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FOR DOWNTOWN, A THRIVING 2006
$1.9 BILLION WORTH OF DEVELOPMENT PROJECTS IS MOST IN MANY YEARS EMPLOYERS OPTIMISTIC

Author: Jamie Smith Hopkins
Date: Feb 8, 2007
The Sun - Baltimore, Md.

(Copyright 2007 @ The Baltimore Sun Company)

In an article published Feb. 8 about downtown development, photo captions referring to the Vue Harbor East and condominiums at 414 Water St. were transposed. The photos are labeled correctly here. The Sun regrets the errors.

Development projects under way last year in downtown Baltimore totaled nearly $1.9 billion, more than the area has seen for years, according to a report scheduled for release today.

Much of that - about $1.6 billion worth - is still under construction, the nonprofit Downtown Partnership of Baltimore said in its annual State of Downtown report.

The construction work includes five hotels and nearly 1,500 apartments, condominiums and townhouses, more activity than experts remember since a recession began in 1990 and definitely the most since the group issued its first comprehensive report in 2000.

On top of that, if developers' plans come to fruition, work will begin downtown on nearly $2.8 billion in construction between now and 2010, according to the report.

"The challenge is managing growth now," said Kirby Fowler, president of the Downtown Partnership. He said the expected increase in the number of workers and residents will create demand for better traffic management, public transit and schools.

A building boom doesn't always play out the way developers expect. The increase in downtown construction could increase vacancies downtown if it outpaces demand, said Richard P. Clinch, director of economic research with the University of Baltimore's Jacob France Institute. But the rise in activity is good news for the city, he said.

After years of construction largely involving hospitals and universities, a diverse mix of projects are under way downtown, Clinch said. He attributes that to regional change: Suburban land is harder to come by, and what remains costs more than it used to, making the city more competitive.
"At some point, these things do become self-reinforcing," said Clinch, who was not involved with the Downtown Partnership report. "You're reaching a critical mass."

Downtown's economic health matters to the rest of the city and the region because it is a key employment center. About a quarter of Baltimore's 375,000 jobs are downtown, according to the Downtown Partnership, which includes the central business district, the Inner Harbor, the west side and Mount Vernon in its calculations.

The number of jobs downtown held essentially steady last year, the group said, dropping by about 225, a decrease that the group characterizes as statistically insignificant because of wiggle room in the estimate resulting from data-collection issues such as businesses that decline to participate.

The report finds that private-sector employers added nearly 1,300 jobs last year, but government cuts of 1,500 jobs overwhelmed that gain. The biggest job increase was in education services, closely followed by the accommodations and food-services sector.

More businesses opened downtown than closed or left. One of the newcomers, the software company Metastorm Inc., moved its headquarters, with about 40 people, from Columbia to new Inner Harbor office space in April and has been delighted by the variety of hotels and restaurants within walking distance. The company, which has about 160 employees overall, often has investors, customers and potential clients coming in for meetings.

"From a business perspective, being located in the heart of a city is a good thing," said Laura Mooney, Metastorm's senior director of corporate and product marketing.

Downtown employers have high expectations for the near future. They told the Downtown Partnership that they plan to add more than 6,000 jobs this year. The group says that might be overly optimistic, but increases on that scale were posted in 2005, an unusually good year.

"Some huge projects started in '06," said Bob Aydukovic, vice president of economic development for the Downtown Partnership. "This is going to start playing into the employment rolls this year and into 2008."

Some of the construction is transforming old offices into hotels and residences, which is having a ripple effect. The group found that office vacancy rates dropped to about 11 percent at the end of last year, compared with 13 percent a year earlier, and that rents inched up. Class A space, the highest-quality offices, rented for $25 to $30 a square foot, up from $24 to $28 at the end of 2005.

In another apparent ripple effect, development is expanding, touching neighborhoods that were long ignored. In communities near downtown, nearly $900 million in construction projects were completed or under way last year, and about $3.7 billion worth were planned, according to the report.

Among the projects is the huge mixed-use community planned by developer Patrick Turner in Westport, south of downtown.

"The prosperity is spreading from the heart of downtown outward," Fowler said



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