Corporations Head For The Suburbs

Baltimore’s downtown, like that of many cities in recent years, has been battered by companies leaving for the suburbs.

Just this year, insurance giant USF&G announced it would move out of its downtown office tower to a corporate campus on the northern edge of the city. And Baltimore Gas & Electric said it too would flee to suburbia as part of its merger with Potomac Electric Power Co.

But Sylvan Learning Systems, an educational tutoring company, is bucking the trend and has already broken ground on a new $12 million downtown headquarters.

And other cities, like Atlanta and Louisville, are also seeing a return to downtown, where rental prices have slipped and local leaders are willing to help facilitate affordable moves.

“What Sylvan is doing does send a good positive signal and we will use that,” said Baltimore Mayor Kurt L. Schmoke. “It brings a good powerful symbol that the city is a good place to do business.”

Sylvan’s new seven-story headquarters building will be part of the new Inner Harbor East development, a $350 million complex that is the first major new downtown development in five years.

Sylvan founder Doug Becker’s theory is that as more and more companies have moved to the suburbs seeking cheaper office space they have driven up the cost of suburban locations and made downtown space affordable again.

Others agree.

“We’re seeing a lot of the companies that moved out to the suburbs now looking at downtown because the rental rates are competitive,” said David Kornblatt, president of the Kornblatt Co., which owns several Baltimore office buildings.

Sylvan, now headquartered in Columbia about 12 miles west of Baltimore, isn’t the first employer to move downtown this year, said Ira Miller, principal of Miller Corporate Real Estate Services, a Baltimore brokerage.

The Annie E. Casey Foundation, a children’s philanthropy, moved to new downtown offices from Connecticut this year as have several other companies, Miller said.

“And there are others that are considering it,” said Miller, who helped negotiate the Sylvan deal.

Also important is the fact that major downtown employers whose leases are coming up for renewal have decided to stay put.

About 20 percent of the office space downtown is now vacant, up from 17-18 percent a few years ago.

Companies now looking for top quality office space downtown can find it for $17 a square foot, while in the suburbs it is often leased at $21 to $22 per square foot, Miller said.

One advantage suburban locations have over the city is the availability of free parking, brokers say. But the city in recent years has started to address the problem, offering deals for employee parking, Miller said.

And Baltimore isn’t the only place where the trend toward the city is evident.

Atlanta this year lured a major utility holding company, Southern Co., downtown in what city officials billed as the first time they had managed to get a major company to move into town since 1982.

Hillerich & Bradsby, maker of Louisville Slugger baseball bats, recently opened a new headquarters building in the center of Louisville.

Still, there are companies that feel city life is just too costly.

Sylvan overcame that obstacle by getting Baltimore officials to make the move downtown affordable.

“We went to the city and said this is what we’d be willing to spend,” Becker said.

“I hope that we’re really signaling change in the other direction.”