City considers loans for upgrades vacancy rate
Aims to make building improvements affordable, help lower
November 30, 2009
Naomi Powell
The Hamilton Spectator
http://www.thespec.com/News/Local/article/681720
The city will look at offering low-interest loans to building owners as part of a new push to fill office space in the downtown.
The loans would be used for leasehold improvements landlords say are crucial to attracting tenants.
"One of the gaps is that banks don't lend for this so what do we do?" said Ron Marini, the city's director of downtown renewal. "We have programs where we lend money to create housing; it seems natural that we provide money for leasehold improvements."
The city's downtown office strategy is designed to lower the vacancy rate in office buildings to 11.25 per cent by 2011, down from 15 per cent in 2008. It comes after the economic downturn prompted companies to slash overhead and consolidate operations, causing vacancy rates to climb across the country.
Of five million square feet of office space in Hamilton's downtown core, about 770,000 is vacant, according to a report by city staff. That's roughly the equivalent of two Stelco Towers.
"In today's economy things are contracting and so our challenge is to not only try to reverse that but also to bring in new jobs," Marini said.
To secure corporate tenants, landlords often agree to complete extensive upgrades on their buildings. Expensive loans can scuttle those deals by forcing the landlord to increase rents beyond what the tenant can afford. The city program would close that gap by offering loans at one percentage point below the prime lending rate offered by banks, Marini said.
"It gives the downtown a leg up in terms of a more affordable lease rate."
Hamilton recently developed a database to track office space downtown.
It hopes the tool will draw the attention of national real estate brokers such as Cushman & Wakefield and Colliers International, which research and recommend office space for clients.
At the moment, the city is "off the radar" in the quarterly market reports prepared by these firms, whereas London, Windsor and Niagara region are featured, the city says in its report.
The data will also allow the city to provide office vacancy information on its website.
Downtown landowner David Blanchard questioned the value of the database. Most downtown office buildings belong to a handful of owners who are already well known to real estate brokers, he said.
But the financial incentives, particularly the loan program, is a "very good idea," Blanchard said.
Though his buildings have a vacancy rate of just 6 per cent, Blanchard can understand why other owners are struggling to fill space.
"You have to have the money to clean and fix the buildings -- it's essential," he said.
The city will also consider revamping its Enterprise Zone Grant program -- designed to encourage owners of downtown buildings to improve their properties by offering grants to help cover associated tax increases. The program is now only available to buildings that are 50 per cent vacant -- a requirement that leaves many downtown buildings ineligible.
It will strike a task force of office owners and real estate agents and continue to work on improving safety and cleanliness of the downtown, including Gore Park.
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