In our series on downtown Dayton’s Courthouse Square, we mentioned that the KeyBank Tower is largely vacant, with the bank pulling out in favor of a new downtown office and the tower’s out-of-state ownership unavailable for comment.
One key tenant, however, remained in the building: the Downtown Dayton Partnership. But soon it was announced that they too were leaving the tower for the other side of Courthouse Square, which will leave Dayton’s second tallest building completely empty.
That isn’t expected to last long, however. Only a few days later, news emerged that Stratacache CEO Chris Riegel, owner of the city’s tallest skyscraper as well as the Courthouse Plaza SW building, is entering into an agreement to purchase the KeyBank Tower.
The details are a bit complicated: the city of Dayton actually owns the land and air rights, and the company that previously held the leaseholder rights owes “hundreds of thousands of dollars in unpaid rent and real estate tax obligations.” If Riegel’s company hits certain targets for investment in the property and jobs brought to the tower, it will earn the option to take over ownership of the land and building.
A recent Dayton Daily News article shared current occupancy rates for major downtown office towers, which shows major disparities between downtown’s successful and struggling skyscrapers.
Downtown Dayton Tower Occupancy, 2023
- Stratache Tower 55%
- Key Bank Tower 3%
- 130 Building 58%
- Fifth Third Tower (1 S Main) 42%
- Premier Health Building (110 N Main) 35%
- Talbott Tower 79%
- 111 Building 77%
- Courthouse Plaza SW 29% (since increased)
- Liberty Tower 94%
Downtown Dayton’s office struggles are the result of multiple factors, including shifting work patterns as the result of the COVID-19 pandemic. But the challenges faced by downtown’s office towers go back much farther as well.
Even before it opened, the KeyBank Tower had leasing issues. It was built for a single tenant, the Mead Corporation, but to qualify for financing, Mead had to lease over 125,000 square feet that it wouldn’t be using, at a time when over 300,000 square feet of vacant space existed elsewhere downtown.
At that time, 1976, other buildings downtown were largely occupied but some already portended the future vacancy issues:
Downtown Dayton Tower Occupancy, 1976
- Winters Bank (Stratacache) Tower, 85%
- Grant Deneau Tower, 68% (which, according to the 1976 article, “has financial problems (and) will go on the auction block soon for the second time to meet demands of creditors”)
- 111 Building 100%
- Centre City Building 95%
- First National (130 Building) 62%
It’s positive news any time new leases are signed downtown, but often those tenants moving into new spaces are relocating from elsewhere downtown and leaving their original spaces vacant, a shuffling which doesn’t move the occupancy needle overall.
And this too was the case when these office towers were first built. Mead had been located in a number of other downtown buildings before the new tower was built, with the largest footprint in the Talbott Tower, which an article said “will be hardest hit” by the new construction.
Let’s fast-forward to the 1990s, a time when the area’s suburbanization and deindustrialization were really starting to pick up. Downtown’s largest towers, however, were largely still holding strong.
Downtown Dayton Office Vacancies, 1990s-2000
As of 1992, the downtown office vacancy rate was 22% (an occupancy rate of 78%).
Occupancy rates for key buildings were as follows:
- Kettering (Stratacache) Tower 98%
- Mead (KeyBank) Tower 95%
- Citizens Federal (Premier Health Tower) 80%
- One Dayton Centre (Fifth Third Tower, 1 S Main) 28%
- Courthouse Plaza SW 80%
The glaring outlier there is today’s Fifth Third Tower which at the time was still brand-new but only about a quarter occupied. That was largely due to the fact that it opened in the same year as today’s Premier Health Tower, resulting in a glut of office space far exceeding the demand. (Not to mention the fact that the latter tower required the demolition of a National Register-listed historic district.)
Today’s Fifth Third Tower was intended to prop up the Dayton Arcade shopping center, but was delayed and poorly executed, with the mayor at the time admitting that “neither he nor the assistant city manager for development services were prepared” for the project and even that he “was very naive and very idealistic about what it took to tear down a block and build an office tower.”
The market studies to support the Arcade tower “did not anticipate the presence of a second office tower of equal size,” which “made the whole deal suffer.”
The then-owner of the Arcade was perhaps looking into a crystal ball when he declined to participate in the tower project, saying: “I thought that wasn’t the time or the place, and I think time will prove us to be accurate.”
But all that aside, as Dayton entered the 21st century there would be some positive trends.
As of February 2000, the CBD office vacancy rate dropped to 13.91%, the third year in a row it had improved (16.18% in 1998 and 19.10% in 1997).
But the momentum wouldn’t continue.
High-profile companies continued to leave the city core, including Mead. And by 2008, the financial crisis was in full swing which would have a devastating effect on the whole region including downtown Dayton.
New Proposals for Vacant and Underutilized Downtown Office Towers
Another relevant factor in the discussion about vacant space downtown is that the statistic typically measures only the vacant leasable space, so completely shuttered buildings are taken out of the calculation.
The 1976 statistic, for example, shows that the Centre City Building was an impressive 95% occupied, while today it looms empty over downtown in a precarious state.
But it’s being targeted for a major redevelopment, at the same time as other new projects, both in progress and proposed, have the potential to revive some major eyesores and return them to productive use in a manner that’s consistent with post-COVID work patterns.
The Centre City Building has previously won major tax credit awards but then failed to move forward. This time, however, it’s led by Dayton Arcade developers who are going for $14 million in Transformational Mixed-Use Development Program tax credits to aid the next phase of their efforts.
$8 million of that total would go to the Centre City, and the plan calls for 200 apartments and roughly 50,000 square feet of commercial space.
The Fidelity Building at 211 S. Main is another vacant office building that has recently seen a new project proposed.
A North Carolina-based group has requested $5 million in state historic preservation tax credits to support a $50 million project with 100 residential units and two as-of-now unknown “entertainment destinations” on the ground floor.
Before the KeyBank Tower emptied out this year, the Grant Deneau Tower at 40 W 4th St followed a similar trajectory.
This was the tower that faced financial problems and was auctioned off way back in the 1970s, but around a decade ago it was doing fine with a full roster of tenants led by Premier Health.
But after the health system moved to 110 N Main, others followed suit and it fell vacant.
After being bought by Windsor Development in 2019, it is currently being transformed in a mixed-use development which will see offices on floors 3-5 and apartments on floors 6-22.
And the very tower that Premier Health moved to after leaving the Grant-Deneau Tower is approaching the same fate.
It too was very recently full but is in the process of emptying out while Premier has listed it for sale, largely due to the shift towards remote work. The tower had roughly 1,000 daily workers pre-pandemic, compared to just 200 now including the building’s other tenants. As of September it had interest from multiple buyers, and was “in the evaluation stage.”
Additional Sources
“2 New High-Rises to Boost Office Space,” Dayton Daily News, 3/28/76
“Office Market Glutted,” Dayton Daily News, 11/24/92
“City Retools Arcade Tower Loans, Grants, Dayton Daily News, 5/26/90
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