As a former mayor of Providence, and a current owner of downtown office buildings, I am very concerned about the sizable increase in the amount of vacant office space throughout the downtown. According to broker surveys, one million square feet was vacant at the end of 2008 and I believe the amount could rise to 1.5 million square feet in the foreseeable future. This would constitute a vacancy rate of 25 percent.
Vacancies such as these, in the midst of a severe recession, threaten to roll back the “renaissance” that transformed the downtown and brought national acclaim to Providence and Rhode Island. As vacancies rise, the number of downtown workers falls, which diminishes the customer base for stores, restaurants and hotels. The specter of hard times also makes it more difficult for all those expensive condos that have gone up in the last few years to be sold.
To counteract these trends, the state and city governments must increase the amount of office space that they lease downtown. Government must also aggressively seek new private investment in the downtown. In particular, the city’s colleges and hospitals should be given a green light to expand, as long as the city government receives new revenue as compensation. This could be paid by the expanding institutions themselves or by state government on their behalf.
As the recession deepens, for-lease and for-sale signs are everywhere. Brokers are currently seeking office tenants for the recycled South Street power plant, One La Salle Square, the American Locomotive Works property, the so-called American Express building and a portion of the recently completed GTECH building, among many other buildings. Occupancy rates in some of the downtown hotels are around 50 percent.
With the financial sector in crisis worldwide, even bigger losses for downtown Providence could take place. Only a few years ago, two of the nation’s largest banks, Fleet and Citizens, were headquartered in downtown Providence and going strong. But Fleet was bought by Bank of America, which has suffered massive losses over the last year. Meanwhile, the long-time owner of Citizens, the Royal Bank of Scotland, has been taken over by the British government, and the continued presence of the Citizens home office in Capital Center can no longer be taken for granted.
The last time that the downtown was thrown into a crisis of this magnitude was when its department stores and major specialty stores closed in the 1970s. The political, business and civic leadership rallied and produced what we proudly called the Providence Renaissance. For anyone visiting Providence Place mall or experiencing Waterfire on a warm summer evening, the value of our home-grown renaissance is emphatically evident.
The state and city governments must take the lead by increasing their commitment to the downtown. In recent years, the state government has actually reduced its commitment. The state has moved a number of offices from the downtown to state-owned property in Cranston. This is a major reason why total governmental employment in Providence has fallen by about 2,500 jobs since 2003.
As the financial sector fades in the downtown, it is increasingly apparent that colleges and hospitals will grow in importance, especially in the historic areas. Many for-profit businesses such as law, bank and accounting firms prefer new office buildings with large floor areas. However, the city’s colleges and hospitals already are satisfied tenants in smaller historic buildings throughout the city. We should encourage these institutions to continue their expansion in the downtown, which is laid out to handle large populations, instead of imposing on crowded neighborhoods.
As these tax-exempt sectors expand, the city will need new sources of revenue in order to provide necessary services. The institutions should consider a new treaty that provides new and more generous payments in lieu of taxes in return for the right to construct new facilities in the downtown.
We must keep in mind that an empty building has no employees and pays hardly any taxes. If governments, colleges and hospitals find creative new means of filling those buildings, all of the partners will benefit. We will ensure new investment and new life on downtown streets, and preserve the renaissance that brings so much pleasure and pride to Rhode Islanders across the state. •
Paolino was mayor of Providence from 1984 to 1991, director of the R.I. Department of Economic Development from 1991 to 1994 and is currently a major owner of commercial properties in downtown Providence.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
