T. Rowe Price’s Pending Move Would Mark the Latest Downtown Departure
The Harbor Point district has become one of the top landing spots for Baltimore’s office tenants. (Armada Hoffler Properties)
By Michael Cobb
CoStar Analytics December 2, 2020 | 6:36 P.M.
Harbor East and Harbor Point are emerging as Baltimore’s new central business district. With striking views of the Inner Harbor and a growing inventory of top-quality office supply, the fast-growing neighborhoods collectively are the biggest competitor to the Pratt Street corridor and are steadily evolving to become the city’s main business hub.
That theme has never been more pronounced than now, as this week’s announcement by T. Rowe Price that it plans to relocate its headquarters after 83 years in downtown Baltimore to Harbor Point sent shockwaves through the city.
The migration of office tenants from Baltimore’s central business district to the Harbor East and Harbor Point neighborhoods isn’t new. It first began in 2009, when Legg Mason left its former namesake building at 100 Light St. for nearly 300,000 square feet at a newly constructed building at 100 International Drive. That was seen as a monumental shift, as its former location at 100 Light St., in addition to its signage atop the city’s tallest office building, was synonymous with the downtown skyline.
Six years later, OneMain Financial would join Legg Mason at 100 International Drive, vacating all 314,000 square feet at 300 St. Paul St. for a slimmed-down office totaling about 110,000 square feet. At the time, the relocation from 300 St. Paul St. left a sizable block of vacant space in Baltimore’s core. The move ended up being offset three years later, however, when 300 St. Paul was converted to market-rate apartments.
The shifting tide continued in 2016, when Exelon departed the Pratt Street corridor for Harbor Point, leasing just over 400,000 square feet at a 23-story tower that bears its name. That represented yet another blow to the central business district, which had already been struggling to attract sizable relocations and net-new demand.
Fast forward to 2019, when Duane Morris LLP departed its nearly 16,000-square-foot space at 111 S. Calvert St. in favor of Harbor East. The law firm had called the central business district home for more than 10 years, but eventually moved to the up-and-coming neighborhood in southeast Baltimore, where it traded up in quality of office space.
Then, in 2020, both EY and digital marketing company Jellyfish Group exited the central business district in favor of Wills Wharf, the newest office building at Harbor Point. Both of those tenants committed to the property in 2019 while it was still under construction.
Those weren’t the lone moves to take place, either, as Gordon Feinblatt just announced in November its intentions to leave the CBD early next year. The law firm has been in downtown Baltimore for more than 50 years, but has signed a lease to relocate to a building on Fleet Street in Harbor East in April.
The Emergence of a New CBD
The emergence of a new, quasi-central business district isn’t unique to Baltimore. The very same thing has been taking place in Boston, where the Seaport has emerged as a direct competitor to the city’s long-standing commercial hub, the Financial District. That has also been the case in New York, where Hudson Yards has been attracting tenants with some of the highest-quality office space that Manhattan has to offer. Boston’s Seaport District (Getty Images)
Similar to Harbor Point in Baltimore, the Seaport was formerly a vacant stretch of underutilized real estate within walking distance to downtown. That changed in the early 2000s, as both the public and private sectors began working to revitalize the waterfront node into one of Boston’s premier office submarkets.
In the process, the Seaport has attracted companies such as Amazon and MassMutual, which sought well-rounded environments, as well as biotech firms in search of more affordable office space compared to the premier life sciences hubs in Cambridge.
At Hudson Yards in New York, office-using tenants have been lured by $25 billion worth of retail, hospitality, office and multifamily investments at the site. The live-work-play development, coupled with top-quality office space, has attracted firms from all parts of the city.
Office tenants in Baltimore have cited similar motivations in relocating to Harbor East and Harbor Point. It isn’t a secret that downtown Baltimore lacks the aforementioned live-work-play lifestyle that office tenants have been seeking in order to both attract and retain talent.
While the central business district has made progress of late, particularly within the multifamily sector, downtown Baltimore is still a 9-to-5 city. Most employees leave downtown at the end of the workday, and that is expected to continue for the foreseeable future even when a vaccination for COVID-19 becomes available and the majority of workers return to the office.
What’s on the Horizon for Baltimore’s CBD?
In terms of the Baltimore office market, it’s a mixture of large-scale positives and negatives.
T. Rowe Price’s planned exit is slated to create a sizable chunk of vacant office space in the heart of Baltimore. In fact, the more-than-460,000 square feet the investment management firm currently occupies accounts for about 2% of the central business district’s existing office inventory alone. That percentage jumps to roughly 5% when only examining the CBD’s inventory of top-quality office space.
While T. Rowe’s pending move has made headlines, there’s also uncertainty about whether Transamerica will remain in its namesake tower. The insurance company listed its 125,000-square-foot space at 100 Light St. in January, with its lease slated to expire at the end of 2021. While no public decisions have been made surrounding its intent to either remain in place or relocate, the listing of that space alone has caught the eyes of observers monitoring the health of downtown Baltimore’s office market.
Not all is doom and gloom, though. After all, the redevelopment of State Center could provide the stopgap for filling space in the CBD in the coming years.
In November 2019, Gov. Larry Hogan announced that the long-planned redevelopment of State Center would be moving forward. State Center, a 28-acre government complex in midtown, is home to 3,300 state employees.
As part of the redevelopment, the 12 agencies that comprise the employment base will be moved in phases to the central business district. In total, Hogan estimates those employees will require about 1 million square feet of office space.
A move of that caliber could be transformative for Baltimore’s central business district. One million square feet equates to just over 4% of the submarket’s existing office space. The influx of those employees in the coming years could potentially offset T. Rowe’s move, and more. It would also introduce one of the largest swaths of net-net demand that the central business district has seen in years.