A decade ago, about half of downtown Dayton’s commercial office space was either vacant or heading into abandonment.
Today, developers are pouring hundreds of millions of dollars into adaptive-reuse projects designed to catalyze Dayton’s post-industrial core. The first phase of Cross Street Partners’ Arcade project is wrapping up, and construction on the new AC Hotel by Marriott — part of Crawford Hoying’s $100 million Mendelsons redevelopment — will begin this spring.
As Dayton’s office market heats up, industrial relics are being rebirthed as mixed-use powerhouses complete with offices, restaurants, retail and housing. For developers, it’s all part of a push to create self-sustaining districts in areas that have long been overlooked.
“They’re creating their own submarkets within a market,” Aaron Savino, principal at Apex Commercial Group, told me. “That’s what people and companies want.”
It’s a 180-degree turn from several years ago when companies often sought offices near economic drivers like Wright-Patterson Air Force Base. Demand is still strong near the base, Savino said — but with new spaces materializing downtown, companies now have far more options to choose from.
But even while companies flock to modernized offices in polished mixed-use districts, occupier interest for Dayton’s landmark office towers has remained fairly low, exacerbating a growing vacancy problem.
The leading challenge? They’re outdated. Some floors haven’t been touched in generations, Savino said — and most towers offer conventional, closed-office layouts.
Decades ago, rigid office designs were a selling point. Now, they’re a deterrent.
“When you walk through some of those buildings, they’re so cut up, and it’s so hard for these companies to visualize themselves in it,” Savino said. “The old ways of building out office space are gone. Users want more open views. They need more natural light.”
A possible solution for tower owners is to gut one floor of the building for touring purposes. That should allow prospective occupants to visualize themselves in the space, making it easier for Dayton’s landmark office towers to attract new tenants.
“It needs to be demoed so that the user can envision how they fit into it,” he said. “Those towers are incredible if they were just opened up.”
Still, the office market is positioned for continued growth, Savino said — even in neighboring suburbs. In nearby Kettering, Synchrony Financial’s former offices boast about 400,000 square feet of space; and in Miami Township, LexisNexis’ recent sale of its 391,000-square-foot office campus opens up more room for companies looking to relocate.
Odds are, there aren’t many single-tenant local occupiers looking for that much space, Savino said. But often, massive office portfolios are an appetizing opportunity for out-of-state companies seeking a more affordable business environment.
“We’re seeing a lot of out-of-town companies reaching out to us about specific large blocks of space,” Savino said. “With other markets having such higher costs on the east and west coast, they’re looking at Dayton and saying, ‘This could be a potential option for us.'”
It’s also worth noting that companies’ space requirements are changing. In Synchrony’s case, the continuation of work-from-home prompted a smaller footprint. But for those eyeing a post-pandemic return to offices, the opposite often rings true.
“Office density is not the most critical factor anymore,” Savino said. “I’m hearing some companies say, ‘We don’t need as much space,’ and I’m hearing other companies say, ‘We need more space, because we need more circulation. We’re not going to be sitting on top of each other like we once were.'”
As the push for downtown redevelopment forges ahead in 2021, Savino said he’s optimistic. In January and early February, he saw more activity in the urban core than he’s seen in months — and that momentum is likely to continue.
The wild card, he said, is when the amenities that support a downtown lifestyle can return to normal operations.
“What’s the point of being in an urban district if you can’t go walk out and grab a bite to eat? That’s the whole point,” he said. “Once these restrictions are lifted and the office starts to find normalcy, hotels and restaurants will be back again. Activity will pick up.”