Downtown Vacancy: Is it That Bad?

The revived concern about downtown leads one to speculate on how downtow, AKA the Central Business District, or CBD, compares with suburban office markets.

The real estate company Colliers has a very useful set of reports in .pdf format available from their site that provides vacancy percentages for various markets (as well as one that's not on their site but available via google). Unfortunatly the more recent reports don't break out the rates by Class A, B, or C space (Class A being the most desirable) for recent years.

But what is available permits a quick plotting of trends for the CBD and the three suburban market on a bi-annual basis (with two points of Class B/C data for the CBD)




One can see CBD Class B/C pushing 30% for midyear 2007. One should also note this doesn't included buildings that are off the market, like 25 South Main and the Arcade offices, or government buildings. Yet the CBD doesn't seem so bad compared to whats happening with the north suburban market, which has comparable vacancies.

A good question is if the 20%-30% range is high. Or is there a certain natural vacancy rate for office markets?

The theory is that a natural rate is at which vacancy rates settle after working through an economic shock, such as a recession or difficulties in an economic sector or loss of a major employer.

There has been some research on this, and a good introduction is a paper from the Federal Reserve Bank of San Francisco: Natural Vacancy Rates in Commercial Real Estate Markets.

This paper looks at vacancy rates for the metro areas in that district, noting that rates vary by city. One might also say a natural rate might vary by submarket within a metropolitan area, as may be the case in Dayton.

For Dayton there are only about four data points here, so not enough of a time series to really say what a natural rate would be. The theory would say that for Dayton the loss of the Mead Corporation would be an economic shock affecting CBD rates due to the second tallest skysrcaper in the city coming onto the market.

When one or two properties as large as the Mead Tower come on the market would this mean the natural rate would undergo a phase shift, to a consistently higher percentage? And how would that effect properties at the lower end of the scale?

For Dayton there is some history to work with. When newer buildings came on the downtown market in the 1970s the older high and mid rises ended up going vacant. Of the 28 multiple tenant office buildings listed in a 1968 study, 2 were torn down, 2 went vacant and were closed, and 3 were converted into government offices. So the market corrected by taking space out of play in various ways.

In any case, the vacancy rate, at least what's shown in the Collier studies, are not as high as one would expect, with at least two thirds of the space in the CBD being occupied.

So maybe the situation isn't that dire.

Once More Into the Breach with Downtown

If you’ve read the series on I-675 over the past month on this blog, you can see how in the 1970s a coalition of business leaders, suburban governments, and highway planners made the fateful decision to push for I-675 without mitigations such as regional growth control, rejecting mass transit solutions that would have emphasized the center city.

Starting in the early 1980s office developments proliferated along the bypass, permitting white collar work to decentralize from downtown.

The coup-de-grace was during the past 10 years, when the last corporate tenants left. Spin offs-from MeadWestvaco and NCR relocated to suburban office parks. Reynolds and Reynolds and Woolpert relocated to the Research Park, indirectly tied to I-675 but part of the same decentralization process. These were the high-profile moves. Presumably smaller businesses also left downtown during this era.

Nothing backfilled the vacant space since potential tenants could chose suburban locations developed along or near I-675. Suburban office locations were superior due to free parking, lower taxes, perceived safety, modern office space, and close to where people live.

But not just along I-675. Office decentralization was happening even before I-675 was completed, at other locations in the metropolitan area, and continue to do so. I-675was just the most visible example.

The result was that downtown, though physically impressive, became peripheral to the economic life of the region. It remained the location for government, the courts, law offices, banks, and arts venues, but little else.

This apparently was recognized in this headline…

Downtown Too Important to Slip off Radar
…from DDN editor Kevin Riley’s recent op-ed on downtown. “Slipping off radar” is a pretty good way to put the situation. Downtown as “far away and long ago” is another way to say it.

Riley synopsizes a series of initiatives and suggestions, which sounds like a last ditch effort to save downtown as an employment center. Downtown as office space is a tough sell for the previous reasons, and also because a future driver of white collar employment will be military I/T and R&D. Defense work will locate close to Wright-Patterson, along I-675 in Fairborn or Beavercreek, US 35 in Beavercreek, or in Riverside (Harshman./Woodman) and Kettering (Research Park). Downtown won’t even be in consideration.

It’s interesting that the planning initiatives in Rileys op-ed are turning to office uses. In the recent past adaptive re-use of downtown office and commercial buildings to housing seemed a possibility (following a national trend), but perhaps the market isn’t there given the Dayton regions’ small-town/suburban culture. Downtown housing conversions and new construction stalled even before the recent housing finance crisis.

If no housing and no office use then what? Maybe demolition and urban agriculture?
The large city blocks downtown could lend themselves to mini-farms as sort of a land-bank solution, or they could just be parkland, sort of what Fort Wayne has done. Or just plant grass like they are doing with the Patterson School site.

Realistically there will always be some demand for downtown office space due to government and the courts, which will draw legal services firms. There will also be some % of “other” use, such as banks, accountants, other professional services, non-profits and social service agencies,

But not enough demand to support all the buildings that are downtown today.

The question really is how to shrink downtown while retaining it as niche market?

The Re-Use Study and Downtown

The ten re-use study buildings, how do they fit into downtown trends?



One can assume that that the selection of these particular buildings was not random. They are all of certain types so good demonstration designs, but maybe their distribution is worth looking at.

Laying the study subjects into downtown again, then noting some other features in building types and use:
...and then stripping away the base map to note if there is a pattern. And there seemst to be.

The study subjects are strung out along the St Clair/Jefferson corridor, connecting downtown with the entry to the Oregon district.

A second group is located in the "heart of downtown", the cluster of banks, newer skyscrapers ("Class A" office space), and arts venues clustered around 2nd and Main, running along 2nd towards the courts. These two areas also contain most of the mainstream nightlife downtown; live music and dance venues.

Only one building, 25 South Main, doesn't fit in this north of Main/east of 3rd pattern. It does fit in with the Shiffler properties and a possible adaptive re-use of the vacant Arcade and Dayton Daily News complexes.

So, on can see how these proposals would contribute to the active parts of downtown (2nd and Main) areas that are becoming more interesting (like the Jefferson/St Clair corridor), and potential re-use projects (Arcade/DDN).

Ten Downtown Buildings: Re-use study.

Ten downtown buildigns as a design study. Ten local architectural firms get 1o buildings to propose a re-use. Read about it at this DMM post.

The buildings on a downtown map:And pix keyed to the map.



South Jefferson Street

Starting with the "Transportation Center" (AKA "that big parking garage"). It would take a couple of snapshots to really capture this building, but its a big monolithic barrier between downtown and the Oregon District. Here is the Jefferson Street facade, as it fits in with the next two subjects.
Next, across the street, Price Brothers. There might be a stone neo-romanesque facade hiding beneath that gold screen.


A half block south on Jefferson, 20 s. Jefferson has a crumbling terra cotta facade. This is maybe the most intriguing one as what's proposed here could be applied to three other similar buildings nearby


The Fire Blocks

"Merchants Row". The city designates this entire block as Merchants Row, so not sure if this is going to be an urban design scheme or the architect is going to be working with specfic buildings. This block, or most of it, is listed on the National Register as the "Fire Blocks", rebuilt after a fire during the 1913 flood.


The "David Building", one of the Merchants Row buildings. This place actually has a few tenants already, including a charter school on the upper floors. Whats notable about this one is that it seems to have the original windows.


Also on Merchants Row, kittycorner from the library, the big windows suggest a loft conversion. Ground floor is a funky mix of porn, the Dayton Dirt Collective, and Bingers.


Main Street Buildings

The next three would be eligible for city money. See this post about the fund left over from the Shuster Center construction and its set-aside for Main Street renovations.

25 South Main was closed as offices in the mid 1970s and was aquired by the city in the mid 1980s as part of the failed Arcade Centre urban renewal project. Recently news reports say it was given to Bob Shiffler, who owns the old McCrorys next door.


The KeyBank Building is at a prominent location at the heart of downtown and will be empty when Keybank relocates across the street to the former Mead Tower. This building is a good example of the Chicago approach to high-rises (think Michigan Avenue facing Grant Park), as discussed in the book Form Follows Finance.


The Walker Building is a former mens' clothing store, notable for how it wraps around the corner high rise, having a facade on 1st Street (left) and Main (right).

Moving off Main, another parking garage. At the corner of 2nd and Ludlow, again at a prominent location in the heart of downtown, the Leigh Building does a pretty good job of "holding the corner" and creating street space. The Leigh Building also fits into the prewar Dayton tradition of disguising garages to look like a downtown commercial blocks via that neat facade treatment. Does this need that much work?




(but yes, the garage interior is dark and grungy)

Next, a look on how these subjects fit in with what's going on downtown.

Fall Almanac IV

Thou comest, Autumn, heralded by the rain,
With banners, by great gales incessant fanned,
Brighter than brightest silks of Samarcand,
And stately oxen harnessed to thy wain!
Thou standest, like imperial Charlemagne,
Upon thy bridge of gold; thy royal hand
Outstretched with benedictions o'er the land,
Blessing the farms through all thy vast domain!
Thy shield is the red harvest moon, suspended
So long beneath the heaven's o'er-hanging eaves;
Thy steps are by the farmer's prayers attended;
Like flames upon an altar shine the sheaves;
And, following thee, in thy ovation splendid,
Thine almoner, the wind, scatters the golden leaves!
Autumn- Henry Wadsworth Longfellow

Longfellow isn't much read nowadays, is he?

Looking at our scene, on can see bare branches. And we had a lingering taste of summer last week, before things clouded up, then a trace of rain. Temperature has dropped below 60 for the first time this season, and the first low below 40.

Clouds at the end of the week before the weather changed.

And a scene deeper in the forest, so we can watch how the understory changes color.

The Paper-Highway

The May 1979 cover letter from MVRC to DOT mentions that I-675 was a “paper-highway”; though it was still on paper the bypass was a fait-accompli, already generating and guiding development. Planning and zoning was already being based on the existence of I-675.

This was the case as early as the late 1960s with the Dayton Mall.

The mall developers were looking at the proposed OH 48 interchange as a potential site before settling on the current location near the terminus of I-675. So both sites were probably in consideration due to I-675. In fact the “Mall Area” could have been in speculation since the early 1960’s since the southern alignment was already public knowledge and never in question, and the mall site was also adjacent to an I-75 exit..



I-675 alignment was near-final in 1965 and included in the 1965 transportation plan. The 1976 draft EIS notes that after 1965 “major developers began to consolidate holdings” at the southern terminus, and mentions Galbraith, Mead Corporation, and Oberer by name. Press reports and property maps also show that NCR, Beerman Real Estate, and the Mead family also acquired real estate in this area. DeBartolo was the first mover for retail, building the mall in 1969-70.

Once the mall was open it drove adjacent development, as retail, food, and drink establishments located close to the mall.

After final alignment was decided in the late 1960s one can see how subsequent real estate development was sited to make way for the I-675 right-of-way, as these examples from the southern leg of the highway.





This is the OH 48 interchange site in 1977, showing an early office park undergoing development in ancipation of the bypass, but leaving room for ROW and an exit ramp.

Yet during the 1970s development was sparse. The first spec office development near a proposed I-675 interchange was Governors Square from the early 1970s. By 1977 an office park was under development at the proposed OH 48 interchange (shown in the above graphic). After the northern “Fairborn” segment opened in 1975 the first office park at the northern end of I-675 went under construction across from Wright State, opening in 1977 or 1978.


(Daytonology will look at the evolution of office development along I-675 in a future post)

Only after the final decision for the bypass did development really accelerate, particularly in Greene County (which had the most post-1986 growth) but also in the OH 725 corridor the OH 48 interchange and north of Clyo Road:



A good example is Cross Pointe, built after 1982 by an out-of-town developer on the old alternate site for the Dayton Mall. The first development here was an early big-box, Gold Circle, plus some auto dealers.

Cross Pointe as the poster child of I-675 sprawl in a newspaper article (developer Linclay was from St Louis and was building a skyscraper in downtown Cincy at the same time)



Cross Pointe before and after aerials. The site also included the now-closed Showcase Cinemas, facing the interstate.



Cross Pointe today, one of the larger strip centers in the area.



Coda

In retrospect Neal Goldschmidt was correct that the traffic projections justifying I-675 were self-fulfilling, since the highway became more crowded as it generated more development. It was reported that traffic counts were under projections during the first year of operation, before build-out of the interchange areas and residential sprawl beyond.

The MVRPC analyses said retail was not going to be a significant player along I-675, but this proved very wrong as major retail centers developed at all interchanges, especially at Fairfield Road via Fairfield Commons mall.

The impact of retail development on downtown was felt years before the bypass was opened. I-675 alignment drove the Dayton Mall site selection, and the mall opened 16 years before construction completion, drawing addition retail through the 1970s and 80s.

Retail was dying even before the Dayton Mall opened in 1970, but the mall pretty much dealt the mortal blow. Downtown retail was for all intents and purposes dead by the time I-675 opened in 1986. Subsequent impact was in the older suburbs, like Fairborn, Trotwood, Riverside, and Kettering, killing the Salem Mall and sucking strip center shopping to the I-675 interchanges.

The big impact to Dayton city was in lost jobs, particularly white- and pink- collar employment. A large collection of hotels and spec office buildings went up at the interchanges, as well as some light industry. This destroyed the market for downtown hotel rooms and office space, resulting in vacant skyscrapers, closed hotels, and a deserted center city. Development at the interchanges also meant employment opportunities moved away from inner city residents, especially in service industry work.

The suggested mitigations of revenue sharing, subsidized housing, and extended transit never happened, so the economic benefit of I-675 was limited to suburban areas adjacent to the freeway, especially Greene County.

The end result, 22 years after opening, is the “Dayton Banana”, a crescent of new suburban and commercial growth along and to the east and south of I-675, with a stagnant or dying center city and older suburbs.



Everything the opponents of I-675 had predicted has come true.

As a postcript, the final timeline of the NIMBY Forest controversy: a 6-7 years delay between construction periods, and 13 years between the EIS requirement in late 1973 and completion in 1986.




Adding the pre-1973 work and planning, 1957 to 1986, it took 29 years to build I-675.

The Enchanted NIMBY Forest IV: Quasi-Expressway & Endgame

I-675 looked dead after Goldschmidt’s decision, but bypass advocates didn’t give up. During the first half of 1980 the quasi-expressway concept was developed.

The concept, which surfaced earlier in the controversy, was to build a limited access highway from I-75 to OH 48 (Far Hills Avenue), with interchanges at OH 725 and OH 48. After OH 48 the route would be a four-lane at-grade highway to US 35, with stoplights at Wilmington Pike and Indian Ripple Road.




Presumably this would have been a lot like the US 35/Trotwood connector, which has a similar mix of at-grade and limited access segments.






This proposal was just a short step away from a full limited access highway, so wouldn’t have met the city and citizens’ group objections. One could easily imagine a future project changing the stoplight intersections to grade-separated interchanges and adding extra lanes.

A justification for the quasi-expressway was that an alternative package of surface street improvements was too costly. This was questioned by staff at the DOT regional office in Chicago, who thought the TCC was gaming the estimates to push a decision to the quasi-expressway.

The quasi-expressway was the preferred alternative of the I-675 advocates until the 1980 presidential election began in earnest. The concept was then dropped and bypass advocates decided to lobby the Reagan campaign for a statement in support of a true interstate, hoping Reagan would make good on the campaign promise if elected.

And that promise was made by VP candidate George HW Bush during a campaign swing through Dayton in September.

When Jimmy Carter came to Dayton in October for a town hall he was provided this “Situation Report” by DOT while being driven in from the airport:

“The President is stepping into a very HOT issue that has pitted the city and its black community against the region and its suburban white population”

…a succinct outside opinion, notable for not sugar-coating the racial subtext of the controversy.

Carter later said he would support the quasi-expressway. Not good enough for I-675 proponents.

In November Reagan was elected (though Carter carried Montgomery County).

Reagan Approval and the Final Battle.

Reagan appointed Drew Lewis as Secretary of Transportation. Lewis’ was a railroad man, CEO of the Union Pacific railroad, widely regarded at the time as one of the best-run US railroads. A concern surfaced after the election that I-675 might have stayed dead, as there was talk that Reagan administration was not going to fund any more interstates as a cost-cutting measure.
Instead, DOT generated a list of high-interest highway projects for Lewis to review. I-675 was on the list.

In 1981 Lewis reversed Goldschmidt’s decision, approving the bypass.

McGee left office in 1982. The 1981 Democratic mayoral primary was an opportunity for bypass proponents to pay back Pat Roach for opposing I-675. Roach was challenged in the primary by Paul Leonard, a state representative and strong supporter of I-675. Leonards’ opposition to Roach and support of the bypass ensured support from the business community. Leonard won the race 2 to 1. Roach remained on the city commission for a short time after her defeat and, true to her principles, cast the lone “no” on the final I-675 vote on February 1982. She then faded into political obscurity.

The Citizens against I-675 continued to fight, challenging Drew Lewis’ decision via an administrative appeal in 1981, and when rebuffed, went to Federal court. The suit challenged the bypass on the ground the EIS was deficient. As a measure of the continuing bitterness over the bypass the TCC and the Chamber of Commerce asked to be named as co-plantiffs in the case.

While the legal challenge was underway, engineering was completed, contracts advertised, and bids opened. Contracts couldn’t be let until the final legal decision, which was rendered on 22 April 1981 in favor of the bypass. 19 minutes later the first contract was awarded.

The remaining parts of I-675 were completed in stages. The first parts opened in 1984, between I-75 and OH 725 and between Fairfield Road and US 35. The final segment was open to traffic in the fall of 1986.


During construction the nearly forgotten DART light rail scheme resurfaced. The question was if an overpass was needed over the proposed rail line. The decision was no, being the final nail in the light rail coffin.

The TCC, in the forefront of the I-675 battle, disappeared. During the early 1980s discussions surfaced about disbanding the TCC and rolling transportation planning into the MVRPC. This apparently did happen in the 1980s.

The leader of the neighborhood opposition, Frank Mione, eventually moved from the NIMBY forest and now lives in a duplex in Washington Township.

And the NIMBY Forest, no longer enchanted, was bisected by I-675.