If its deal with Constellation Energy is approved,Exelon Corp.is expected to increase the number of employees in Baltimore and move its alternative energy traders to downtown Baltimore over the next few years. Both announcements are welcome, and the deal would be excellent news for downtown.
There has been, however, significant debate surrounding the real estate implications of Exelon's move to Baltimore. Indeed, Exelon has generated fevered interest in the development community by exploring the possibility of constructing a new office tower.
Despite the excitement, it is important to step back and answer three critical questions: Would it be better for downtown for Exelon to stay in Constellation's current offices? If Exelon needs to build a new tower, what location would generate the greatest benefit for the greatest number of stakeholders? How can public policy best be harnessed to ensure the optimal outcome?
Exelon very likely knows that its future success is tied to a location in our vibrant downtown. With 113,000 employees, downtown is the economic engine of the region, ranking 15th in the country for job density and eighth in the number of residents. Because of this attractive environment, Exelon will be able to retain and recruit the best and the brightest employees, drawn by downtown's superior quality of life.
Despite these high rankings, downtown is still suffering the aftershocks of the recession, and the office market is working to regain its foothold. Because of corporate downsizing and relocations, a number of older office towers are struggling to compete. If Exelon wishes to create a net positive impact, it should evaluate its real estate options in the context of today's office market.
Exelon has stated that it does not intend to remain in Constellation's current offices — the nearly new, 750 East Pratt tower and the adjacent Candler Building. While there must be operational challenges to splitting employees in two buildings, we hope that Exelon will not dismiss the cost savings of simply staying put. And, if sustainability is a goal, adaptive reuse of an existing building is far greener than constructing a new one.
Taking a broader view, a decision by Exelon to stay in the current location would help stabilize downtown's office market. Downtown does not currently need several hundred thousand square feet of additional space. If Exelon were to vacate, employers in older office buildings near Baltimore and Light streets would be drawn to fill the void, destabilizing the historic commercial core.
In our communications with its representatives, Exelon has discussed its desire to consolidate its forces in one location and create large trading floors. If a new building is to be constructed, what would be the best location that would meet the needs of downtown, the city, and Exelon?
Since a decision to vacate would leave significant space available in the traditional Central Business District, Exelon should choose a location that reinforces the central core of downtown, radiating out from the intersection of Pratt and Light streets. If Exelon were to relocate outside this core, it would inflict double damage by vacating two buildings and moving farther from the center of downtown.
Fortunately, locations near Pratt and Light are extremely appealing. They are close to restaurants, retail, apartment buildings, hotels, attractions and other office buildings. They are also near all types of transit (including MARC) and in the middle of an extensive road network. Exelon employees would need only to cross a street to find a variety of offerings and amenities.
Locations in the core of downtown are ideal for attracting the best and the brightest. Why else would the center of downtown be the home of international companies likeT. Rowe Priceand Transamerica? If Exelon followed suit, its employees could easily network with other corporate employees because of the close proximity of office buildings. An isolated building does not afford this type of dynamism.
It's clearly a smart business decision to select a location near Pratt and Light. Better still, such a location would reinforce the core of downtown and be in the best interests of the city. Like most other cities, downtown Baltimore's office market still needs time to recover. If Exelon must construct a new building, public policies and incentives (such as payments in lieu of taxes, or PILOTs) should be directed at securing the best solution for downtown. A central location would spin off tremendous benefit to hundreds of property owners, many of whom pay the highest taxes in the city, according to a recent article in The Baltimore Sun. This result would achieve the "greatest good for the greatest number" and, in the process, stabilize downtown's office market.Copyright © 2015, The Baltimore Sun