From today's Crain's...

Comerica Inc. moving out of Comerica Tower; building’s naming rights in play

By Daniel Duggan
Comerica Inc. will move its remaining Detroit employees out of the building on Woodward that bears its name, taking on a project to renovate a building it owns on Lafayette Avenue in Detroit.

The move is a blow to the Comerica Tower at 500 Woodward Ave., where Comerica occupies 285,000 square feet, but it also puts the naming rights for the building in play. Losing that space will put the building at 71 percent vacant.

Comerica, which moved its headquarters from Detroit to Dallas in 2007, said it will spend $18 million to renovate the 550,000-square-foot building at 441 W. Lafayette and move to the building by 2012.

Of the roughly 1,500 employees in Detroit, roughly 800 are in 411 W. Lafayette and the rest at 500 Woodward, said Thomas Odgen, president of Comerica-Michigan.

In 2007, the company had 2,500 employees in both buildings, according to past Crain’s reports.

Ogden said the move is a chance to invest in a downtown building, consolidate employees in one place, and save money.

“We’ve had multiple facilities in Detroit for a long time, so this is a chance to bring all the employees into one building,” he said. “Through that we expect internal efficiencies, better communication and a lot of improvement.”

The building opened in 1971 for Manufacturer’s Bank, which Comerica acquired.

Given its older layout, Ogden said Comerica will complete a new layout of the building, renovate the offices and purchase new furniture. Architecture and construction firms have not been selected yet, he said, but the goal is to use local firms.

Moving employees out of leased space and into a company owned building is a perfect real estate play, said Steve Morris, executive managing director and principal in the Farmington Hills office of Newmark Knight Frank.

Comerica said it will spend $18 million to build-out the 550,000 square feet, which works out to $32 per square foot, he said, which is the typical cost for a tenant to improve its space for a new lease.

“That’s a no-brainer,” Morris said. “They’re spending zero for the space since they own the building and then spending the typical amount for tenant improvements. Plus they’re putting money into an older building, which is good for the city.”

The move is a blow to the Comerica Tower building at 500 Woodward, also called One Detroit Center.

The 957,000-square-foot building is currently 41-percent occupied according to Bethesda, Md.-based CoStar Group.

The building was completely occupied when it opened in 1991, and had relatively stable occupancy until 2002 when it was rocked by the downfall of consulting firm Arthur Andersen, which left its 100,000 square foot office in the building in August 2002.

Also in 2002, the Michigan Supreme Court left the building and 25,000 square feet vacant, but in 2005, the Boston-based law firm Foley & Lardner LLP leased 40,000 square feet.

The biggest exodus, however, started at the end of 2006 when accounting firm Ernst & Young gave up 85,000 square feet to move to One Kennedy Square. Advertising firm J. Walter Thompson then gave up 150,000 square feet to move to Dearborn.

The building is majority owned by New York-based iStar Finanical. A message was by left by Crain’s for the firm’s public relations department, but that message was not returned.

If there is any positive effect of the move, it is that questions are now answered about whether the naming rights for the building will be available said Sam Munaco, a member of the leasing team for the building and an associate broker and principal with Southfield-based Signature Associates.

Naming rights to a building are sometimes included with the building’s largest lease.

“A positive effect is that it frees up the naming rights for a large prospective tenant in the future,” he said. “We are currently talking to a number of prospective tenants that have been asking about the naming rights, and until now, we weren’t able to give them an answer.”

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This could be a good thing. 411 gets filled up with what remaining Comerica employees they have in Deroit, and the Comerica Tower/One Detroit Center could attract a new tenant looking for a impressive signature building. Also, for those of us that were afraid Comerica would drop the other shoe and move out entirely, an investment of this magnitude may suggest otherwise.