Turns out the federal government isn’t the only institution looking tocut down its real estate portfolioto save some much-needed capital. The State of Maryland is takinga page out of theDepartment of Government Efficiency’s playbookwith new plans to sell the 37-storyWilliam Donald Schaefer Buildingin Downtown Baltimore and relocate its workers there, in a bid to avoid repairs to the property that are estimated to exceed nine figures.TheBusiness Journalsfirst reported the news, citing a MarylandDepartment of General Services(DGS) spokesperson. The state’s decision to sell the tower at6 St. Paul Street, which houses some 800 workers across more than a dozen state agencies, comes after over a year of handwringing over what to do about the aging property, which it purchased in 1992 for $12.2 million. The 1986-built tower was facing “catastrophic failure” if repair and upgrades to it weren’t made, according to a December 2023 report by DGS, including structural issues in its underground parking structure and HVAC system. The estimated cost of the repairs are more than $110 million.The stateBoard of Public Workslast July approved a nearly $3 million emergency request to design structural improvements and HVAC repairs, according to theBusiness Journals. Yet the state ultimately decided last month to “retire” the property and sell it, with a timeline still to be determined.“I have to question whether it is worth it for us to put $110 million into this building rather than moving the employees to other buildings,” Maryland ComptrollerBrooke Liermansaid in a statement following the July emergency spending approval. “I’m happy to vote yes on it, but $110 million is three elementary schools, so I’m cognizant of it being a lot of money. I just want to understand what kind of comparison or economic analysis we have done to make sure that’s the right course for the future of the state office buildings in Downtown Baltimore.” A spokesperson for DGS did not immediately respond to a request for further comment. The state’s decision to sell the 37-story tower and others comes just a few months after Gov.Wes Moore’s executive order to improve government efficiency and save taxpayer funds. Moore’s order from early January directed all state agencies to collaborate with hisOffice of Performance Improvementto identify viable operational cuts, and clearly the shedding of the Schaefer Building fit the bill. There are also other state-owned properties Maryland could unload, including some at the 28-acreState Center, less than two miles north of the tower. That’s also true of a stable of other state-owned properties that are either underused or too costly to maintain, per theBusiness Journals. The aging State Center, for example, had for years been tied up in courts, as the state’s previous administration canceled plans to redevelop the vast complex in 2016 and then announced plans to trade it to the City of Baltimore in 2022. While that transfer hasn’t yet happened, Moore in November announced that a $58.5 million settlement had been reached with the developer of the canceled redevelopment, potentially paving the way for the property’s sale. “The delays caused by the ongoing litigation have created questions about the future of State Center, delayed critical planning, and blocked much-needed investment and redevelopment in the City of Baltimore,” Moore said in a statement at the time. “A settlement will avoid more prolonged, costly litigation and risk on behalf of taxpayers, which would have continued for years.”The decision to sell the Schafer Building also reflects current market realities in Baltimore. Despite a strong final quarter of 2024, office vacancy in Charm City has steadily trended upward since at least the onset of the pandemic, hitting 19.7 percent at the end of last year, according to a recent market report byCBRE (CBRE). The city has also posted five straight years of occupancy loss, mostly from tech and business services tenants, per the brokerage.
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