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Thursday, August 13, 2009

Queen City Square: An Opportunity Lost?

Last Friday Cincinnati Business Courier publisher Douglas Bolton wrote an interesting editorial piece that discussed the recent news about tenants at the Great American Tower at Queen City Square.

In the past I have said that the new office space is a plus for the downtown office market even if it filled up by shuffling existing office tenants around. The thought process was that some local companies would be able to upgrade their office space for a comparable price due to the additional supply in the market. The space left behind by those companies would then potentially be filled by a company looking to locate in the center city market, but previously could not afford to do so, or find enough contiguous space to fit their needs.

What makes Bolton's editorial piece interesting is that he used it as an opportunity to throw down a challenge for Eagle Realty and other businesses who might be considering filling up the remaining 20 percent of office space inside the tower.

"I have a challenge to Western & Southern Financial Group CEO John Barrett, who marvelously brought to fruition at the end of last year a 20-year vision for the block at Sycamore and Third streets. The challenge extends to any other company located downtown considering moving to the remaining seven floors and 175,000 square feet of space available in what will be the city’s tallest building: Don’t do it."

Bolton goes on to discuss the importance and opportunity of landing an out-of-market company for the remaining space, or bring a "marque" suburban company into the downtown market.

I was left thinking about something else during a recent conversation on the topic. Is the Queen City Square development a project meant to boost Cincinnati's good ol' boy network? Consider the following.

The Western & Southern-controlled Eagle Realty, who is developing Queen City Square, has had some recent troubles with other development projects - most notably the prominent Fifth & Race lot which has since had development rights taken from Eagle and transferred to Towne Properties.

Queen City Square is a marque project that will add instant starpower to Eagle Realty in future deals. The two-phase mega project needed to be successful though, so insert the rest of the good ol' boy network in Cincinnati. In rolls IFS Financial Services and Fort Washington Investment Advisors (both entities of W&S), Great American Insurance, and Frost Brown Todd.

So far everyone involved in this development project has come out smelling like roses. The architect, developer, financiers and tenants all included. But what is being done in and of itself is not immediately productive for the downtown office market. That success will come when those vacated spaces left behind by these already existing downtown companies are filled; and that work will be done by the owners of those other buildings.

What will probably happen is that these vacated spaces will fill up with a plethora of small tenants looking to take advantage of the low price points, therefore creating less fanfare than a large single entity moving into Cincinnati and downtown. It is unfortunate, but true, and the Cincinnati business community needs to step up their game and take Bolton's challenge.

Queen City Square presented Cincinnati's best opportunity in many years to land a new corporate tenant or headquarters for downtown with its high-quality finishes, large contiguous space and prominent location on the city's skyline. This will be virtually impossible to do with the older spaces that are now available - opportunity lost.


Jeff said...

It would be nice to attract a large corporate headquarter into downtown from the suburbs.

There must be some forces at work pushing large corporate headquarters into the suburbs. I grew up in Chicago during the 90's when many corporate offices moved from downtown to the northwest suburbs.

That said, it's still seems advantageous for smaller entities like law firms and marketing agencies to be located in downtown.

theargylist said...

I disagree. With the commercial real estate market as depressed as it is, out-of-town corporate tenants have their current landlords by the balls (current leases are being renegotiated with steep discounts). There won't be a lot of moving going in the next few years.

You can't blame Cincy's current corporate residents' decision to upgrade. They have an image to keep up, and Cincinnati needs to keep these guys happy. (The best customers are your current customers--if we don't cater to local companies, they might leave (just look at Dayton)). We can't alienate our best corporate residents just to have a shot at getting new corporations (if they want to move to Cincy, they will). [Not saying we don't keep marketing outward, but inward marketing has its place too.]

Don't forget, these corporate citizens could have hammered their landlords for better rates/renovations, etc. But these companies are investing in new growth downtown.

And just imagine if this building was finished and it still had vacant space. It would just add to the image of "another downtown failure". Because these corporate residents have stepped up, this is now an unqualified (and greatly envied) success.

Quimbob said...

When people start moving into the Banks, you're gonna see a ton of re-shuffling.

N_O_R_T_O_N said...

god that's going to be an ugly skyline...

Dave Rolfes said...

Not sure if ugly is the word, but it definitely will take some getting used to.

As for the topic at hand, it is an interesting discussion. Clearly an out of town move-in would be a coup, but for the well thought out reasons about commercial real estate it is not likely to happen. Let's fill this one up, get things moving (a subtle streetcar reference), and then when the next building goes up we will hopefully get some new to the area tenants into town.

Paul Wilham said...

Cincinnati has "desirability Issues" when corporations are looking to potentially relocate. I read the Indianapolis paper and 2-3 times a week some company is expanding or coming to Indy.

Cincinnati's good ole boy network really holds it back. The city council is a joke and there is little, if any, "Forward Thinking" going on. The Streetcar fight and the fact we have an unused subway under the city doesn't help.

OTR should be a crown jewel of the city and the city can't get behind basic improvements to inspections and permits proposals Mike Morgan put out.

The city is following a failed Blight=Bulldozer mentality following failed 1960's urban renwewal models other cities long abandoned.

It is going to take a lot of work by the business community to lobby the city for some forward thinking changes. Otherwise they will continue to lose potential business to Indy and Louisville. The council needs to understand that not only do corporations fill buildings, they bring jobs and valuable income taxes that this city sorely needs.

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