completed, Spring 9 Under Construction, Spring Planned Through 19 2,335 2, , 1,5 2, 2,5 One mile radius Mapped area outside of one mile radius 8

9 Life Sciences New investment, capital expansions, and employment growth by hospitals, bioparks, and higher educational institutions continued to redefine Downtown and its skyline. Downtown s assets in these areas, often considered recession-resistant because of federal funding sources, is perhaps one reason Forbes and BusinessWeek both listed Greater Baltimore as one of the best places to ride out the struggling U.S. economy. Mercy Medical Center The massive scale of life science and hospital expansions set the stage for an employment surge in 21 through 212 as these new facilities begin to come on line. The University of Maryland Biopark made significant progress in 28 with the opening of the Bio Building II, the ground breaking for the Bio Building III, and the construction start on Maryland s new Office of the Chief Medical Examiner and Forensic Medical Center. In addition, Mercy Medical Center began construction on the Mary Catherine Bunting Center, the largest construction project in Downtown, totalling more than 68, square feet and more than $4 million in investment. Life Science Construction, One-Mile Radius SF Completed Through 8 211, SF Completed, Spring 9 SF Under Construction, Spring 9 994, SF Planned Through , 2, 4, 6, 8, 1,, 1,2, Education The Johns Hopkins Carey Business School chose Downtown as its headquarters and began consolidating students and faculty from the Columbia and Washington campuses at the beginning of 29. Two secondary schools within the one-mile radius also saw major investment. The Baltimore School for the Arts and Paul Lawrence Dunbar High School each had capital improvement projects valued at $3 million. Carey Business School 9

10 Retail Retail trends from 27 continued into 28, with openings along Pratt Street and in Harbor East, including Miss Shirley s restaurant, Sassanova (shoes / accessories), and Teavolve. Downtown largely avoided closures of its national chain stores due to the weak economy, and Filene s Basement expressed its confidence in the Downtown retail market by keeping its Lockwood Place store open, even as it shuttered others within the region. Financial challenges at General Growth Properties, owner of Harborplace & The Gallery, left the fate of these two signature properties in the air as the year drew to a close. Retail Development Projects Project Neighborhood Square Footage available Retail Space Development (sf) 1,, 885,255 8, 6, Mechanic Centre City Center 19, Superblock (multiple projects) Westside 222, Flour House City Center 25, Harbor Point Inner Harbor 233, 4, 2, 157,529 Under Construction, Spring 9 Planned Through 19 Hilton Baltimore Hospitality Overall visitation numbers for 28 were similar to those in 27. The Baltimore Area Convention and Visitors Association reported that 11.5 million overnight visitors spent $2.9 billion. By far, the biggest hospitality industry story of 28 was the opening of the 75-room Hilton Baltimore Convention Center Hotel, but there were multiple other projects in various stages of completion. As expected, the delivery of new inventory resulted in slightly lower occupancy and average daily room rates. Many other hotels opened or were undergoing construction in 28, including the Brewing Company Fairfield Inn, the Quality Inn, and Hotel Monaco. New hotels in the planning stages include the Hyatt Place City Center and the former Drovers Bank site Hotel Rooms Completed, 112 Calendar Year Hotel Pipeline 684 Under Construction, Spring 9 Planned Through 19 2,798 Completed, Spring Hotel Inventory Under Construction, Spring 684 1, Planned Through ,743 2,798 6,44 Inventory 7 Rooms Added 8 Rooms Added, Spring Total: 7,639 1

11 ACKNOWLEDGEMENTS This report is made possible thanks to the support and cooperation of Downtown Partnership of Baltimore member organizations, industry partners, and dedicated staff. Special thanks to the Baltimore Neighborhood Indicators Alliance at the University of Baltimore for its invaluable assistance collecting and verifying employment data, and to the Baltimore Development Corporation for its ongoing support in the production of this report. DOWNTOWN PARTNERSHIP STAFF CONTRIBUTORS Robert Aydukovic Michael Cook Michael Evitts Kirby Fowler Sarah Husain Michael Menser Mackenzie Paull Nan Rohrer LaToya Staten INTERN Kelly Biscuso PRODUCTION Design - Michael Evitts Multimedia Design - High Rock Studios Mapping - Emery Pajer Photography - Michael Evitts, Joseph Giordiano, Robin Shotola About This Report This report is produced by Downtown Partnership of Baltimore, Inc., which is solely responsible for its content. Data is collected by, or on behalf of, Downtown Partnership and covers activity within a one-mile radius of the intersection of Pratt and Light streets. Charts, graphs, maps, and images are the property of The Partnership unless otherwise noted. Downtown Partnership of Baltimore, Inc., is a 51(c) 6 non profit incorporated in the State of Maryland. It has approximately 6 member firms throughout the mid-atlantic region from dozens of industry sectors. For more information about Downtown Partnership or on becoming a member, please visit call us at , or us at membership@dpob.org. 11

12 Sponsors DEVELOPMENT INTERIOR DESIGN ECONOMIC DEVELOPMENT APARTMENT DEVELOPMENT & MANAGEMENT COMMERCIAL REAL ESTATE BROKERAGE CONSTRUCTION ARCHITECTURE LAW ENGINEERING COMMUNICATIONS WASTE & RECYCLING OWNER / MANAGEMENT