Deal with tech company seen as a possible ‘game changer’
Downtown planners and property owners say they expect the mixed-use riverfront development anchored by IBM will show a demand for downtown living in Baton Rouge and spur other projects by bringing more workers and residents to the central business district.
However, observers cautioned that while they expect the project to transform downtown, the unique nature of the deal that landed the tech giant limits how applicable it is to other major projects in the works or on the horizon.
The $55 million development announced last week will take up the block bounded by River Road and Main, North and Lafayette streets. When it opens in 2015, IBM will employ 800 office workers in the eight-story building along North Street. An 11-story residential tower along Main Street will include 95 apartments and nine luxury townhomes.
Davis Rhorer, executive director of the Downtown Development District, said the addition of that many office workers and residents, the nature of the technology jobs and the allure of potentially working with IBM for other companies makes the development a “game changer.
“When you capture a company such as IBM, that is internationally recognized and renowned,” Rhorer said, “it is very significant. It changes the market.”
“Once the announcement was made, our office was inundated with phone calls,” he said of the current and prospective downtown businesses and developers interested in what the deal could mean to them.
Branon Pesnell, a broker with Beau Box Commercial Real Estate, said the project is significant for downtown in two ways.
First, it will spur development because the employees at IBM will probably be younger, recent college graduates who are more interested in living downtown and are more inclined to want entertainment options within walking distance in the evenings and on weekends.
“It adds a different type of employee than we’ve seen downtown in the past,” he said.
Second, technology companies that want to do business with IBM will likely begin to target downtown, Pesnell said.
“The hope for everybody is that there will be businesses that feed off of IBM and it actually becomes a hub,” he said.
Downtown’s renaissance has been marked by successful developments large and small, both public and private. They include the addition of several state office buildings and parking garages, The Main Street Market, The Shaw Center for the Arts, the II City Plaza office building, Kress at Third and Main, the new courthouse, Hotel Indigo, the Hilton Baton Rouge Capitol Center, the Hampton Inn & Suites and the North Boulevard Town Square.
But the past 15 years also have seen the announcement of several major residential and mixed-use projects that have fallen by the wayside — Richard Preis’ One River Place, the Hartley/Vey riverfront condo tower and the Brownstones, which was Commercial Properties Realty Trust’s planned apartment building . Other projects, like Pete Clements’ River Park and the redevelopment of the Commerce Building, are still in the works.
Preis, who finally sold the One River Place site to former Shaw Group chief Jim Bernhard late last year, said there is demand for residential development downtown. He said Hurricane Katrina, the financial crisis and national recession just made the last decade difficult, and that it is still tough to get ambitious projects financed.
“If it hadn’t have been for the hurricane and the credit crunch, there would have already been downtown living,” he said.
The deal that brought IBM to Baton Rouge consisted of major incentives from the state and city-parish, and the involvement of the Baton Rouge Area Foundation, making comparisons with other projects difficult.
Preis said it will be interesting to see whether the IBM project will have any direct effect on other projects in the works.
“Are (banks) gonna say, ‘That’s great, we will now do a Richard Preis-type development here, here and here,’ or are they going to say, ‘Let’s see how the market absorbs these 90-plus units.’ ”
Trey Trahan, an architect who owns four pieces of downtown property, including the rest of the block Bernhard bought from Preis, said he thinks the IBM project improves the prospects for everyone downtown.
“We’re really excited about IBM coming to town and are in discussions about what the opportunities will be as a result of it,” he said. John O. Hearin, who owns a half-block along North Sixth Street between Convention and Florida streets and would like to do some kind of a mixed-use development there, agreed.
“Something like this definitely helps. People are taking a harder look at their real estate and what they can do with it,” Hearin said.
Hearin, however, said it is difficult to say whether the IBM deal improves anyone’s prospects in the short term.
Each project has its own hurdles and not every deal gets the kind of public-sector muscle that the IBM deal did.
“I don’t see this IBM deal alone changing things,” Pesnell agreed, noting the project probably wouldn’t work financially in a traditional deal.
“This deal would be very difficult to work if it was an arms-length transaction,” he said.
Preis offered a similar assessment.
“In my opinion, the days of the private sector doing that type of development are gone,” Preis said.