By: DAN SHINGLER
FirstEnergy’s HQ move will create a hole — and an opportunity
The movement of FirstEnergy Corp.’s headquarters from Downtown Akron to West Akron might be a non-event in the short term, given that nearly all of the 925 people who used to work in the downtown building have been working from home for the last three years.
But it’s a big long-term challenge for the city center, which had been hopeful FirstEnergy’s downtown workers one day would return.
“This is a big deal,” said Jerry Fiume, a commercial real estate expert who has done work with the city of Akron and others involved in downtown development, and who heads SVN Summit Commercial Real Estate Advisors in Fairlawn.
Fiume said he was shocked to learn that FirstEnergy agreed to buy the building from its landlord, McKinley Inc., which has an office in Akron and is based in Ann Arbor, Michigan. A local McKinley spokesperson declined to comment; a representative in Ann Arbor could not be reached immediately on Thursday afternoon, May 11.
Even though FirstEnergy just signed a 10-year lease in 2019, Fiume said he’s surprised the company is willing to buy the building.
“It’s cheaper to buy the building than to pay the lease? That’s fascinating to me,” Fiume said, given the challenging state of the commercial office building market.
Asked how difficult it is to sell a major office building today, Fiume said, “Impossible…. But the proper term is probably ‘very difficult.'”
Look no further than FirstEnergy’s decision to see the reason why, he said.
FirstEnergy is far from alone in finding that it does not need as much office space as it did before the pandemic. Moves by many companies to right-size their real estate holdings have created a huge glut of office properties, Fiume said.
“This is taking place all over the country,” Fiume said. “In some places, they’re just tearing office buildings down because there’s no use for them.”
One might look to Lyndhurst for an example of that, as the 500,000-square-foot former headquarters of TRW is being torn down there to make the site salable, even though that headquarters was only built in 1985 — 10 years after FirstEnergy moved into its big building in downtown Akron. FirstEnergy took nearly the entire building and almost 360,000 square feet of space in the building’s two towers.
For its part, FirstEnergy has said it doesn’t yet know what it will do with the building once it owns it, except to say that it won’t be using it to return its employees downtown. Remote work has proven effective, and the company has embraced it for employees whose jobs allow it, said Jennifer Young, FirstEnergy’s manager of external communications.
Whatever happens to the building, it’s more than likely going to require some work, say those who know the building, Akron’s downtown and the surrounding real estate market.
It’s one of the few buildings downtown that could be converted to modern, open office space or into residential units, said Don Taylor, CEO of the Welty Building Co. He’s one of downtown Akron’s most important developers, with the Bowery District and other big projects to his credit.
Taylor also built FirstEnergy’s 211,000-square-foot campus on White Pond Drive in West Akron, which soon will house the company’s headquarters. He said he’s not surprised FirstEnergy is moving there, even though he’s concerned about the impact on downtown.
“It is a true high-performance workspace with lots of light and open space. If people are going to get back to work, it’s exactly the environment they will want to work in, so I understand FirstEnergy’s decision,” Taylor said. “The problem is, it’s not downtown.”
Taylor said he hopes the city will, under its likely incoming mayor, Shammas Malik, come up with a plan for individual downtown buildings that will increase the number of downtown residential units and decrease the amount of older office space that’s no longer attractive to most big or growing companies.
“We have not had high-performance office space downtown,” Taylor said. “And we can’t afford to put in new office (developments) because we have so much Class B, C and D, crappy old space, on the market…. We need a plan.”
Taylor said he thinks the FirstEnergy building should be converted to residential. That’s where the demand is, he said, and it would help the city’s tax base.
“Cities used to want businesses downtown for income tax (revenues). That’s what drove their economy,” Taylor said. “Now that people are working remotely… have them live in your city and work from home to contribute to the tax base.”
Taylor also thinks Akron’s best chance at attracting more businesses downtown, including office tenants, is to get more residents downtown.
“Today, jobs go where the people are,” Taylor said. “I am bullish on more housing in downtown Akron.”
If the building is suitable for a conversion to residential use, as Taylor believes it is, it’s also in what could be a unique location for a residential or mixed-use development. That’s because it butts up against the now-vacant Innerbelt property, about 33 acres that was the site of the city’s Innerbelt highway before it was closed in 2018.
The city is working on a plan for the site. It received nearly $1 million from the state earlier this year to help fund the planning.
“If that turns into a park or is redeveloped into some amenity, which I’m sure it will be in time, that’s going to be a great place, location-wise,” said Jason Segedy, who until this month was Akron’s director of planning and urban development.
Like Taylor, Segedy is a fan of more residential and mixed-use development downtown. He said he will not be surprised to see FirstEnergy’s headquarters converted.
“I’m pretty bullish on how much demand there is for residential,” Segedy said. “I wouldn’t be surprised if they looked at a hybrid, with commercial or offices on the lower floors and residential on the upper floors.”
The city, its new mayor in 2024 and FirstEnergy are likely going to take some time to figure this out. FirstEnergy has said it likely will take a year or more for it to complete its move and settle on a plan for its former headquarters.