Downtown Jackson sees DOR move as key remedy to empty office space

November 6, 2011

Real Estate

CBD promoters keeping fingers crossed Department of Revenue will lease 200,000 square feet at Landmark Center

Downtown Jackson’s office vacancy rate languished at 27 percent at the end of the third quarter, a worrisome figure that has changed little in the nearly three years since the departure of such major tenants as the Butler Snow law firm, HORNE CPAs and a large piece of Regions Bank’s operation.

All along, Central Business District boosters and leasing agents have pinned their hopes for a comeback on state government.

Some of that hope paid off late last spring with the state’s signing of a lease for 50,000 square feet in what was then a half-empty Regions Plaza. State officials moved the Mississippi State Personnel Board and the Mississippi Department of Finance and Administration’s Management and Reporting System into empty space on the second, third, fifth, eighth, 13th and 14th floors.

Now all eyes are on an even bigger prize in the leasing sweepstakes: the Landmark Center at 175 E. Capitol St.

The circa early 1980s Landmark Center last month won top ranking in a Cushman & Wakefield study of possible new homes for the state’s Department of Revenue, a more than 500-employee agency exiled 15 years ago from the Woolfolk Building to a massive warehouse in Raymond.

Landmark Center also has the backing of Gov. Haley Barbour and Kevin Upchurch, executive director of the Department of Finance & Administration, the agency charged with making an official site recommendation.

The 353,898-square-foot Landmark’s main tenant, AT&T, is vacating its 20,000 square feet next fall. Snagging the Department of Revenue would give Landmark a tenant for 20 to 40 years and could draw new businesses downtown that work with the Revenue Department.

And it could give the city tax revenue to help offset losses from the multitude of state-owned buildings downtown that are untaxed. Gov. Barbour cited this in recommending legislators go with the Landmark option.

“Leasing the Landmark Center will be an economic boost to Jackson by keeping the building on the city’s tax rolls, as well as supporting growth in downtown business activities,” Barbour wrote in a letter to legislators.

Barbour said the Landmark lease option represents a savings of up to $16 million from the costs of building a new building. Further, moving hundreds of workers into the CBD and filling up vacant office space provides a “positive impact on downtown Jackson.”

Ben Allen, head of Downtown Jackson Partners, said the arrival of up to 600 new workers downtown would be a giant economic boost for the CBD, and said in relative terms the move would have the kind of impact on downtown that Lockheed Martin’s opening of a 350-employee support center is going to have on Clinton.

Upchurch called Landmark “a very clear choice,” though he noted a purchase also would provide significant cost savings compared to the new construction option.

Further, Landmark would get the Revenue Department out of Raymond earlier than would new construction, according to Upchurch. “It would take some four years to complete construction of a new building whereas it would take less than two years to renovate the Landmark Center to meet the specific functional needs of the MDOR,” he wrote in a Sept. 30 report to Barbour.

John Barton, senior VP and senior asset manager for Parkway Properties in Jackson, said downtown’s office market has a big stake in the Department of Revenue’s relocation. Without the department taking the 200,000 square feet in the Landmark, occupancy rates in the Central Business District could climb to 38 percent, said Barton, whose firm is handling the leasing for the Landmark.

Further, downtown office landlords would have a significant amount of new space in which to compete against, Barton noted.

However, leasing with the runner-up candidate, Regions Plaza, would take significant vacant space off the downtown market as well.

Regions Plaza had the space but at “the lower end of what the state was calling for,” said John Michael Holtmann, VP of brokerage at Duckworth Realty, the leasing agent for Regions Plaza.

Regions Plaza would be a tight fit and would limit options for expansion, Holtmann conceded. “The bigger floor-plate was over at the Landmark building.”

At Landmark Center, the state would get “preferential” leasing rights to other space in the building and would retain the right to purchase the building at fair market value at any time, Parkway’s Barton said.

Its ample space, easy ingress and egress for employees and visitors and proximity to Interstate 55 are among Landmark’s most redeeming features, according to Barton.

The building has a loading dock and room for the DOR’s print shop. “It’s as close to perfect as it gets,” he said.

Landmark has 60 surface parking spaces and access to 540 spaces across Capitol Street at Shops & Parking at Jackson Place, Barton said.

Barton said the Landmark also meets the DOR’s huge need for data transmission and storage capabilities. “From a technological perspective, the building is very enhanced considering AT&T was one of the users.”

Capitol and Lamar streets are “lit up like a Christmas tree with more fiber than you can imagine,” Barton said, and noted the on fiber optics by nearby occupants Entergy, Regions and Trustmark banks and Parkway.

Neither Barton nor Duckworth Realty’s Holtmann are sure the favorable consideration given to leasing Landmark Center signals the state will more inclined to lease additional downtown space in the future. Cushman & Wakefield is looking at helping the state frame its facilities policy as part of a $3 millions study that included the site selection submitted on Oct. 1.

But Holtmann said he thinks Cushman & Wakefield will find that if the state can lock into long-term leases at attractive rates “it just makes a lot more sense economically.”

,

No comments yet.

Leave a Reply