The 15-story Fidelity & Deposit Building in downtown Baltimore has stood empty for nearly two decades. In the lobby, the building’s former grandeur is evident in the ornate marble columns and faded gold detailing on the vaulted ceiling.
Built in 1894, the former office tower will soon find a new life. Developer Trademark Investments bought the building last year and plans to convert it into a mix of commercial space and 231 rental apartments.
“For us, this was a perfect opportunity,” said Patrick Grace, owner of Trademark Investments. “The location is great, the building is fantastic, it lends itself well to apartments.”
And it’s full of vintage charm, like the huge bank vault in a room Grace plans to convert into a restaurant and the intricately carved banister on the staircase. “That would be insanely expensive to recreate, and it looks nicer than a construction-grade staircase that we’re going to build now,” Grace said.
A vault in the Fidelity Building where the new owner wants to open a restaurant. (Amy Scott/Marketplace)
Remodeling an old building – built for an entirely different purpose – also comes with challenges, like adding a second staircase to meet housing regulations. Trademark bought the building last year for $6 million and will invest another $47 million in construction.
The Fidelity building went vacant well before the pandemic, but the recent shift to hybrid work has left office buildings underutilized across the country. Cities like Houston, San Francisco, Chicago and Washington, DC have office vacancy rates of over 15%, according to the National Association of Realtors. By the end of this decade, commercial real estate firm Cushman and Wakefield estimates that vacant office space will increase to 1.1 billion square feet, with 330 million square feet considered “excess vacancy due to remote and hybrid strategies.”
The lobby of the Fidelity & Deposit Building in Baltimore. (Amy Scott/Marketplace)
An architectural rendering of the lobby at 210 N. Charles Street in Baltimore known as the Fidelity Building, a former office tower being converted into apartments. (Courtesy of Trademark Investments)
To take advantage of that space and add much-needed housing, more developers are looking at remodeling, said Doug Ressler, who follows the commercial real estate market at Yardi Matrix, a research firm.
“It’s increased by about 5% to 10% each year for the last three years in terms of total square foot converted offices,” Ressler said.
Between 2020 and 2021, office-to-home conversions grew faster than new construction, according to Yardi data, adding 11,000 homes nationwide. New York City recently announced plans to create thousands of new homes by converting unused office space.
“One of the things you’re seeing is tremendous pressure on governments, cities and states to be able to meet the affordable housing shortage that’s really been with us for almost a decade,” Ressler said.
However, Ressler and others doubt that office conversions will greatly affect this shortage. Last year, Moody’s Analytics analyzed around 1,100 office buildings in New York City for potential conversions.
“We basically found that about 3% could be profitable,” said Kevin Fagan, the company’s head of commercial real estate economic analysis.
There are just too many obstacles, Fagan said. Offices, for example, tend to have a larger footprint, with central areas cut off from natural light.
“There’s no need for natural light in the center,” he said. “You don’t live there, you’re there for a period of time, and you put your young analyst in a lightless office in the middle, and that’s fine.”
But that doesn’t work for housing, Fagan said. It can also happen that existing tenants have to be bought out or plumbing and windows have to be replaced.
“Often people in the developing world say it’s better to build from scratch than to do a renovation,” Fagan said.
Patrick Grace and Eva Hodsdon of Trademark Investments stand in a hallway of the old Fidelity & Deposit Building in Baltimore. (Amy Scott/Marketplace)
For Grace at Trademark Investments, the bottom line is worth the effort.
“It’s going to look amazing,” he said of the Fidelity Building, which Trademark estimates will be leasing by 2025.
Eva Hodsdon, Trademark’s asset manager, showed me what a finished office into an apartment might look like in another old building the company is converting nearby. Inside, the apartments look much like you would find in any new building, with quartz countertops and stainless appliances.
“This is probably – of all the units I have in my portfolio – the one that could feel the most ‘commercially converted’,” Hodsdon said as we walked into a large ground floor unit that may have housed a shop front .
In the bedroom, floor-to-ceiling glass windows looked directly onto the busy sidewalk.
“You have to be flexible with the conversion,” said Hodsdon. “When a renter comes in here and says, ‘I want this whole window to be screened, or I want some kind of soundproofing,’ that’s always a conversation we’re open to because we want this space to work for that too.” she.”
Hodsdon himself lives in a converted flat, in what was once a law firm. Aside from the dark wood paneling and some legal motives in the building, she said, you’d never know.
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