The new building is a showpiece: 13 stories enveloped in glass, with 325,000 square feet of prime space including a café on the ground floor, a 5,000-square-foot fitness center, state-of-the-art security, a modern data center and underground parking for 180 cars.
It’s also “green,” with vegetative roofs, high-efficiency lighting and lots of daylight, rainwater harvesting system, water-efficient toilet fixtures and several other features expected to earn it a Silver LEED certification from the U.S. Green Building Council.
The $114.2 million Blue Cross & Blue Shield of Rhode Island headquarters is fast taking shape on Parcel 2 of downtown Providence’s Capital Center. In a recent interview, Thomas Bovis, assistant vice president, said construction is on budget and on schedule.
“The project is going very smoothly, and we’re very pleased,” he said.
At this point, Bovis said, the glass curtain wall is finished, and the building has been weathered up to the ninth floor. Drywall construction has begun on the bottom three levels, and on the rest, heating, air conditioning and ventilation systems and electrical systems are being set up. On the first floor, walls are already up and painted.
“We’re projecting the certificate of occupancy, based on where we are, at the end of August,” he said. Around late October, he said, the move-in will begin – about 1,000 people in four or five phases on weekends, until the entire staff is there by year’s end.
Once the move is completed, Blue Cross, which now has offices in six buildings downtown, will have all its operations, except for a warehouse that will remain on Niantic Avenue, under one roof, one of the biggest appeals of the new headquarters.
And because of a 20-year property tax phase-in plan (until 2024) and a “pad” already built before Blue Cross came in, plus savings on rent and the revenue from selling two buildings, at 15 LaSalle Square and One Empire Place, the insurer has said it will not have to dig into its reserves or pass on costs to subscribers to pay for the project.
The downtown real estate market, on the other hand, may feel an impact.
For starters, Blue Cross is planning to lease the top floor of the building and possibly part of the 12th floor as well. It has hired the Providence office of CB Richard Ellis-New England to market the property, but the listing is new, and details are not yet on the CBRE Web site.
In an interview, Charles T. Francis, Rhode Island president and a partner at CBRE, said the space is “is definitely unique, because it’s high up, [has] great views, it’s a signature building, and it’s a brand-new building,” he said. Being LEED-certified will also help, Francis said.
But in this economy, Francis conceded, and with all the available space downtown, it may take awhile to find a tenant. Indeed, CBRE’s own 2009 Market Outlook report for Providence shows that at the year’s end, the downtown vacancy rate was 15.2 percent, up from 14.8 percent a year earlier. And while the Capital Center district ended the year with a 12.9 percent vacancy rate, when Fidelity Investments’ lease on 117,981 square feet expires in March, the vacancy rate will rise to 32.9 percent, and the downtown vacancy rate, to 17.1 percent.
Capital Center only has about 590,000 square feet of office space now, so the Blue Cross building will dramatically increase the total office space for the district. Consider that the GTECH Center still has 42,000 square feet available, and the challenge becomes clear.
Francis said he knows that “the market is soft now,” but he added that “the building is not going to be occupied for a year, so we have got some time.”
Then there’s the space that Blue Cross is vacating – about 300,000 square feet altogether, including the two buildings it sold last year to Boston-based Berkeley Investments Inc. for $26.7 million, as well as the corporate office building at 444 Westminster St., which it leases from former Mayor Joseph R. Paolino Jr., and other spaces.
CBRE also has the listings for the Berkeley properties, Francis said both are “solid buildings,” though only 15 LaSalle Square – opposite the Dunkin’ Donuts Civic Center – is truly Class A space, while One Empire Street is of somewhat lower quality.
Karl F. Sherry, a partner at Hayes & Sherry, another major player in the downtown real estate market, said the “good news” for the properties’ owners is that they have a year to find new tenants, an unusual situation and one that will also help “soften the blow” of having so much space become available at once in the downtown market (it is about 5 percent of the total 6 million square feet of office space).
Still, Sherry said, “in this market, it’s going to be difficult to absorb that kind of space in a year.” •
