Tuesday, July 30, 2013

Not Looking Up

Is the high-rise downtown office building obsolete?

Posted By on Tue, Jul 30, 2013 at 2:09 PM

The Memphis skyline looks great in those golden-hued pictures taken from the other side of the Mississippi River or in an aerial shot taken at night when the lights are on at AutoZone Park.

The trouble is that several prominent buildings from the Pyramid to the South Bluffs are empty or emptying out. The skyline shot is a bit of a fake.

The 100 North Main Building is the tallest building in Memphis. By our standards, it is a skyscraper. The view from the 34th floor looks down on Civic Center Plaza, the Marriott Hotel, the convention center, and the Pyramid, where Bass Pro Shops has plans for an observation deck and restaurant at the apex.

But the 1965 office building with more than 400,000 feet of space is sparsely occupied, mostly by lawyers who work at the courts. The lobby is barren except for a concession stand and a few parched potted ficus trees. The escalators don't run, and the elevators run so infrequently that some tenants worry about access to the upper floors in an emergency. There are no tenants at street level. The revolving restaurant on the roof is long gone, along with the Union Planters Bank sign (the bank was never a tenant) that gave the illusion of occupancy.

Building manager John Freeman declined to talk about any deal that might be in the works to sell the building, which was on the market for $20 million in 2006, but said he might have news in August. The owner lives in California and could not be reached for comment. Paul Morris, president of the Downtown Memphis Commission located across the street, said tenants are being notified that their leases will not be renewed. "The building has been neglected over the years and desperately needs improvements," he said.

Reinventing a building that was as bland as its name in its best years "is a tough one." Suggestions include a combination hotel, condo, and apartment building.

"The best market now in downtown is multi-family apartments," Morris said. "But that is a huge building. I don't think it would be profitable or cost effective to turn it into apartments. The proximity to the convention center helps. We need more hotel rooms. That is a possibility."

Chuck Pinkowski, a consultant to the hospitality industry, has spoken to the owner and is not optimistic.

"It would be very expensive to retrofit it," he said.

Job sprawl and office blight have taken a huge toll on downtown. It is more than likely that, within a year or two, Civic Center Plaza will be bracketed by two empty office buildings. The 12-story state office building on the north side of the plaza has been declared obsolete in a state report, and its 900 workers will be moving, possibly to another downtown building.

Nearby, the owners of the Lincoln American Tower and Court Square Properties have said they are facing foreclosure without extended tax breaks. Raymond James is laying off hundreds of employees and shopping for space in East Memphis to use in negotiations when its lease runs out at 50 Front Street next year. One Commerce Square lost its main tenant, Pinnacle Airlines. The Sterick Building next to AutoZone Park has been vacant for 25 years and, like other abandoned buildings, is not counted as leasable space in the reports that put downtown office occupancy at 84 percent.

"I don't think the theory of an office tower is obsolete," Morris said, citing the positive stories of AutoZone and First Tennessee, both of which own and occupy their buildings. "I have not gotten any credible information that Raymond James has made a decision. The advantage downtown has is that market rates are less. But the downtown office market is very weak, in contrast to the downtown residential and entertainment markets, which are doing very well."

Indeed, the signs of new development can be seen this summer south of the train station and along the future path of the Harahan Bridge bicycle and pedestrian trail. Developer Henry Turley has cleared several acres for apartments and has been goading other property owners and the city to improve cleanliness, lighting, and safety so that visitors "wouldn't think the city died in 1945."

If you look out instead of up, things are looking up.

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