The decision by Reynolds American Inc. to vacate the historic Reynolds Building could potentially put a lot of empty office space on the downtown market when the city doesn't need it, a local appraiser said yesterday.
But others are asking whether the building could have a different future as a place to live downtown.
The Reynolds Building has 239,781 square feet of usable space. Company officials say that the space could be considered "high-quality Class B space."
The timing is "far from ideal" for such a big chunk of office space to come onto the market, said appraiser Michael Clapp.
Clapp's July survey on the city's office-building trends found a 25 percent vacancy rate among Class B office space, which is typically in older buildings. There was a 13 percent vacancy rate in the higher-quality Class A office space.
"Certainly Class B is oversupplied," Clapp said. "The times are real uncertain right now. The trends are not good for absorbing any kind of space."
Adding to the potential impact is the uncertainty over Wachovia Corp.'s future here, Clapp said. The result could be a lot of empty office space in Wachovia Center, Winston-Salem's tallest building.
If the Reynolds Building is considered Class B space -- and if it came on the market today as vacant property -- it could increase the city's Class B office space vacancy rate to about 30 percent, based on Clapp's July survey.
A lot could depend on the state of the economy by 2010, Clapp said.
"By the time it comes on the market, the economic conditions could improve. Also, they (Reynolds) could be looking for a tenant now and may find one before they actually vacate. These are things that could reduce the impact," Clapp said.
Reynolds officials say they're going to spend several months looking at the options for using the Reynolds Building for other businesses or even other uses.
Doug Edgeton, the president of the Piedmont Triad Research Park in downtown Winston-Salem, said that an official with Struever Bros. Eccles & Rouse told him that the Reynolds Building would be well-suited for upscale housing downtown. Struever Bros. is planning to redevelop 40 acres of former tobacco buildings and parking lots in the north district of the research park.
"Because of its height and building-code restrictions, it would not work for lab and research space," Edgeton said, adding that he's had no contact with Reynolds officials over the future of the building. "I'm sure that every redeveloper in America is looking at that building as a great opportunity because it is such a unique and historic building."
The Reynolds Building could have a restaurant and retail shops along with housing, said Gayle Anderson, the chief executive and president of the Greater Winston-Salem Chamber of Commerce. She said that residents would have both a great view and the appeal of living in a historic building.
Having the Reynolds Building vacant does give the city another building to market to businesses that might want to move here, said Jeffrey Garstka, the vice president of Winston-Salem Business Inc., an economic-development marketing agency.
Clapp said that an increased vacancy rate for office space would put pressure on landlords to lower rents. But that could make it more affordable for businesses to move downtown, said Jason Thiel, the president of the Downtown Winston-Salem partnership.
"And there is something to be said about being based in not only a revitalizing downtown Winston-Salem, but also in the building that inspired the Empire State Building," Thiel said.
■ Wesley Young can be reached at 727-7369 or at wyoung@wsjournal.com.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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