What Does Elm Place's Closure Mean for Downtown Dallas? Is the City Worried? Well ...
Elm Place's closure, announced this morning, comes as no surprise: A section of George Dahl's 52-story office tower, at Elm and Akard Streets, fell into foreclosure in the early part of '09, and the former First National Bank of Dallas and Bank of America building been shedding tenants for years. City officials certainly were not caught off-guard; they've known today's announcement was imminent.
"But there's not a lot we can do," says Karl Zavitkovsky, head of the city's Office of Economic Development. For Zavitkovsky, the owners' decision to shutter the tower, built in '65, is bittersweet: He went to work for the city after retiring from Bank of America, and he recalls having "training meetings" on the sixth-floor terrace of Elm Place, which Bank of America kept as a sort of "back office" after moving into One Main Place in 1985.
I called Zavitkovsky to find out if the city was concerned about Elm Place's shuttering, given the amount of time and money City Hall's been spending to resurrect downtown. Long story short: Yes and no. Yes, because its closure means downtown now has about 5 million square feet of empty office space, much of it older and uninhabitable. No, because look at all the good things going on downtown, from Main Street Garden to the Continental redo to Joule owner Tim Headington's recent acquisition of more downtown property around his hotel.
Our brief Q&A follows. And when I saw "brief," I asked two questions to which Zavitkovsky provided paragraphs' worth of answers.
Was the city aware that Elm Place was close to closing its doors?
We were aware of it. [Assistant director of economic development] Hammond Perot may have talked to them, but there's not a lot we can do about it.
This is obviously a mammoth property -- the biggest empty building in downtown.
That's true, but we need to stay focused on things we can impact and on ways we can create positive synergy. We've got a good partner in DowntownDallas, and we've put a lot of focus on the Main Street corridor, on Commerce Street and, to a lesser extent, on Elm. We've done a lot around the Mercantile plaza and Main Street Garden, and the biggest issue is the Grand Hotel. We're on our way to getting the Continental done, and all that is very expensive. We're extremely fortunate Tim Headington's gone through a consolidation of properties around the Joule. Here's a guy who has not been afraid to put resources in downtown. We provided him with some help through the City Center TIF, but he's acquired the Cliff Booth properties around him. That covers a significant area. [According to several downtown properties owners to whom Unfair Park has spoken in recent days, Headington has also acquired the former Praetorian Building at 1607 Main Street.]
On these older buildings, am I concerned? Yeah, but in terms of proactive things the city can do, we need to look at areas where there's energy being created. Downtown is a huge area. I asked someone to draw me up some parallels, and I think it's the size of White Rock Lake, the size of Highland Park. So it's a relatively big area, and we've got a lot of old empty office space and surface parking lots, and you can chip away at this a block at a time. Momentum's a funny thing, and you try to build on things. The mayor said, "All right, we've got some very significant opportunities to build on the deck park, the Arts District and even Victory Park, which has taken its hits. These things are all going to happen, and how do we build on that?
And I think that's what we've tried to do. We've tried to pull all the resources we've got. I've got some hopes our foreign investment program is going to help us on that, but it's like everything else: It's gotta be done in combination. Nothing's a deus ex machina that will solve everything at once. But it always bothers me when there's a big empty building, and there are a couple of them.
The city's obviously invested millions, especially with TIF money, to bring new life downtown. But then a building like this comes along, and it's about to become a million-square-foot ghost town. Does it feel like one step forward, one step back?
These things present a big redevelopment challenge. Will somebody take that on at some point? They might. Right now it's hard to get private sector money for a really viable project, let alone something where you're stretching, And with downtown and the deals in the Southern sector, you're looking at 50 percent public money sometimes -- from the city, the county, the state. The private sector is involved in enforced conservatism right now.
What comes back first typically will be the single-family market, and we're not there yet. And we've got 5 million square feet downtown empty, and all of that is not particularly inhabitable. The concern is, you've got a global economy that's contracting in terms of job creation, so there's less demand for office space. You've got a lot of new product in Victory and Uptown, and that competes with our better product downtown. Most of the decent Class A space downtown was built in the '80s. The Victory and Uptown rents are also very attractive. Take Haynes and Boone, which moved out of Bank of America Plaza to Victory Park.
On the flip side, it was very positive that Oncor made that decision to move their headquarters of Woodall Rodgers. That's an older building they'll rehab. My reaction is, Elm Place closing isn't something that alarms me, because it was not unexpected. And it's not a clear and present danger to anyone from a health and safety standpoint. We've got to keep our eyes on the ball and keep chipping away and trying to maintain the discipline that will keep momentum going during difficult times like this.
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