While residential real estate in downtown Dayton booms, there is a different tale with commercial development, as entire high-rises remain vacant and workers continue an exodus to suburban office plazas.
Now, after years of losing downtown jobs, the city of Dayton has a new strategy for fighting back.
The Dayton City Commission last week approved a sweeping change to its existing ordinances on property tax breaks in the downtown district that — for the first time — will make incentives available to proposed commercial/office and industrial developments. Those breaks could be 25 percent or higher.
The city will negotiate the breaks with the developer along with the Dayton School Board, which must be consulted by law. The breaks will be allowed in other Community Reinvestment Act areas in the city as well.
City Commissioner Joey Williams, an 18-year commission veteran and Senior Vice President at Citizen’s Bank, acknowledges the move represents a break with tradition.
“One of the major priorities is that we have to do something about the downtown vacancies — in particular for commercial real estate,” Williams said. “We are pleased with residential real estate and we are almost at a point where we can’t build them fast enough, but we have to have a policy to spur commercial real estate.”
Said Mayor Nan Whaley: “We need these tools to be aggressive in attracting business to downtown.”
Figures from the city show $4.8 million for new residential construction has been spent downtown since July 1 of last year, accounting for 32 new single-family dwellings.
But the vacancy rate for downtown commercial buildings is daunting. A survey by the Gem Real Estate Advisory Group of 41 office buildings in the Central Business District showed a vacancy rate in 2014 of 32.4 percent, or 1.4 million square feet. The list of partially vacant and fully vacant office buildings is considerable.
The Arcade, Centre City Building and Paru Tower are among the vacant office buildings.
The Paru Tower, or Third National Bank and Trust building, stands 14 stories tall across Main Street from Courthouse Square and was built in 1926. It’s been empty since 2012 when a self-proclaimed Hindu guru abandoned it.
The Centre City Building includes a quarter million square feet and has a penthouse. There’s been redevelopment interest, and the building has been approved for historic tax credits, but to date its fate is unclear.
The Arcade remains abandoned with seemingly few development possibilities.
Although it is unclear as yet how many developers will line up to restore vacant high rises and return them to use, new developments are covered by the changes as well. All of the $45 million Water Street District development that’s underway is covered by the revisions as well as other projects, said Aaron Sorrell, the city’s Director of Planning and Community Development.
The residential component of the Water Street District features 215 luxury rental apartments, a mixture of two-story townhomes and 1-2 bedroom flats. A 50,000-square-foot commercial building fronting Patterson Boulevard is also in the project. PNC Bank is the anchor tenant.
More is in the pipeline. Earlier this year two investors purchased several commercial buildings to launch a new entertainment and residential district around East Third Street to be called the Fire Blocks District.
Winfield Scott Gibson, of Tulsa, Okla., and Elliot Katz, who splits his time between Dayton and Boca Raton, Fla., said the investment will be in the tens of millions of dollars and that the financing is lined up.
“It’s a tool to help encourage reinvestment, and that’s what it’s intended to do.” Sorrell said of the ordinance changes.
The boundaries of the downtown district are not changed. Generally, the western boundary is Wilkinson Street east to Patterson Boulevard. The Northern border is the Great Miami River and the southern border is the CSX railroad tracks, or what used to be Sixth Street.
Chris Kershner, Vice President for Public Policy & Economic Development for the Dayton Area Chamber of Commerce, said the breaks will help provide incentives for redevelopment and new investments in downtown.
“The downtown Dayton vacancy rate is an issue and we’re glad to see the city is taking it seriously,” he said. “However, we can’t forget that surrounding Dayton areas like the Midtown project, also need serious attention from the city.” The Midtown redevelopment includes plans for the Montgomery County Fairgrounds after it moves from its current location on Main Street across the street from Miami Valley Hospital.
The city has been working to improve gateways into downtown. Last week the city awarded a construction contract on a $3.7 million project to rebuild Warren Street — an infrastructure improvement similar to what has been undertaken on Brown Street.
Kershner said such investment is needed for development to flourish.
“New development is great, but you have to have the infrastructure to support it,” he said.