By Jeff McKinney and Ken Alltucker
The Cincinnati Enquirer
Cincinnati banking giant Fifth Third Bancorp, in a step that signals major expansion, is investing $62 million to buy two more buildings near its Madisonville operations center and shift 1,750 workers from downtown Cincinnati.
The move, which could also create up to 1,050 new jobs in the next few years, would mark the second major expansion in three years for the $88 billion-asset bank at the former U.S. Shoe building site.
Madisonville would be the largest center of Fifth Third's employment, boosting investment there to $134 million.
George Schaefer Jr., chief executive, said the parent of Fifth Third Bank needs the extra property because it has outgrown its existing 2,500-worker operation.
"We thought that the Madisonville operations would last us for another five years, but we've grown faster than we anticipated," he said.
The expansion calls for Fifth Third to employ 4,250 in Madisonville when completed in March 2005, with enough space to add 1,050 more. That means up to 5,300 Fifth Third workers could work in Madisonville. Fifth Third now employs 7,700 in Greater Cincinnati.
City and state business and community leaders applauded Fifth Third, saying it's a major commitment by one of Ohio's most valuable companies and one of the Tristate's largest employers.
City Manager Valerie Lemmie said Fifth Third's latest investment could have a major impact, possibly encouraging other major Cincinnati companies to invest in the city.
"It's tremendous to have a company like Fifth Third make a commitment like this to the city," she said. "They're making a commitment not only to retain jobs, but add new jobs as well."
Cincinnati approved incentives months ago to spur the Madisonville project. In December 2002, the city agreed to reimburse Fifth Third more than $6 million in earnings taxes over 10 years in exchange for the bank's pledge to create 100 new jobs and retain 1,100 full-time positions. Also, the city agreed to pitch in $1.4 million for road improvements.
Furthermore, an enterprise zone eliminates all property taxes generated from the project - a $4.7 million value to the bank for over several years.
The state of Ohio's contribution comes in the form of tax credits and training grants passed in September 2002. Ohio approved a 10-year tax credit valued between $1.4 million and $5.4 million. The value of the tax credit depends on the number of jobs the bank creates.
Mayor Charlie Luken said the incentives were a good deal for the city and state: "We save jobs in the city, and we did it at a very reasonable cost to the city. I want jobs downtown, and I also want jobs in Madisonville and other parts of the city."
Fifth Third's newest expansion will give it a campus-type sprawl in Madisonville off Interstate 71, with a second office complex that initially will be used to handle so-called back-office functions for its 5.5 million customers in eight states. The expansion will include:
$14.8 million to buy the land and buildings from Cabot Industrial totaling 598,504 square feet, near its existing Madisonville operations center that opened in March 2002.
About $47.2 million to renovate and expand the two buildings that sit on 31 acres of land.
The latest expansion comes three years after Fifth Third said it would invest $72 million in the Madisonville operations center. At that time, the bank relocated 2,200 workers from downtown and created 300 additional jobs at the site. The bank then added jobs to replace those that left downtown.
While Fifth Third's expansion will be a positive for the city of Cincinnati and Madisonville, it could put a pinch on downtown commercial real estate.
Fifth Third is one of downtown's largest employers. Not only does it occupy 29 floors of the 31-floor Fifth Third Tower at Fountain Square, it also leases space at other downtown buildings such as Convergys Center, the 580 Building and the former Hasbro building.
But Stacie Haas, a Fifth Third spokeswoman, said the bank's rapid growth should be enough to fill its vacated space. There are no plans to sublease its downtown office space to other businesses.
"We're not talking about moving the 1,750 until March 2005. Who knows how much we could have grown by then?" she said.
But if the bank's growth falls short of expectations, some real estate experts warn that the potential loss of hundreds of jobs would have a significant impact on downtown's stagnant office market.
"If they don't backfill it anytime soon, it will have a dramatic effect on vacancies," said Alan Piker, who heads the Cincinnati office of Cresa Partners.
Piker's research shows that downtown's office vacancy rate is at its highest level in several years. He counts downtown's top-of-the-line Class A vacancy rate at 15.7 percent as of September. Older office buildings, too, are struggling to find tenants, although the suburbs are seeing even higher vacancies.
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