By Hanah Cho, The Baltimore Sun
7:14 PM EST, December 24, 2011
Exelon Corp.'s pledge to build a new Baltimore headquarters as part of its proposed buyout of Constellation Energy could alter the city's skyline, injecting fresh life into the traditional downtown business district or further expanding the waterfront corporate center east of the harbor.
While Exelon is not revealing its short list of possible sites for the new building, local real estate brokers and others have identified several attractive potential locations, including some in the core business center and one between Harbor East and Fells Point.
The proposed Constellation-Exelon merger still requires approval from Maryland regulators and others.
The city's major office construction projects in recent years have included the Thames Street Wharf building anchored by Morgan Stanley and the Legg Mason Tower on the Harbor East waterfront. In the central business district, the last new skyscraper, at 500 E. Pratt St., was completed in 2004.
Some see a new building for Exelon as a spur to economic growth in the city.
"Having a new corporate headquarters in downtown Baltimore will stimulate all kinds of growth," said Rod Easter, president of the Baltimore Building and Construction Trades Council, a coalition of 15 construction unions that is expected to be involved in building the new headquarters. "I just see it as an economic boost."
But others fear that a new structure would hurt the city's business center by creating an excess supply of office space. The vacancy rate for the downtown central business district now hovers at 19 percent; 10 percent is considered healthy.
"A new headquarters building quite frankly makes no economic sense to either the shareholders of the company or the economic vitality of downtown Baltimore," said Robert Manekin, managing director and principal at the commercial brokerage firm Colliers International in Baltimore.
Many developers responded to a request for proposals that Exelon's commercial real estate broker put out in August. By late October, Exelon had picked proposals from nine developers.
Since then, the Chicago energy giant has narrowed the field, though the company would not reveal details about the sites being considered because it is in active negotiations, Exelon spokeswoman Judith Rader said.
One thing is clear: The new headquarters will be big. The request for proposals asked for 350,000 to 375,000 square feet.
Even though the combined company would be based in Chicago, the new Baltimore headquarters would house the merged entity's power-selling and renewable energy businesses, which are expected to grow.
Exelon said it would either assume the project itself or find a developer willing to undertake the construction by agreeing to a 15-year lease.
"We will announce our selected site after the merger closes," Rader said in a statement.
One local developer said he had submitted a fully financed proposal to build a 400,000-square-foot, 25-story building downtown.
J. Joseph Clarke of J.J. Clarke Enterprises said Exelon's broker and other principals have interviewed him about his proposed project on the site of the old Southern Hotel at 1 Light Street, noting that talks have continued weekly.
Clarke said his proposal was attractive because "it's in the heart of Baltimore's traditional business district."
"It would transform this neighborhood … and it's right on the Metro," Clarke said, adding that he was also still pursuing a housing development at the same site as a backup plan.
Other potential sites include the old McCormick spice plant on Conway and Light streets; the old News American building on East Pratt Street; and Harbor Point between Harbor East and Fells Point.
Owners of those three properties did not return phone calls last week.
Currently, some 1,500 Constellation workers are based at the company's glassy headquarters on East Pratt Street and next door at the historic Candler Building on Market Place.
Constellation is in the middle of long-term leases for both buildings. The Pratt Street lease, which provides over 100,000 square feet, expires in 2019, according to CoStar Group, a commercial real estate research firm.
Meanwhile, the company's lease at the Candler Building, which provides about 187,000 square feet, runs through 2018.
The Downtown Partnership of Baltimore would like to see Exelon-Constellation remain at the two existing downtown buildings, said J. Kirby Fowler, the group's president.
Constellation's move could cause a domino effect, with tenants from other buildings also picking up stakes, Fowler said. "Creating a chunk of available office space … could have adverse ramifications for the rest of the office market," he said.
Manekin, the real estate broker, said the city's core downtown district would be better off if Exelon's new Baltimore quarters were consolidated into an existing building.
He noted that rents for office space downtown have dropped 20 percent to 25 percent in the past two to three years due to the "challenging economy and the abundance of vacant space."
"The drop in those rent rates coupled with the increase in building vacancy has lowered the overall economic value of commercial office buildings in downtown Baltimore, as well as the real estate taxes that these buildings generate," Manekin said.
But given Exelon's promise of a new building, the Downtown Partnership is advocating sites in the central business district, including the old McCormick plant, the former News American property and 1 Light St. All the locations are now used for parking.
Fowler also mentioned Baltimore City Community College's underutilized Bard Building on Lombard Street and Market Place, a block from the Inner Harbor, as a potential site.
BCCC spokesman Patrick Onley said that plans for the building were in the works but that no decision has been made on the type of development. Onley declined comment to comment further.
Fowler said the four business district sites are appealing because they "are in the middle of strong hotels and residential, retail and office community."
He also pointed to the "great water view."
In addition, given the business district's high vacancy rate, Fowler said it's important to "reinforce the historical core of downtown."
Baltimore Mayor Stephanie Rawlings-Blake continues to have discussions with Exelon and Constellation about their office needs, but her spokesman, Ryan O'Doherty, declined to provide details.
"Mayor Rawlings-Blake is committed to strengthening the downtown office and residential markets and would like to see additional private investment in the downtown central business district," O'Doherty said in a statement.
Outside the central business district, local brokers and others have identified the former Allied Signal chemical plant site between Harbor East and Fells Point as another attractive location for Exelon.
The Harbor Point project — led by bakery magnate and developer John Paterakis Sr. — would include apartments, condominiums, a hotel, a parking garage and shops. The Morgan Stanley building, which opened last year, is the first structure built on the 27-acre Harbor Point parcel.
Michael Beatty, president of Paterakis' H&S Properties Development Corp., did not return a call last week.
In recent years, Baltimore's business district has been expanding into the waterfront communities east of the harbor. Besides financial giants Legg Mason and Morgan Stanley, for-profit education companies Laureate Education and Educate Inc. are based in Harbor East, while First Mariner Bancorp has its headquarters in Canton.
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