The “Inner Harbor” district in Baltimore City is experiencing a severe commercial real estate downturn. We reported last week that two office towers were sold at massive discounts. Now a third tower at 100 E. Pratt St. was reassessed at a 45% discount compared with what it was originally assessed at, inciting fears that a “domino effect” will ripple across the area, according to Baltimore Business Journal.
Maryland State Department of Assessments and Taxation spokeswoman Meghann Malone told the local paper that the landmark office at 100 E. Pratt St is now worth $93.65 million, a 45% haircut compared to the $171.4 million that the property was initially assessed at. The tower is expected to see anchor tenant T. Rowe Price Group Inc. shift to Harbor Point, part of the metro area still on the water but newer and somewhat safer.
The plunge in office tower valuations means the city’s commercial tax revenue will take a sizeable hit. We reported last week that two large office properties in the central business district were sold at steep discounts.
The first is the 30-story office tower at One South Street in downtown Baltimore was sold in June for $24 million, a 63.6% discount versus the tower’s 2015 sale of $66 million.
The second tower on E. Pratt St. sold for $25 million. It was once valued at $80 million in 2018.
We must note the plunge in tower valuations is confined to the Inner Harbor district (for now). We noted in April that this area was “effectively dead.”
The Baltimore Business Journal blames the “struggles in Baltimore’s commercial real estate” on “corporate downsizing and hybrid work schedules impact leasing post-pandemic.” But makes no comment on Mayor Brandon Scott’s failure to enforce law and order as progressive policies pushed by City Hall backfire.
Michael L. Higgs, director of the State Department of Assessments and Taxation, said he’s concerned that other building owners will file assessment appeals and unleash a “potential domino effect that continually diminishes the central business district’s tax base and puts further strain on the commercial market.”
“I see a wave coming,” Higgs warned.
We have spoken with several financial firms in the city who tell us while corporate downsizing is ongoing, one of the significant problems of why the metro area’s office vacancy rate downtown is creeping up is because white-collar workers don’t have faith in the mayor’s progressive crime-fighting plan. And, of course, no one in the business community will ever publicly criticize the mayor because he might weaponize some city agency against them.