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The Future of Capitol Square

THE FUTURE OF CAPITOL SQUARE

The office towers that surround the Statehouse have some of the most prestigious addresses in Columbus, but their owners know that’s not enough.

Renovations began last month on the Fifth Third Center at 21 E. State St. on Capitol Square, three years after a Michigan private equity firm bought the 25-story building out of foreclosure.

Birmingham, Michigan-based ValStone Partners paid $28 million for the skyscraper that casts a long shadow across the Statehouse lawn. It got a $24 million construction loan to fund renovations, which are needed to boost the current 15% occupancy rate, said Gerald Timmis, ValStone’s senior managing director.

“We are invested in Columbus, and our building is at the very core of the city’s vibrancy,” Timmis said in an email.

Improvements will include creating an open-concept lobby; renovations to storefronts and streetscapes, giving tenants more efficient space and improved street-level presence; upgrading the fitness center; modernizing the elevators; putting an outdoor patio on the 22nd floor; creating a penthouse tenant lounge; and restoring the facade.

“Employers are seeking modern, efficient space within experiential assets to help draw employees back to the physical office,” Timmis said. “Our renovation is fully focused on providing that experience.”

When the Covid-19 pandemic sent most downtown workers home to work remotely, the future of high-rise office buildings such as the Fifth Third Center came into question.

And while many employers are creating hybrid work policies for their employees and rethinking their office needs, real estate developers, brokers and property owners are still bullish on these tall towers, especially those skyscrapers that surround the Statehouse lawn.

The overall vacancy rate in Capitol Square is 17.2%, which is higher than downtown as a whole at 11.6%.

Capitol Square is home to some of the oldest buildings in the city and has a long history of being the place to work downtown. But times are changing and so is the way companies think about traditional office space.

And as these buildings age, improvements are a necessity to keep longtime tenants and attract new ones, the building owners say.

Cautious optimism

From his office window on the “sidelines of Capitol Square,” local real estate veteran Dany Tiano has a view of traffic at the intersection of 3rd and Town streets. Tiano, who owns and operates the 175 on the Park glass tower just south of the Statehouse, said parking meters that had been empty are starting to fill up again as workers return downtown.

“I’m very hopeful,” he said, adding that many tenants are extending leases in his building, which houses the Columbus Bar Association, the coworking firm Intelligent Office and Hemingway’s Coffee.

“There is always going to be a need for downtown office,” he said. “And if you’re looking for a downtown presence, it’s always going to be around the Square or in the vicinity.”

Tiano’s family-owned firm is updating the 13-story building, freshening the lobby and elevators and resurfacing its glass windows.

“People are talking about amenities,” he said. “You have to cater to your tenants.”

Michael Tomko is president of the Tomko Co., which owns buildings at 2/4 E. Broad; 2-10 N. High; 8 E. Broad; and 16/20 E. Broad. The buildings at 16 and 20 East Broad were combined this year into a 20 East Broad address as part of a renovation.

Tomko’s buildings are a mix of retail, residential and offices.

“Businesses looking for 3,000-, 5,000- and even 7,000-square-foot floor plates ... there’s a sweet spot for that kind of space,” Tomko said.

‘Catering to tenants’

The 37-story Huntington Center on Capitol Square underwent an $16 million renovation in 2019.

The work included a renovated lobby, modernized elevators and escalators, a 6,000-square-foot conference center, a tenant lounge on the 36th floor and a rooftop terrace.

The time and money was well spent, its owners say. The building was more than 90% occupied to start the year, according to Colliers data.

Hines, the international real estate firm that owns the building, said the renovation made the tower more attractive to new tenants, such as the law firm Taft that recently announced its upcoming move from 65 E. State St.

Just off Capitol Square, work also is being done to convert about half of PNC Plaza at 155 E. Broad St. to mostly residential use with some ground floor-office and retail space.

Developer Jeff Edwards, of Edwards Cos., said the other half of the building will remain office space.

The most significant piece of the renovation is the removal of the dark glass atrium on the ground floor of the building, which is being replaced with a below-grade garden element connected to new restaurant space.

The project will likely be completed this time next year.

Capitol Square towers also are competing with newer space being developed outside the downtown core.

Wayne Harer, executive managing director at Newmark, which represents a number of office properties across the region, said the “flight to quality” and buildings overflowing with amenities will continue to draw tenants to new sites coming online, such as on the Scioto Peninsula and Franklinton.

New office buildings in the Arena District, Easton and Dublin’s Bridge Park also are pulling companies from the central business district, Harer said. The Arena District’s vacancy rate is 7.1%.

Capitol Square’s average full service gross rent is on par with Columbus’ average, at $20.93 and $20.97 per square foot, respectively. Franklin County’s average full service gross rent rate is slightly lower at $20.66.

“It’s not a mass exodus from downtown by any means,” Harer said.

“I still think people like to live and work downtown and I think long-term the majority of people will return to the office in some fashion for the community, culture and energy of being together.”

Can Capitol Square keep up?

Marc Conte, executive director of Capital Crossroads and Discovery Special Improvement Districts, said every major city’s identity is tied to its downtown.

He said Columbus, like many other large metropolitan areas nationwide, is waiting for workers to return.

“So many restaurants depended on business from 11 a.m. to 2 p.m.,” he said.

“I don’t know how many can continue to hang on with reduced traffic. Business right now is probably one-third of what it was pre-pandemic,” Conte said.

Greg Davies, CEO of the Columbus Downtown Development Corp., said because income taxes help drive the city’s budget, he would like to see all the buildings around Capitol Square fill up.

He said to bring companies back and attract new ones, downtown Columbus must act as a magnet for activity.

“That’s (CDDC’s) job, is to get downtown to a point where people are excited and want to be down here and are energized to bring their company’s downtown and have their employees live downtown,” Davies said.

Collin Wheeler, a first vice president with CBRE, said he’s confident people will continue to want to live in the city.

“There is something for everybody downtown,” he said.

“There is a draw to be downtown and be in and around the historic core.”

On the south side of Capitol Square, nestled in a row of taller buildings along State Street, is the historic Ohio Theatre. It’s owned by the theater and arts management group CAPA, which also owns the Palace Theatre across Capitol Square and the Southern Theatre a few blocks south.

CAPA recently finished a decade-long renovation at the Ohio Theatre and also spent tens of millions of dollars on upgrades to the other theaters in recent years.

“This block has always been a driver for downtown,” CAPA CEO Chad Whittington said.

The organization is also working to convert a former church at 132 S. 3rd St. into a recital hall, he said.

“We have a symbiotic relationship with our neighboring downtown businesses,” Whittington said. “We rely on them doing well so that we can continue to grow and thrive.

“This block is important to the vibrancy of the city.”