Office buildings under construction in South Bend, but what about turnover and vacancies? – South Bend Tribune

SOUTH BEND On a cold and blustery Thursday, officials gathered on the edge of an open field in Ignition Park to witness the citys latest groundbreaking for office space.

Press Ganey, a business that was started here by a couple of Notre Dame professors, had finally had enough of the space it has been cobbling together in the city for more than 30 years. Efficiency, convenience and camaraderie could be improved if the companys estimated 380 employees were under one roof.

So officials broke ground for a new 83,000-square-foot building along Ignition Drive that should be ready in the first half of 2021 for the company that aims to improve health care performance by measuring patient satisfaction.

The new office, which will include training and fitness centers, as well as a rooftop deck with cafe, is being built to house an estimated 500 employees with the possibility of an additional building expansion in the future.

Meanwhile, a new five-story office building is progressing at the corner of Jefferson Boulevard and Main Street that will eventually house the law firm Barnes & Thornburg and Lewis Hansells River Park Leasing Corp., on the top four floors with space for a coffee shop and retailer on the ground level.

All good news since its better to have a combined $25 million in new investment than to risk one or more of the businesses moving out of the city.

But those two moves also will add a considerable amount of square footage to the downtown office market that could be further boosted with the possible sale of the 63,000-square-foot building occupied by South Bend Community School Corp., at 215 S. Dr. Martin Luther King Jr. Blvd.

In its latest market report for the second half of the year, Bradley Co. said the office market in St. Joseph County is experiencing a significant level of turnover which is driving up vacancy rates.

The firm said the office vacancy rate was 9.4% in the third quarter compared to 8.5% in the same period last year and that the office market within St. Joseph County is experiencing a significant level of turnover, which is driving up vacancy rates.

The commercial real estate firm said space that has been vacated has remained empty for extended periods, especially larger spaces beyond 5,000 square feet, and that there already is about 20,000 square feet of vacant space in Leighton Plaza, more than 10,000 square feet in the Holladay building, more than 60,000 square feet in Jefferson Centre and about 8,000 square feet available in the Key Bank Building.

And thats without the additional space that could added by the Barnes & Thornburg and Press Ganey moves, the possible sale of the school districts administrative building and the potential redevelopment of the former South Bend Tribune building.

John Jessen, a vice president at Bradley, said the Pete Buttigieg presidential campaign also is occupying a good amount of downtown office space that eventually wont be needed no matter the outcome of the race for the White House.

We need a new user that can gobble up a floor or even a building, he said.

Until that happens, there will likely be price pressure on downtown office space, especially larger offices and those that need to be upgraded. The market will favor those who are potentially interested in moving downtown or relocating to a different space, Jessen said.

Any building that has obsolescence and an owner that doesnt see the need for upgrades is going to have challenges, said Jessen, adding that owners also should do their homework before planning investments.

Despite the potential challenges, Jessen and others pointed out the investment in new office space is the first in about 20 years in the downtown area and that the market is vibrant with more people and businesses deciding to locate near the heart of the city.

Its hard to argue that there havent been positive improvements that have made downtown a desirable place to be, said Ed Bradley, senior vice president at Cressy Commercial Real Estate. And that impacts whether we see the additional office space as an opportunity or a threat.

Some of the space might have to be divided or redeveloped but eventually it will find its best use, said Bradley, pointing out there also is likely a year or more before the space now occupied by Barnes & Thornburg and Press Ganey even becomes available.

The next thing is still to be determined, Bradley said. Though there are vacancies being created by these decisions, there will opportunities created.

That might not have been the case 10 years ago, but today there is a sizable amount of investment going on throughout the downtown, said Bradley, adding that the Buttigieg campaign has put a positive spotlight on the city.

Developer David Matthews, who is building a 10-story building in the East Bank area adjacent to the Commerce Center, said he believes a key to the ongoing revitalization effort is getting more people to move downtown.

Some of those people might be decision makers who want their offices closer to where they live, said Matthews. Though there could be a short-term problem with too much office space, he too believes the issue will eventually work itself out.

Id have a different opinion if businesses were leaving, Matthews said. But more people and businesses are choosing to be here.

Dan Buckenmeyer, director of business development in the citys Department of Community Investment, said the potential for excess space is the result of the first significant investments in office buildings in decades.

The city will continue to work with local businesses to help them expand and grow here, Buckenmeyer said.

And similar to how Press Ganey was born here, perhaps the next tenant in downtown will be another venture that is being developed at innovation centers at Notre Dame and other places, he said.

Besides getting its staff under one roof, the relocation to Ignition Park gives Press Ganey the technology infrastructure needed to support a data-driven company.

This is an absolute long-term commitment to South Bend, said Joe Greskoviak, CEO of the company. This gives us the space we need to grow into the future.

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Office buildings under construction in South Bend, but what about turnover and vacancies? - South Bend Tribune