John Paterakis Sr. didn't believe it when Mayor Kurt L. Schmoke told him nearly two decades ago that Harbor East's Marriott Waterfront Hotel would spur revitalization from the Inner Harbor to Canton.
The city had picked Paterakis' H&S Properties Development Corp. to build the hotel, launching a parallel career for the baker and developer. Today, Paterakis marvels at the upscale shops, luxurious living spaces and top-flight office space set to line the southeastern Baltimore waterfront — and already booming along it.
"You have to give a lot of credit that he was right," said Paterakis, president of H&S Bakery Inc., which grew from a two-man operation that opened in 1943 to a baking empire spanning more than two dozen states.
H&S Properties is poised to add another piece to the puzzle linking Harbor East's growth to Fells Point with plans for a department store, an expanded Whole Foods Market and apartments at two sites on Central Avenue. Along with Exelon Corp.'s planned local headquarters tower at Harbor Point and other projects sprouting to the north, the development would boost a long-standing priority of city planners to transform Central Avenue into a bustling boulevard.
Developers say the connection is an important one in a business where success is built upon a critical mass of residents, workers and free-spending visitors — though some worry about traffic and other effects of the higher-density development.
"I think you're going to see more developers interested in that whole corridor," said M.J. "Jay" Brodie, who led the Baltimore Development Corp. for 16 years until retiring in 2012. "There's going to be major development opportunity from Fells Point and Harbor Point moving north toward Hopkins."
H&S Bakery is freeing up space for the new development by moving a distribution center it operates on Central Avenue to Hollander 95, an East Baltimore business park. The city Planning Commission approved plans for the new facility last month, prompting speculation about how the old center's prime real estate might be used.
It sits on the edge of the Harbor East development H&S spearheaded, in a stretch of warehouses and industrial-oriented businesses that have separated the towering hotels and condominiums of Harbor East from the cobblestones, rowhouses and shops of Fells Point.
That site will see retail, potentially a department store, topped by apartments, Paterakis said Friday.
The developer also plans to build on a parking lot across Aliceanna Street from the distribution center, breaking ground this summer on a Whole Foods that Paterakis said would be three times the size of the grocer's original location a block away on Fleet Street. A Whole Foods spokeswoman would not confirm the move Friday.
The H&S Bakery plant on nearby Bond Street will remain for the foreseeable future but is yet another industrial property that could be redeveloped in coming years to complete the connection to Fells Point.
Developers of neighboring projects welcomed the plans, saying "more is better."
"You need a certain critical mass to make restaurants, stores and everything work," said Larry Silverstein, whose Union Box Co. developed the Canal Street Malt House condos and the former Holland Tack Factory building farther up Central Avenue. "You can't do that with just townhomes and short buildings."
When developers such as Union Box and Chesapeake Real Estate Group first began exploring the neighborhood, it contained little more than the original Whole Foods store and the headquarters of Sylvan Learning Systems, now occupied by Sylvan spin-off Laureate Education. But the addition of projects such as Chesapeake's mix of restaurants, retail and offices at the Bagby Building on Fleet Street helped bring more people into the neighborhood.
Other coming additions include Union Box's redevelopment of the Fallsway Spring building at Eastern and Central avenues, to become headquarters of local technology company Groove Commerce, and a block south of that, a Hyatt Place hotel to include a retail component.
The key for urban development is having "a great mix in a dense area," said Doug Schmidt, a Chesapeake partner.
"My plans were to add more to take advantage of the great amenities they were putting in," Schmidt said of H&S. "There's no doubt we wouldn't be here if it wasn't for what they had and what they put in."
For the owners of the businesses filling those developments, the prospect of more development is welcome, despite the traffic headaches it could bring.
"It's becoming a very beautiful area and people want to walk around here," said Karen Patten, owner of Kali's Restaurant Group, which includes four Fells Point restaurants. "It's what the city needs — more taxpaying bodies."
But developers and city officials acknowledged concerns about bringing Harbor East's high-density levels toward Fells Point.
"We are conscious of making sure that the scale is appropriate for the context," said Thomas J. Stosur, the city's planning director. "The areas that are to the east of Central [Avenue] have tended to be a lower scale and sort of blending right into Fells Point. I would say we'd be looking to make sure we're respectful of that kind of scale."
Under zoning proposed in the city's land-use overhaul, Transform Baltimore, the H&S sites would be permitted a mix of residential and commercial uses going up to about 10 stories, said Laurie Feinberg, head of the city's comprehensive planning program. The sites currently are zoned for industrial use.
City Council hearings on the zoning plan are scheduled for the fall, but if projects arise before the plan is approved, they could be reviewed for zoning changes individually, Feinberg said.
Development along the Central Avenue corridor has long been a priority for city economic development and planning officials. Last year, the city Transportation Department launched a five-year project to improve the roadway, including storm drain upgrades and, eventually, new landscaping, bike lanes and sidewalks.
The $33 million project will include a four-lane bridge extending Central Avenue south to Harbor Point, where Exelon plans a 23-story tower. City officials expect bridge construction to start next year.
The projects continue a shift of the city's marquee employers and prime shopping from the traditional downtown area around the Inner Harbor to Harbor East. While Harbor East's gains often are viewed as losses for the downtown area, boosters say that's not the case as the older city core seeks to draw residents to fill vacated offices. A number of projects have been announced to make over older buildings as apartments.
"I think the city can absorb a lot of growth and should anticipate that it can absorb a lot of growth in the next decade," said Kirby Fowler, president of the Downtown Partnership of Baltimore. "Experts with whom I deal have said there's really no limit to what they see in terms of attracting residents to the downtown area, including Harbor East."
The bulk of downtown workers remain in the traditional business district around Pratt and Light streets, but the city's workforce center has been spread out, stretching from the campus of the University of Maryland, Baltimore, in the west to Harbor East.
Whether downtown workers are along Pratt Street or in Harbor East makes no difference to city coffers, Brodie said.
"If Harbor East hadn't have been done and kept companies like Laureate, Legg Mason and lots of other smaller companies, those companies would not be on St. Paul or Charles [streets]; they'd be in the county," he said. "They were not staying in the older buildings."
Meanwhile, H&S Properties senses more demand for residential space in Harbor East as well — and at the highest end of the market. The developer shelved plans in January 2009 for 23 stories of condos atop the Four Seasons hotel as the housing market tanked. The hotel opened in late 2011, topped out at about half of its planned 44 stories.
But more recently, Paterakis said he has gotten interest from potential buyers again, including one who would seek to build out a space taking up a full floor. H&S officials are gauging the interest to determine how many units the market could support, he said.
Meanwhile, he said he continues to be surprised by the other developments sprouting along the waterfront, including Bozzuto Group's Union Wharf condominiums in Fells Point and the Canton Crossing shopping center farther east, set to include a Target and Harris Teeter supermarket.
"They're coming back to the city, and if they want to be down here in Harbor East or Canton, God bless 'em. At least we're bringing them downtown again," Paterakis said. "I imagine you can consider Harbor East has become downtown."
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