Downtown activity bumps lease rates up

To date in 2004, 45 new businesses have opened. Factoring in a handful of closings, there are total of 40 net new businesses, said John Simmons, executive director of Urban Districts Alliance.

“I would say this is a banner year for new businesses,” Simmons said. “This year matches the previous three years’ total combined.”

With all the activity, some lease rates have increased by about 50 percent and in some cases doubled.

Sam Freeman of Center City Development Co. owns three commercial properties downtown, including 220 S. Campbell, which has been vacant since Allison’s Floral and Gifts moved out in October.

“With a market that’s changing as fast as it seems maybe some people, I think, are going with shorter leases rather than longer leases,” Freeman said. “I think the base lowest rate you could rent something now would be $8 a square foot up to $11 or $12, and I’d say two years ago or so, it was probably $6 to $8.”

These rates now compete more closely with south-side office rates, including National Park Plaza at $13 per square foot, Corporate Center at $15 per square foot and Plaza Towers starting at $13 per square foot.

Some say the downtown excitement is due to plans for Heer’s Tower and College Station, but Terry Reynolds of downtown property owner C. Arch Bay Co. said the excitement precedes those development plans.

“I think it was already coming back before,” she said, “but those only add to the spark, or the reason to want to come downtown.”

Larry Grover with CJR Commercial Realtors is working with partner Skip Liebman to lease the Heer’s Tower. As the project progresses, Grover said, “People will understand how much more the downtown area is coming back. People already know that it is, but the Heer’s Tower and College Station are such major parts of downtown that that will really put a stamp on it that everything’s come back the way it was.”

Grover said that lease rates at the Heer’s Tower range from approximately $13.25 per square foot to $22 a square foot, and he has confirmed leases for about 35 percent of the building. However, he is unable to name tenants at this time, with the exception of city and state offices previously announced.

Energy

Creative energy is what drew Colleen Sundlie downtown. She opened Park East Inc., a branding and advertising agency, about 13 months ago in an 1,850-square-foot loft in the Marx Building, 313 Park Central East, Ste. 201. She signed a two-year lease, but declined to disclose the rental rate.

“I am aware that, for the square footage, we would be hard put to find anything less expensive. I would say the price range is between $750 to $1,200 for something our size,” she said.

Sundlie, who grew up in Springfield, said she had lived outside of the area for eight years. “When I would come visit Springfield … it seemed like this was where a lot of the new activity was going on. And because we are a creative business, downtown seemed to me to be the area that was growing and (had) creative energy,” she said.

Sundlie’s landlord, Joe Bowman, has owned the Marx Building, which was built in 1899, with partner Charlie Slavens for nine years.

He started a $1 million renovation on the building in 1996.

The building now has three residences and three offices on the second and third floors, and two commercial spaces on the ground floor.

Bowman has temporarily set up his office in one of the retail spaces until renovations on his third-floor office are complete. The other ground floor retail space is vacant, and Bowman said the commercial spaces rent for $8 per square foot annually. “For the most part, people are asking for one-year leases, and I’ve been doing that,” he said.

Even though the leases have been short-term, his confidence in the revitalization of downtown is high. “The last year has been a significant turnaround. It’s more like an accelerating curve. I’ve seen interest for a long time, but now it’s kind of snowballed,” he said.

Into the groove

Downtown business is going so well that some entrepreneurs aren’t satisfied with one location. After operating The Groove, a hairstyling salon at 303 Park Central West, for nearly four years, Valeria and Michael Boss in October opened a second shop, A Valeria Boss Salon, at 312 E. Olive, the former site of RS Kelley Printing.

“The staff that we had in The Groove outgrew that particular location, so we opened a facility that was about three times the size,” Michael Boss said.

“We have about 4,000 square feet over here as opposed to the 1,300 or 1,400 that we had there, and then we just restaffed the original location.”

Boss said that he and his wife signed a seven-year lease for the new shop with College Station developer Scott Tillman for $2,000 a month. He declined to share details about the lease for the original shop.

Downtown addresses are a priority for the Bosses.

“Valeria’s dad is Vern Morgan. He’s the center city coordinator, so we’ve always had an interest in downtown and supporting it because it’s really close to home in terms of our family,” Boss said.

Downtown needs

As downtown continues to evolve, more goods and services will be needed. “The more people we have living down here, we’re going to need more services and amenities – grocery stores, drug stores and things like that,” Reynolds said.

Freeman said that more retail storefronts are needed.

“It’s very difficult for someone to find a 1,500- to 2,000-square-foot retail space downtown. There’s still a considerable demand for that, and that’s something that College Station will supply,” he said. Freeman is leasing agent for College Station.

Bart Collins of Mellinger Commercial LLC has been showing downtown properties to a sandwich shop franchise, but declined to disclose its name.

The chain, he said, realized the importance of establishing itself downtown.

“It used to be you needed to go downtown because it’s trendy and all that. (Developers) tried a couple of times to get downtown cooking, and now it’s pretty much taken hold,” Collins said. “There’s so much money going on down there, there’s so many developers pushing money into the area, it’s not a fad anymore. It’s here to stay. The redevelopment’s going to stick.”