On the former site of oil storage tanks in East Baltimore, a 17-story tower rises at the center of what will be a sprawling $1 billion project to include condos, restaurants and a hotel. In a blighted neighborhood of rundown row houses near the world-renowned Johns Hopkins Hospital, workers have begun razing hundreds of vacant and dilapidated homes for a $1 billion biotech park and new and rehabbed mixed-income housing.
And after decades of decline in the one-time shopping hub of West Baltimore, massive redevelopment is bringing retail, office buildings and pricey apartments to the area around The Hippodrome, a newly refurbished former vaudeville theater that now hosts Broadway shows.
Cranes point skyward in almost every direction from downtown as a $7 billion development blitz redefines huge swaths of the city. The scale and scope of the building boom, city planners and developers say, outpaces even the Inner Harbor urban renaissance that made Baltimore the toast of urban planners everywhere 25 years ago.
Anchored by the twin glass pavilions of the festival market Harborplace and attractions including the National Aquarium, the Inner Harbor transformed Baltimore from an aging port city long overshadowed by Washington, Philadelphia and New York into a destination that draws more annual visitors than Disney World. At Harborplace, nearby restaurants and tourist attractions thrived, and the Inner Harbor's success spilled over into a few neighborhoods south and east of the harbor.
But until recently, broader investment had been stalled by a host of factors, including the precipitous decline of manufacturing, the economic slowdown of the 1990s, the loss of 10 major corporate headquarters (and ensuing downtown office vacancies), and the familiar inner-city woes of poverty, drugs, crime and vacant housing.
Recovery builds in all sectors
“We've seen an unbelievable amount of momentum in development,” says Anirban Basu of the Sage Policy Group, a Baltimore economic consulting firm. “As we enter 2006, given where we were in 1999, it's hard to believe there are this many high-rise cranes reaching for the sky.”
Today, the $7 billion worth of new development extends well beyond the banks of the Inner Harbor basin, into one-time industrial wastelands and long-neglected neighborhoods that had been written off by many just a decade before. And along with new attractions such as the evocative Reginald F. Lewis Museum of Maryland African American History, projects now under way include a healthy mix of office space, cutting-edge biotechnology research labs, downtown apartments, condos and luxury hotels.
The new construction reflects optimism among developers and investors, says M.J. Brodie, president of the Baltimore Development Corp., the city's economic development agency. “This is way beyond anything we've seen before,” says Brodie.
Washington commuters, for instance, have found that prime waterfront condos and townhouses are more affordable than in D.C. According to an analysis by the Baltimore Sun, the number of Baltimore-area residents working in the Washington region increased by 21,000 during the 1990s, and projections suggest the growth of Baltimore as a bedroom community to Washington has grown even more in the new century.
Favorable cost of living
David Cordish, a Baltimore-based developer known for reviving what had been failed urban entertainment and retail projects here and throughout the nation, says looking just a bit south explains much of Baltimore's appeal. “Just take a look at Washington: The cost of everything here is triple there — commercial rents, cost of land and houses,” Cordish says.
Lower real estate costs and higher returns on investment in this secondary market also have drawn investors far and near to some of Baltimore's most prized real estate. In September 2004, an Irish group, CMC Investments, bought the downtown office building at 300 East Lombard Street for $40 million, or $173 per sq. ft., then a record price.
Harbor Group International LLC of Norfolk, Va., bought three Baltimore office properties in two years: the 22-story Mercantile Bank and Trust office building at 2 Hopkins Plaza at the end of last year for $51 million; a 16-story building at 10 East Baltimore Street in September 2004, which sold for $16.4 million and the Wachovia Tower, a 25-story building at 7 St. Paul Street in January 2003, which sold for $50.2 million.
Over the summer, a limited liability company affiliated with Colorado real estate company Amstar Group Ltd. bought the Verizon Communications Inc. building at 1 E. Pratt St. at the Inner Harbor for $20.7 million, considered below-market pricing because Verizon has the option of purchasing the building at the end of its lease.
Mayor Martin O'Malley is quick to note that private investors have been financing much of the development without public subsidies. One notable exception: A $305 million hotel, to be built by 2008 on the west side of downtown behind Oriole Park at Camden Yards and connected by walkway to the Baltimore Convention Center.
The hotel, to be built and financed by the city, overcame opposition from critics who said the money would be better spent to eliminate blight in poor neighborhoods.
New housing and demand in newly gentrified city neighborhoods has helped push the median home price for the Baltimore area to $260,000 in a state with the nation's third-highest median income. Baltimore sits on I-95, providing easy access to the Northeast and the South. Washington, D.C. is less than an hour to the west, providing additional employment opportunities. The newly expanded Baltimore-Washington International Airport has attracted office tenants and companies who seek a location with easy access to an airport just 10 minutes from downtown.
Area Median Income (AMI) is calculated every year by the U.S. Department of Housing and Urban Development (HUD) for every county and metropolitan area. The 2003 Area Median Income in the Baltimore area for a family of four is $67,300. Families with incomes below 80% of AMI, or $53,850, are categorized as being low-income by HUD and are eligible for special programs and benefits.
Number of city dwellers rising
After years of population decline — from nearly 906,000 in 1970 to 651,000 in 2000, the city is on track to add 10,000 residents during 2005.
Decidedly upscale places to live, work and shop are sprouting from the once blue-collar shores of Locust Point, and eastward beyond the Inner Harbor to Canton, where pricey new condos share the shoreline with 19th century industrial buildings.
The latest boost for the region, says Basu, the Baltimore economist, is the fallout from the Department of Defense base realignment program. Thousands of new jobs may be created at Fort Meade in Anne Arundel County and Aberdeen Proving Ground in Harford County.
Reflecting a healthy local job market, the Baltimore area recorded an unemployment rate of 4.6% compared to the national average of 4.9% in August, according to the Bureau of Labor Statistics. Maryland, which added more jobs than any other state in August, posted a 4.4% rate, also well below the national rate of 5.4%.
Even some of the city's poorest areas are seeing signs of a rebound. Just west of downtown, in an area once dominated by high-rise public housing projects that the city razed in the 1990s, new developments are taking shape spurred by growth of the University of Maryland Baltimore's BioPark project. The $350 million biotechnology park, planned for 10 acres west of Martin Luther King Boulevard, will eventually have 10 buildings put up by the university in collaboration with other developers.
New tenants who will move into the park's first building that was recently completed include SNBL Clinical Pharmacology Center Inc., Alba Therapeutics, a university start-up working on diabetes treatments; Baltimore law firm Miles & Stockbridge's life sciences division; the School of Medicine Center for Vascular and Inflammatory Diseases; and Harbor Bank of Maryland.
Medical students and yuppies have fueled demand for new apartments rising in this part of town, where pubs and bistros now line streets, just blocks from Oriole Park and the Ravens stadium.
“We're seeing Washingtonians moving here and keeping their jobs in Washington,” says Brodie of the BDC.
Magnet for projects
The Inner Harbor area itself continues to attract development, especially toward the east. Inner Harbor's newest office tower, 500 E. Pratt Street, opened last fall. Built on spec by the Multi-Employer Property Trust, the building is now 80% leased with tenants such as Chicago-based insurance brokerage Aon Corp., technology consultant FTI Consulting Inc., accounting firm Reznick Group and law firm Saul Ewing LLP.
The building's developer, Trammell Crow, says it will be fully leased by year's end. That's despite asking rents of $30 per sq. ft. — a more than 40% premium over downtown's $21.63 average, according to Mackenzie's third-quarter report. And even farther east along the harbor, new office space also is coming on line as part of mixed-use projects in Harbor East between Little Italy and Fells Point, and Canton Crossing in Canton, a neighborhood east of downtown.
Construction is nearing completion on a 17-story tower in Canton Crossing on a former industrial site. That building, slated to open next spring, is about 80% leased, with First Mariner Bank planning to move its headquarters there.
It is part of a $1 billion mixed-use project that also will include condos, restaurants and a hotel under development by Edwin F. Hale Sr., who is CEO of First Mariner and owner of the Baltimore Blast soccer team.
“It's like there's been this huge awakening here with many people wanting to move back into the city,” Hale says. Not so long ago, though, Hale recalls mentioning the new Canton Crossing project to a realtor at a big firm. “He says, ‘That's not going to work. That's the hinterlands.’ I like to remind him now that he said that.”
Beleaguered office market
Baltimore still has a high office vacancy rate. During the 1990s, the city lost corporate headquarters of companies such as Maryland National Bank, USF&G Corp. and Alex Brown as they were swallowed up by rivals.
Although the vacancy rate in the central business district increased in the third quarter of 2005 to 14.15% from 12.5% the previous year, several deals that were signed over the summer are not yet accounted for, according to Mackenzie Commercial Real Estate Services.
Vacancy rates have increased as well in Baltimore's suburban office market to 11.63% with an average asking rent of $20.74 in the third quarter, Mackenzie says.
Vacancies have risen both in the northern market, which extends from White Marsh to Owings Mills in Baltimore County, north to Harford County, and in the southern region.
“Recent building completions and a slowing of activity were major contributors,” according to Mackenzie.
Yet plenty of new development lies ahead. In Baltimore County, leasing has begun for what will become a 1,000-acre office and industrial park. Developers of the $500 million Baltimore Crossroads @95 are hoping to draw pharmaceutical and other technology employers to the region. The project calls for the development of 5 million sq. ft. of office, flex/office, warehouse and industrial space, some 400,000 sq. ft. of stores and two hotels.
In the southern metropolitan market, the defense and tech industries are driving demand. A total of 651,032 sq. ft. of space was added to the submarket in the third quarter, and 1.4 million sq. ft. is under construction in the Baltimore-Washington Airport and Columbia submarkets, according to Mackenzie. Anne Arundel County, which includes the airport, has an array of office projects in the pipeline in Annapolis and Odenton.
There, and throughout metropolitan Baltimore, there's no sign of a slowdown anytime soon.
Gary Gately is a Baltimore-based writer.
BALTIMORE - BY THE NUMBERS
POPULATION OF METRO AREA: 2.5 million
Source: U.S. Census (2000)
UNEMPLOYMENT RATE: 4.8%
Source: Bureau of Labor Statistics
Johns Hopkins University
Johns Hopkins Health System
University of Maryland Medical Center
Source: Baltimore Development Corp.
METRO AREA VACANCY RATES
13.05% vacancy, 3Q 2005
13.45% vacancy, 3Q 2004
Office Asking Rents:
$19.65 per sq. ft./city
$20.74 per sq. ft./suburbs
Source: Mackenzie Commercial Real Estate Services
4.5% vacancy, 3Q 2005
5.1% vacancy, 3Q 2004
$20.24 rent per sq. ft.: 3Q 2005
$19.56 rent per sq. ft.: 3Q 2004
Sources: Marcus and Milichap Research Services, Reis
9.63% vacancy, 3Q 2005
12.37% vacancy, 3Q 2004
$9.87 rent per sq. ft.: 3Q 2005
72.9% (YTD through August 2005)
68% (YTD through August 2004)
Sources: Smith Travel Research
Canton Crossing, a mixed-use waterfront project on 65 acres in Canton, a city neighborhood east of downtown Baltimore that will include a 17-story, 500,000 sq. ft. office tower, an 11-story office tower with restaurants, 503 condominium units in three buildings and a 450-room upscale hotel.
Cost: $1 billion
Developer: Hale Properties
Completion: 17-story office tower, 2006: condos, 2008
Anchor: Ernst & Young will occupy 60,000 sq. ft.
New EastSide, 80-acre section of East Baltimore that will include up to 2 million sq. ft. of biotech research space, more than 1,200 units of mixed-income housing and new retail
Cost: $1 billion
Developer: East Baltimore Development Inc., with government and private partners
Ritz Carlton Residences, 178 luxury condominiums that will be priced up to $5 million each on waterfront property along Key Highway near Baltimore's Federal Hill neighborhood.
Cost: $250 million
Developer: Midtown Equities LLC of New York