The glut of available office space downtown

[gman430]

Ouch: https://upstatebusinessjournal.com/need-office-space-we-have-plenty/

[PuppiesandKittens]

Greenville has a recurring issue with high office vacancies, and it's been going on for years.  However, one solution is that government shouldn't promote development of large blocks of office space outside of downtown (government jumped for joy when the TD Bank campus was built alongside I-85, but the result was more sprawl and higher vacancies downtown).  We need to get over this "let's build anything since growth is automatically good, whatever its characteristics" mentality. 

[distortedlogic]

I saw that article too and doesn't sound good. I was surprised, just a year or two there was an article about historically low vacancies.

All the more reason to do a total housing redo of the landmark building, take that outdated space off the market, let tennents fill space elsewhere DT, add a couple stories to the top for a penthouse and rotating restaurant and a new tallest; win-win-win!

Edited April 8, 2018 by distortedlogic

[gman430]

30 minutes ago, distortedlogic said:

I saw that article too and doesn't sound good. I was surprised, just a year or two there was an article about historically low vacancies.

All the more reason to do a total housing redo of the landmark building, take that outdated space off the market, let tennents fill space elsewhere DT, add a couple stories to the top for a penthouse and rotating restaurant and a new tallest; win-win-win!

Yep. With new office space coming online, companies downsizing/moving to the suburbs, and other closing up shop completely it’s a big lose situation right now. CertusBank, TD, BB&T, WYNIT, etc...the skies are dark right now. When is the city going to wake up?  

That’s not a bad idea with the landmark building. I wouldn’t mind seeing it and others converted to hotels also. 

Edited April 8, 2018 by gman430

[ausrutherford]

The article lost me when they said there isn't enough parking...

[Jet-set]

34 minutes ago, ausrutherford said:

The article lost me when they said there isn't enough parking...

It lost me when it said “The Greenville market continues to show low vacancy rates and record-setting asking rates”

Edited April 8, 2018 by Jet-set

[gman430]

1 hour ago, ausrutherford said:

The article lost me when they said there isn't enough parking...

There isn’t. A lot of the garages have waiting lists. That’s why a new garage was recently built just for the South State Bank building on Broad Street. 

51 minutes ago, Jet-set said:

It lost me when it said “The Greenville market continues to show low vacancy rates and record-setting asking rates”

That’s just NAI Earle Furman talking and trying to make the situation sound better than it really is. The real issue is told by Colliers: 

“The Greenville office market is in a unique position with lots of large block availabilities,” says Taylor Allen, brokerage associate at Colliers International. “These availabilities will span throughout both the suburban and downtown markets. As new projects have been developed over the past few years such as ONE and 110 E. Court St., the tenants experienced a flight to quality, which has left large chunks available.”

Edited April 8, 2018 by gman430

[vicupstate]

I never saw a vacancy percentage rate in that article just numbers like 500k and 682k (which includes a building that hasn't even started construction).   Percentages would give a better picture. 

This is why i don't think Bridgeway is going to happen very quickly. If it does, it will probably be at DT's expense.  We need to get some HQ relocations to Greenville, if we are going to fill up the building already proposed both DT and in Bridgeway.   having some big blocks of space actually make it more likely to happen though. 

I would be just fine with Bridgeway going on the backburner for a few years.   

 

[gman]

Another issue to consider. https://www.greenvilleonline.com/story/news/2018/04/08/downtown-greenville-job-growth-transportation-park-and-ride-greenlink/492498002/

Edited April 8, 2018 by gman

[gman430]

Not downtown but 70,000 square feet of class A office space is now available at Verdae thanks to CH2M packing up and leaving. 

Edited May 20, 2018 by gman430

[GvilleSC]

5 hours ago, gman430 said:

Not downtown but 70,000 square feet of class A office space is now available at Verdae thanks to CH2M packing up and leaving. 

They were sold to Jacobs. Not exactly just packing up and leaving... except to Mauldin. but your point of available space is true. 

[vicupstate]

That is my fear about the Bridgeway project. That it mostly gets internal moves to  cheaper space. 

[gman430]

80,000 square feet of Class A office space is now for lease inside the TD Bank building downtown. I guess they’re leaving for the burbs. 

[PuppiesandKittens]

I assume that the “all growth is good all the time” crowd would go bonkers, but can’t some type of zoning change be done to prioritize office space downtown instead of in suburbia?  

[Exile]

Seems to me it's not whether that crowd (to which I don't belong, for the record) goes bonkers, but where actual prospective tenants want to be. If, say, a desirable company with no previous ties to Greenville were to want 80K SF, but refuses to go downtown to an existing 80K, and Joe Developer proposes a building in suburbia to accommodate them, what would you do?

Ultimately overdevelopment of office space is on one or more developers; it's not a thing for government to fix. It's entrepreneurial miscalculation, which happens. And since people who have skin in the game (entrepreneurs) calculate better than those who don't (government officials and other bystanders), there's no reason to believe government manipulations will do anything other than make a less-than-optimal situation worse.

(E.g. as I understand it, Apple wants its second HQ in the burbs, or at least not in a DT area).

Edited July 9, 2018 by Exile

[PuppiesandKittens]

I generally don’t like government involvement in anything if the private sector is capable of acting, but zoning is a typical government function, and overdevelopment is a case of market failure: one developer may come out ahead with a new building, but the community overall loses.  There is already plenty of land downtown and near downtown, with infrastructure already in place, and it seems wasteful to build large new office parks in suburbia that requires destruction of semi-natural fields and forests.  

What if zoning in the 1970s hadn’t allowed 4 malls to be built within a few miles of each other?  If it hadn’t, perhaps Greenville would have avoided the creation of large swaths of town that became derelict with the overbuilding of malls that resulted from most of them failing.  Same for office parks: one developer may like a new building, but it isn’t necessarily good for everyone on balance.

Edited July 9, 2018 by PuppiesandKittens

[vicupstate]

One aspect that is completely lacking  from this discussion is the cost of infrastructure to these previously undeveloped areas. If the developer is bearing that cost, then indeed the free market is the best arbiter. However the cost of this new infrastructure is from the taxes these new developments pay, and probably at least to some degree the existing general funds of the affected governments.   That diversion of funds would have otherwise gone to other government functions including the maintenance of existing infrastructure.   

Development where existing road capacity and infrastructure already exits generally is not a drain, whereas new development very often is. 

 

If it is TD Bank that is moving, I assume they would move into their existing  I-85 campus, or possibly expand that campus. 

 

[Exile]

1 hour ago, PuppiesandKittens said:

I generally don’t like government involvement in anything if the private sector is capable of acting, but zoning is a typical government function, and overdevelopment is a case of market failure: one developer may come out ahead with a new building, but the community overall loses.  There is already plenty of land downtown and near downtown, with infrastructure already in place, and it seems wasteful to build large new office parks in suburbia that requires destruction of semi-natural fields and forests.  

What if zoning in the 1970s hadn’t allowed 4 malls to be built within a few miles of each other?  If it hadn’t, perhaps Greenville would have avoided the creation of large swaths of town that became derelict with the overbuilding of malls that resulted from most of them failing.  Same for office parks: one developer may like a new building, but it isn’t necessarily good for everyone on balance.

I don't subscribe to market failure theory. I do believe markets can be distorted, but only by governments or quasi-governmental bodies (e.g., the Federal Reserve).

I also believe that entrepreneurs occasionally miscalculate. Overdevelopment is a case of miscalculation, and so (don't throw anything at me!) it may be the case that Camperdown's 15-story addition, if it includes a lot of office space (which I'm pretty sure it does), would be ill-timed if it goes up any time soon without signed leases. Even if you factor in govt zoning and approvals, if the developer is allowed to proceed, the government becomes a co-miscalculator, but one with no exposure, unlike the developer. It's fine for local govt's to say, e.g., highrises here, midrises there, lowrises over there, etc. (via zoning), but trying to use zoning like a sheepdog to herd developers to specific areas--meaning tenants in reality--doesn't make any sense to me. Since it's the developer who directly bears the costs of failure, and since they're trying to please tenants, they should be given a pretty wide geographical latitude, IMO.

But let's say that the Camperdown office building does go on line with a bunch of empty space, and Greenville's vacancy rate goes up. Rent will go down, which can be a very good thing, because it may be incentive enough to bring in one of the big tenants that everybody wants downtown. Office vacancy is cyclical just like everything else.

As for the malls, McAlister opened in '68, BT in '70, GM in '77 or '78, HM in '80. McAlister and BT coexisted pretty well. GM didn't seem to do any damage to them either. If zoning were to have been exercised to "fix" the situation, it would've had to be HM that got nixed or moved or whatever. And anyway, what you're suggesting seems to me to be zoning writ way too large. GM wasn't even in the city limits when it was built, if memory serves.

It seems to me that most retail areas are cyclical. It's no surprise that Bell Tower declined, along with DT in general, a major death blow in my opinion being the departure of all those medical offices from Pendleton to Faris and Grove. As for McAlister and GM, it seems really to have been Dillards' purchase of Iveys and JB White, and then consolidating them down to one store at Haywood that precipitated their declines (not the whole story, of course). How long did McAlister operate as a mall? 30 years? That's not a failure. Even Bell Tower, as marginal as it always was, lasted a dozen years. Not exactly a failure out of the box. But both were relatively quickly repurposed in good ways. So IMO McAlister went from success to success, and BT from margin to success,  by redirection of that capital to (by that time) higher and better uses. The only real mall miscalculation in Greenville was that redo of GM (which operated for well over 20 years), though even there, nobody could have foreseen the compounded effect of Ward's liquidation+JBW's purchase-and-closing. That was "a series of unfortunate events." The real mistake was increasing the size of the mall. They should have shrunk it--cozy would have worked better for the high-end they were targeting.

Hindsight...

1 hour ago, vicupstate said:

One aspect that is completely lacking  from this discussion is the cost of infrastructure to these previously undeveloped areas. If the developer is bearing that cost, then indeed the free market is the best arbiter. However the cost of this new infrastructure is from the taxes these new developments pay, and probably at least to some degree the existing general funds of the affected governments.   That diversion of funds would have otherwise gone to other government functions including the maintenance of existing infrastructure.   

Development where existing road capacity and infrastructure already exits generally is not a drain, whereas new development very often is. 

 

If it is TD Bank that is moving, I assume they would move into their existing  I-85 campus, or possibly expand that campus. 

 

You're right about infrastructure costs, and that's a limitation that could be reasonably applied to development. If developers know they have to pick up the tab for extension of infrastructure--which is eminently reasonable--then they're much less likely to  go out into the hinterlands; but it wouldn't unnecessarily sheepdog them into specific pre-defined locations either.

Edited July 9, 2018 by Exile

[gman430]

On 7/8/2018 at 3:39 PM, gman430 said:

80,000 square feet of Class A office space is now for lease inside the TD Bank building downtown. I guess they’re leaving for the burbs. 

Just eat it: https://www.greenvilleonline.com/get-access/?return=https%3A%2F%2Fwww.greenvilleonline.com%2Fstory%2Fmoney%2F2018%2F07%2F10%2Fanother-79-500-sf-downtown-office-space-enters-crowded-market%2F769192002%2F The good news is that TD Bank isn’t leaving downtown and this space has been empty for years. It didn’t become available for lease until recently due to TD Bank owning it. They finally decided to drop it. Can’t say I blame them though. Why pay for space if you’re not using it. 

Edited July 10, 2018 by gman430

[GvilleSC]

Carolina First screwed us with their big suburban campus dreams (and implosion). If they'd never planned to leave downtown, TD would probably still have their regional operations located downtown. Ah well. 

Drop the rent prices and catch some fish.

[gman430]

6 minutes ago, GvilleSC said:

Carolina First screwed us with their big suburban campus dreams (and implosion). If they'd never planned to leave downtown, TD would probably still have their regional operations located downtown. Ah well. 

Drop the rent prices and catch some fish.

Reminds me of BB&T leaving for Mauldin. These banks aren’t the smartest of the bunch. 

[Exile]

I don't get the vitriol. This is more proof that some people/companies just don't want to be downtown, no matter how great we think it is. To each his own. Don't get me wrong--I wish they'd stayed downtown, but for every reason to stay, there's a reason to leave, and for some the latter is more weighty. Who am I to cast aspersions--it's their $$? But we can certainly learn how to make the CBD even better so that the inflow exceeds the outflow. ("we" as in those tasked with marketing Greenville).

BBT moved into what amounts to an operations center, right? No point in having that downtown--that move makes sense to me. And I think TD's suburban campus is very nice and, as some on this forum have noted, makes a great statement on I-85, along with Hubbell, ICAR, and the developing hotel village.

35 minutes ago, GvilleSC said:

Drop the rent prices and catch some fish.

Yes. It's an opportunity--or at least that's the way Greenville's marketers need to be looking at it. You never know: there might be a whale out there that wouldn't look at all without big blocks of available space.

[PuppiesandKittens]

37 minutes ago, Exile said:

I don't get the vitriol. This is more proof that some people/companies just don't want to be downtown, no matter how great we think it is. To each his own.

How many of these companies have stated, "We want to be in suburbia. Period."

NONE.

They probably analyze the price of the land/building, commute times, etc. when deciding where to locate, and the competitive position of downtown (and areas near downtown) can be improved with respect to all of these factors so that the center city doesn't keep losing developments to suburbia.  For example, parking, transportation generally, land prices (perhaps by zoning land near downtown to be used for large office developments), etc. can all be improved, making the overall position of downtown more attractive.

Further, the Mauldins of the world could perhaps stop incentivizing relocations to Mauldin (for the tax dollar grab), in consideration of a more equitable sharing of property taxes among local governments. 

Edited July 10, 2018 by PuppiesandKittens

[gman430]

Not downtown but Fluor will be vacating another one of their buildings come August: http://www.greenvillebusinessmag.com/2018/06/28/176038/apartments-new-office-owners-help-transform-fluor-campus This will dump even more for lease office space onto the market. 

[vicupstate]

I seriously doubt there is any real incentive to move to the suburbs except lower cost.  I wonder if they even consult  their employees on these moves. After all they probably bought/rented where they did based on the existing location of their job.  On the other hand, a lot of mid-level employees can't afford to live anywhere other than the suburbs. 

I realize cost always is the biggest factor, but their is something to be said for supporting the city from which you generate an income.  Abandoning space DT for the suburbs and putting costly infrastructure on the taxpayers back does not do that. 

The BB&T move makes even less sense since they already owned the DT building.  Is it really worth paying rent at a brand new building as opposed to staying put at a long paid for building? 

Now that DT has multiple spots of big space available, we will see just how well we do at bring in new business HQs.  They certainly don't have the 'no available space' excuse any more. 

 Can someone in the industry explain why TD Bank would not have sub-leased the space they had already vacated years ago?