Impact of SMH Purchase of the Former Herald-Tribune Building on Main Street - Fall 2018

The iconoclastic downtown Sarasota building constructed in 2006 at 1743 Main St. for the then-New York Times Co.-owned Sarasota Herald-Tribune is poised to have a new owner as early as December. After years of sparse occupancy and determined marketing efforts, it appears that Sarasota Memorial Hospital will purchase the three-story building designed by Miami’s Arquitectonica with the intention of housing 300+ employees there. To say this will be a huge positive for downtown is an understatement. Once occupied, as is projected in May 2019, the employees will enliven this sluggish part of downtown and the positive reverberations will be felt throughout. I caution that no real estate deal is done until closed, but all indicators are positive at this point. The SMH purchase price of about $160 per square foot is significantly less than several recent downtown office building sales, and represents about 2/3 of the amount of the building’s replacement cost – a good deal for the hospital. Removing this building from the “available” list of downtown Class A office space also lowers the amount of total space on the market from 15.5% to 11.6% - nearing respectability. But the pending sale also provides a valuable lesson about Sarasota’s office market. Every major user of downtown office space looked at this building, including several notable law firms, but no one bit. This single user building languished on the market at $250 per square foot for about two years. The reality of the Sarasota office market is this: Ours is a market primarily made up of smaller users and many office landlords have struggled even in these good economic times. The first viable buyer to come along, SMH, appears to be getting a great deal and all the surrounding businesses should also benefit from the added vitality that new workers to downtown will bring. The only negative I see is removing a $175,000 per annum tax-paying property from the tax rolls, though we contend that will be more than made up for by increased consumer spending and other ripple effects.