Senate bills call for moving dozens of state offices to Capitol area

Auto SalesDowntown Jackson would see hundreds of new workers and a whittling of its office space vacancies through proposals from Senate Public Property Committee Chairman David Blount to consolidate more state agencies into space available in the Jackson Capitol Complex.

In support of a pair of bills he has introduced, Blount produced an analysis from Millsaps College’s Else School of Management that shows consolidating state offices that are scattered around the tri-county area into the Capitol Complex would save the state $5 million a year. Consolation would also move state government closer to the federal benchmark of 218 square feet of space per worker from its current 323 square feet, the Millsaps study said, and noted by comparison that Virginia has 222 square foot of rentable space per worker and Texas 225 square feet.

Getting Mississippi to the federal standard of 218 square feet would be a 33 percent reduction that translates to the $5 million a year savings after a phase-in period, said Dr. Bill Brister, a professor in the Else School of Management who led the office space study.

The space and cost calculations include build-out expenses and parking but not actual moving costs, which the study puts at about $3 a square-foot amortized over 10 years.

Neither the study nor Blount’s bills include the relocation of state satellite offices or social service offices such as Medicaid that serve clients directly.

The cornerstone of Blount’s consolidation plan is the state purchase of the vacant Landmark Center, an East Capitol Street office building of 345,000 square feet whose price has dropped in the last year from $14.1 million to $7.6 million. Blount, a commercial real estate professional who represents Hind County’s District 29, proposes having the 500-employee Department of Revenue occupy about 210,000 square feet and the other state agencies the remaining space.

The state, acting on a recommendation from international real estate firm Cushman & Wakefield, came close to buying the Landmark last legislative session for the $14.1million price, but House Speaker Phillip Gunn of Clinton and other legislative leaders stepped in at the last minute to kill the sale and ensure the DOR remained in Raymond through the end of its mid 2014 lease.

Gunn, a Republican, has said he won’t block a DOR move from its metal warehouse headquarters again this session.

Blount, a Democrat, said his SB2763 proposing purchase of the Landmark is identical to one that failed last year, though this one reflects the near halving of the building’s price tag.

Blount’s other bill, SB2472, would put the state’s Department of Finance & Administration in charge of negotiating leases, a task now handled by individual state agencies.

The bill calls for the phased-in office space consolidation of state agencies occupying 198,286 square feet of space through 28 private sector leases. This count does not include the Department of Revenue.

The 28 leases carry a weighted average rent of $14.51 a square foot, according to the Millsaps College study.

A sampling of five office properties within the Capitol Complex – the Landmark, Capitol Towers, Regions Plaza, Lamar Life Building and the State Street Building – shows the buildings only 23 percent occupied with 789,089 square feet to fill. At today’s lease rates, the state could achieve a weighted average cost per square foot of $13.71, Millsaps’ Brister said.

“There’s a lot of space available for lease at very reasonable rates,” he added, and cited further cost savings through state agencies sharing common areas such as break rooms, rest rooms, meeting rooms and parking.

Excluding the Department of Revenue, the state leases 681,294 square feet of office space from the private sector for $8.9 million a year, at an average of $13.13 a square foot.

The 28 leases for space outside the Capitol Complex total 198,286 square feet with combined annual rent of $2.87 million, or $14.51 a square foot, according to Millsaps.

The business school’s analysis showed the state leases 348,339 square feet from private landlords within the Capitol Complex at an average of $14.41.

Brister said acquisition of the Landmark Center at its current asking price represents a “unique opportunity” at the moment. “You could put a whole bunch of these agencies in there, including the DOR,” he said.

He calculated the purchase could shave $30 million off the state’s office space expenses over the next 20 years. “You’ll save the $30 million plus own the building,” Brister said.

The Landmark Center, which became 100 percent vacant with AT&T’s departure late last year, received top ranking in the Cushman & Wakefield study that analyzed options for a new headquarters for the Department of Revenue, which has been operating out of a former Mississippi Power warehouse in Raymond for more than a decade and a half.

The lease on the warehouse expires at the end of June next year. Should Blount’s bill to buy the Landmark Center fail, the state would move ahead with a RFP process that has narrowed candidates for the new home for the DOR to three – The Landmark Center, South Point Business Park in Clinton and Ergon Properties’ Diversified Technologies complex in Ridgeland.

The Department of Finance & Administration says representatives of the three properties are to submit their final offers as early as the end of February. A selection would be made soon after, the DFA says.

The building owner who wins the competition to lease 175,000 square feet to the DOR must also be willing to spend tens of millions of dollars to ready the building for move-in by spring 2014.

Meanwhile, advocates for downtown Jackson are keeping their fingers crossed that Blount’s bills to buy the Landmark Center and to consolidate other state agencies and departments into the Capitol Complex meet with success. The consolidation alone could bring 400 or so new workers downtown, said Ben Allen, president of Downtown Jackson Partners, a public-private entity that works to promote and enhance downtown.

“Downtown is dying,” said Allen, who previously had been reluctant to fully concede the hard times the Central Business District has been enduring.

The full vacancy of the Landmark Center put downtown office valances at around 35 percent, he said, though he speculated “we’re probably closer to 50 percent empty” for private-sector owned buildings.

Those vacancies have been hitting hard at the receipts of restaurants and shops downtown for the past 18 months, Allen said.

Those troubles could be more than reversed by the state picking up the Landmark at a bargain price and consolidating the state office users into the Capitol Complex, he added.

“Let’s hope business acumen wins out over politics,” Allen said.

 

 

 

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