Incentives for keeping companies Downtown

[stlokc]

All,
Those of you who have spent way too much time on this site might remember me as the OKC ex-pat living in St. Louis.

I read with interest today that Peabody Energy, one of St. Louis' Fortune 500 HQ will be staying put downtown after receiving $10 million in incentives from the city.

Www.stlouis.bizjournals.com

This happens a lot here in "the Lou" as companies' leases come up and they play municipalities in the region off one another. This is a big example, but small firms engage in this practice as well. My questions related to OKC are these:

1. Does downtown OKC still see an exodus of firms to suburban parts of the metro area? Obviously the biggies are committed to downtown, but what about smaller firms?

2. Are there firms in suburban parts of OKC that may be lured downtown with these kinds of incentives?

3. Is this even a game OKC wants to play? Is a high vacancy rate downtown a price we're willing to pay so that the precedent isn't set that all firms begin demanding these incentives?

I just have been thinking these thoughts lately because this is such a part of life in STL and not sure if OKC wants to go down this path, or if it might be a way to help solve downtown's vacancy problem-still over 25% even before Devon Tower is finished.

1. Is there still an exodus

[stlokc]

Sorry that little mistake appeared on the bottom. Probably shouldn't do this kind of thing from my I-phone.

[Pete]

The only incentives -- besides the indirect lure of the MAPS projects -- that I can think of were involving St. Anthony Hospital. Circa 2003 they threatened to move to the suburbs and the city wisely made it worth their while to stay. Since that time, the hospital has done a major renovation and has expanded with new structures; more are on the way.

As things stand now, I don't think there is any sort of trend out of downtown and to the suburbs. I think the biggest issue downtown is lack of Class A property. Most the nice buildings are almost completely full, although that will change somewhat when Devon moves into it's new tower.

I think the present course is the best one: keep investing in downtown and make it a place people and companies want to be. It seems to be working without any additional incentives.

[mOKCie]

I have an idea. The city, county, and state of Oklahoma should stop taking money from people and giving it to other people and calling it anything other than theft. That revolutionary approach to government will give good business and good people all the incentive they need to invest their futures here.

[Reno and Walker]

Typical sociological behavior says people and business move out to the suburbs, but they always come back to the core of any city.. Now its our turn for OKC to come back to its core.

[adaniel]

I can only speak for my personal experience, but it seems downtown is holding its own. A friend of mine works for an IT staffing company located off of Northwest Expressway and now that the national economy seems to finally show some life they are currently scoping out some property in downtown. Of course thats just one company. In the few years since I've worked in the CBD I can't recall a company leaving but I don't know of any companies that have moved from NWX, Edmond, Quail Springs, etc. As Pete alluded to its more to do with the lack of quality office space downtown. There's been no new buildings in the CBD even though Class A vacancy is lower in there than anywhere else in the city. At the same time you have a lot of house/garden style "office suite" type places being built all over the suburbs that are more than filling the need. Maybe when Devon moves out of Chase and Mid America you'll see that change.

We are past the point of begging companies of staying in downtown with incentives that this city and state probably can't afford. The CBD offers a lot and those amenities "pay" for themselves. Incentives should only be used for something relocating from outside the area IMO.

BTW, not to change the subject but I LOVE St. Louis, and if some things play out in my life I'm trying to pull some strings to possibly relocate to that part of the world late next year.

[Reno and Walker]

Do people not understand what is going on here in OKC, Its incredible the amount of construction.. The excitement is like never before.. Hey shhhhh don't tell anyone okay..

[earlywinegareth]

I think OKC is on the right track to make downtown a highly desirable place to be. To me, that's the key. You want companies to think that being there adds prestige. I think of Peachtree Street in Atlanta...seems every company wants a Peachtree Street address, it gives them cred. Possibly in a few years, downtown OKC will be perceived as a value-add proposition and companies will be clamoring to be there.

I'm wondering which buildings are considered Class A? Leadership Square and OK Tower? Any others?

[OSUMom]

I would think once it isn't a huge pain in the butt to get around downtown then more companies will start looking into moving there. Personally I love working downtown.

[adaniel]

I think OKC is on the right track to make downtown a highly desirable place to be. To me, that's the key. You want companies to think that being there adds prestige. I think of Peachtree Street in Atlanta...seems every company wants a Peachtree Street address, it gives them cred. Possibly in a few years, downtown OKC will be perceived as a value-add proposition and companies will be clamoring to be there.

I'm wondering which buildings are considered Class A? Leadership Square and OK Tower? Any others?

There's those, plus Chase, Mid America Tower, 101 North Robinson (where the Journal Record is), and an old historic building off Hudson by City Hall but the name alludes me. As far as large blocks of Class A space, thats it, although I could be leaving some off. There's also scatterings of small Class A buildings for one or two offices around downtown and midtown.

I've been in all but one of those buildings listed and they all seem pretty leased up. In contrast there are Class A buildings along Northwest Expressway that are close to half empty.

[Spartan]

All,
Those of you who have spent way too much time on this site might remember me as the OKC ex-pat living in St. Louis.

I read with interest today that Peabody Energy, one of St. Louis' Fortune 500 HQ will be staying put downtown after receiving $10 million in incentives from the city.

Www.stlouis.bizjournals.com

This happens a lot here in "the Lou" as companies' leases come up and they play municipalities in the region off one another. This is a big example, but small firms engage in this practice as well. My questions related to OKC are these:

1. Does downtown OKC still see an exodus of firms to suburban parts of the metro area? Obviously the biggies are committed to downtown, but what about smaller firms?

2. Are there firms in suburban parts of OKC that may be lured downtown with these kinds of incentives?

3. Is this even a game OKC wants to play? Is a high vacancy rate downtown a price we're willing to pay so that the precedent isn't set that all firms begin demanding these incentives?

I just have been thinking these thoughts lately because this is such a part of life in STL and not sure if OKC wants to go down this path, or if it might be a way to help solve downtown's vacancy problem-still over 25% even before Devon Tower is finished.

1. Is there still an exodus

I don't think there's an exodus of companies and I don't think downtown vacancy is a problem. There have been more residential conversions, and there will be more planned in the future...that will be the key to driving down vacancy, not bringing in more companies to office downtown. OKC will subsidize companies to create jobs in the city limits (and does this all the time), and I know some people wish PayPal was going to be in the inner city, but OKC is OKC.

Keep in mind that vacancy was around 35% at the end of MAPS 1. Today it is around 25%. That's huge progress. We still can't fully anticipate what impact Devon will have, but I'm hesitant to say it should be feared. CityPlace is switching several floors to residential, which is also occurring all over Mid-town (which may or may not go towards downtown's numbers, I'm not sure). When Nick Preftakes redevelops that block in the Arts District that will have a HUGE impact on the vacancy rate if he decides to go residential.

I think the key is that OKC has to focus all of this effort STL focuses on subsidies on growing mixed-use in downtown. Not just in Bricktown or Deep Deuce, but downtown itself (Park Avenue, Robinson, Broadway, Harvey, et al) need to become mixed-use themselves. That's going to be hard to do.

[Kerry]

As things stand now, I don't think there is any sort of trend out of downtown and to the suburbs. I think the biggest issue downtown is lack of Class A property. Most the nice buildings are almost completely full, although that will change somewhat when Devon moves into it's new tower.

I think that is the answer right there. While OKC does have a high vacancy rate, it is in the class C and B properties. When Devon moves it will free up a lot of class A space that is in demand. If some of the class C/B properties can be converted to residential/hotel then that would be a huge improvement as well. Getting Devon moved is the bottleneck right now. Once they move more companies will move downtown which will prompt class B/C owners to convert to residential to take advantage on the new downtown employees.

I don't remember reading to many stories about companies moving out of downtown but I frequently see stories about suburban companies that relocate to other suburban areas. I wish more of these companies would move downtown but it probably comes down to a lack of Class A space.

[UnFrSaKn]

There's those, plus Chase, Mid America Tower, 101 North Robinson (where the Journal Record is), and an old historic building off Hudson by City Hall but the name alludes me. As far as large blocks of Class A space, thats it, although I could be leaving some off. There's also scatterings of small Class A buildings for one or two offices around downtown and midtown.

Hightower?

[BoulderSooner]

also remember that in other cities moving to the burbs is moving to a different city ... that is really not a problem in okc .. even when companys move they go to memorial or broadway extention ... or northwest expressway ... they stay in OKC

[okclee]

Giving out incentives for downtown companies is a very slippery slope, and I hope Okc doesn't venture down that slope. Instead use the money, not for incentives but, for more and more downtown improvements, just as Okc is currently doing. Never stop doing this, build upon the improvements and make downtown Okc the best that it can be in every area.

It is already working, not overnight as some would like to see but the numbers prove that downtown has a real momentum going on and Okc is continuing to build upon that.

[Pete]

also remember that in other cities moving to the burbs is moving to a different city ... that is really not a problem in okc .. even when companys move they go to memorial or broadway extention ... or northwest expressway ... they stay in OKC

Great point, boulder.

As much as many of us would like to have seen Chesapeake go vertical downtown, their campus and developments to date have been entirely in the OKC city limits.

But besides CHK, really no office buildings of significance have been built in the 'burbs for quite some time. Just a lot of smaller garden type buildings along Memorial.

[Spartan]

I see two questions:

How much longer are the suburban developers going to only build ranch-style office buildings?

How much longer will it take for Edmond and Moore to amass some major office developments?

[flintysooner]

I see two questions:

How much longer are the suburban developers going to only build ranch-style office buildings?

How much longer will it take for Edmond and Moore to amass some major office developments?

The "garden office park" type developments are driven by demand and one vector of that is tax consequence and another is financing.

Definite interest in Moore for quality office space and there are at least a couple of projects I've heard discussed. Financing is a problem because there are almost no comparables. That little office park development in front of The Willows on Telephone Road seems to be rather active right now.

[adaniel]

I know this thread is about dowtown development but it does surprise me how little high rise or even mid rise development exist in this metro area outside 2 or 3 areas. Those garden style office complexes may be practical for a dentist office or CPA but no firm of considerable size. Even Broken Arrow has a handful of 7-10 story office buildings. Wasn't a 15 story office building slated for Norman at one point?

Of course this should help corporate relocation into downtown.

Hightower?

Yep that would be it.

[Pete]

Just like with Devon causing a surge in downtown vacancy, CHK is likely to do the same in the suburbs.

They now have two 300,000 square feet buildings under construction which will almost double their campus office space. I'm sure they'll be moving employees from other buildings, leaving lots of empty space behind.

Together, Devon & CHK will have added more than 3,000,000 square feet of office space over the last couple of years.

[Kerry]

Together, Devon & CHK will have added more than 3,000,000 square feet of office space over the last couple of years.

And none of it helps to bring down the office vacancy rate because it is all owner-occupied. Not complaining, just making a point.

[Pete]

It will actually cause the vacancy rate to go up when both companies consolidate all their employees into their own buildings that, as you stated, are not listed in the office square footage surveys.

[metro]

As someone else said, I hope we don't go down that slippery slope. We already use it to lure some out of state jobs, and I'm fine with that. Thankfully, we really haven't needed it much for local companies. As someone else said, for metro-based relocations, downtown is just now starting to become attractive and worth the hassle. I think when Devon relocates will be the turning point. I can think of one move coming up, Saxxum PR is moving from The Waterford to about NW 13th and Broadway, they are renovating a small building. Ghost Advertising also recently moved from Paseo and renovated a space at about 8th and Broadway. I think there are more small firms starting up or moving that you don't hear about because they aren't as news worthy as the big dogs. I imagine in time, once downtown matures and we land some more HQ's, we will have to play the incentives game to keep some of them here, that's just the nature of the business cycle in modern America.

[stlokc]

Thanks guys for the thoughtful discussion. Excellent points made all around. I agree that Downtown is making progress and we don't want to go down a "slippery slope" like St. Louis long ago embarked upon. But that's at least partially because of the "suburbs are separate cities" phenomenon. I didn't mean to advocate that I wanted OKC to follow St. Louis's lead.
I do have to admit that I don't think 25% vacancy is something we should be satisfied with, even if it is an improvement over years past. MAPS 1 was 15 years ago and that's a long time, even though we've had a nasty recession in the meantime.
I think about my Mom's firm, a national brokerage, and it's in Waterford. I think about my uncle's law firm, and it's at 63rd and Broadway. Both used to be downtown. (Granted, they moved in the 1980's). I just wish we could one day get back to the mentality that professional service firms would see Downtown as their natural location. If you look at most cities our size, their inventory of office space downtown is far larger.
ADaniel: if you ever get to St. Louis, look me up!

[Kerry]

I think OKC is on the right track to make downtown a highly desirable place to be. To me, that's the key. You want companies to think that being there adds prestige. I think of Peachtree Street in Atlanta...seems every company wants a Peachtree Street address, it gives them cred. Possibly in a few years, downtown OKC will be perceived as a value-add proposition and companies will be clamoring to be there.

You bring up a good point. OKC doesn't have a 'high profile" district. Lots of companies and retail businesses seek high profile address feature like zip codes, street names, area codes, or town names. For example 90210, Rodeo Dr, 212, and The Woodlands. OKC should try to foster this concept around the downtown area. I wonder what can be done.