The Death of Print (Buildings)!
Three makes a trend. The Washington Post Co. Friday announced that it would look to sell its iconic headquarters building in downtown Washington, D.C. In January, the Detroit Free Press and The Detroit News announced they would put up for sale their headquarters, a 1917 arched pile of concrete and stone designed by the architect Albert Kahn. The same month, Gannett said it will sell the building that houses the Rochester, N.Y., Democrat & Chronicle. The building was the place where Frank Gannett started and built his vast newspaper empire.
It’s no secret that newspapers are in crisis. Advertising revenues have fallen by half in the past decade and are back to where they were in 1983; circulation revenues are back to where they were in 1996. The digital numbers are rising, but not nearly fast enough. Print media is hampered by high fixed costs incurred in the pre-digital era—pensions and union contracts, equipment like printing presses, large numbers of employees, and big office buildings.
Virtually every newspaper company has engaged in drastic measures—laying off experienced employees, eliminating sections, cutting back printing from daily to a few days per week. Those efforts are all meant to lower day-to-day operating costs. But we’ve also seen newspaper companies seek onetime injections of cash by selling off non-core assets. The New York Times, for example, recently sold About.com to IAC (the parent of Newsweek/DailyBeast), as well as pieces of its sports business, and unloaded its regional newspaper business.
Increasingly, the large, statement-making headquarters building—typically located smack in the middle of town—is falling into the non-core asset category. The physical plants frequently included printing plants, which are no longer needed. They were built to house much larger staffs than are viable today. Meanwhile, many big-city downtowns are experiencing a renaissance that is bringing new capital. And newspaper buildings have what forward-thinking developers want: central locations, big floor plates, fine bones, and a recognizable address. Supply, meet demand.
Generally speaking, newspaper companies are motivated sellers—the market knows they are eager to raise cash, and quickly. As a result, they don’t always get the best price. In 2004, the New York Times Co. sold its fortresslike headquarters on 43rd Street, to Tishman-Speyer, a huge New York real-estate company, for $175 million. (The Times used some of the cash to build its new glass tower nearby.) But three years later, Tishman-Speyer flipped the building to an Israeli investor at the height of the commercial real-estate bubble for $525 million.
While many purchasers seek to convert the property into a different use, other buyers are looking for a teardown. In May 2011, McClatchy, which owns The Miami Herald, agreed to sell the newspaper’s headquarters, which occupies 14 prime acres overlooking Biscayne Bay, to a Malaysian developer for $236 million. The acquirer plans to raze the building and erect a casino and resort on the space.
Selling your house and looking for smaller, cheaper digs in a different neighborhood is one way to get through tough economic times. Bringing in guests to help pay the rent is a less drastic measure. But newspapers are pursuing this route, too. The New York Times recently reported that its sister publication, The Boston Globe, is recruiting technology startups to set up shop in vacant newsroom space. The Los Angeles Times has been renting out unused space to film crews, and has brought in a call center, VXI Global Solutions, as a tenant.
Traditionalists may find these sales and the continued shrinking of newspapers’ real-estate footprints to be depressing. But it’s actually a positive development. Call it creative destruction, or adaptive reuse. In cities around the country, investors are finding better uses for properties. In lower Manhattan, Class B office buildings that used to house financial firms have been converted into expensive condos. “It’s a great thing, because it drives more tax revenue to the cities. And it gives the suburbs a run for the money,” said Jonathan Miller, president of appraisal company MillerSamuel.
In D.C., the Post will likely fetch an excellent price for its headquarters because Washington is a boomtown. Throughout D.C., investors are plowing cash into housing, office, and retail developments. The building that housed the organization that exposed the Watergate scandal may become the next Watergate complex.
Of course, progress inevitably displaces the prior tenants. It’s likely the new homes that will be occupied by newspapermen and newspaperwomen in Washington, Rochester, and Detroit will be less grand, less central, and less historic than their current homes. And the sale of these properties alone won’t solve the newspapers’ financial problems. But it will buy them a very valuable commodity: time.