The landmark US office buildings that are on life support

This July, a solution finally seemed in reach. The 70-year-old developer who owned it, David Sweetser, had cobbled together a $308 million financing package for a conversion plan blessed by local officials. Then Sweetser died, once again clouding the future of the tower known locally as the Superman Building, for its resemblance to the fictional Daily Planet headquarters.

“This is the tallest building in the city," said Providence Mayor Brett Smiley. “It’s on every postcard. And it’s empty. That has a psychic effect."

The Superman Building’s uncertain fate raises a larger question faced by many cities: What do you do when your most prominent landmark is too historic to tear down, yet too costly to save?

Many cities whose skylines took shape in the early and mid-20th century have them: the Chrysler Building in New York; Times Mirror Square in Los Angeles; Renaissance Center in Detroit; the LaSalle Street corridor in Chicago.

Plans to overhaul New York’s landmark Chrysler Building, with its beloved art deco lobby, ran aground several years ago.

Some have made it to the other side of the conversion process. New York’s Woolworth Building, once the world’s tallest, reinvented its top floors as high-end condominiums. Both the PSFS Building in Philadelphia and the Foshay Tower in Minneapolis were reborn as hotels.

A few landlords have succeeded in luring office tenants to historic properties, particularly when they acquired them at today’s discounted prices. After Seattle’s Smith Tower was bought on the cheap by a local group, they more than doubled occupancy to over 75%.

But in today’s office downturn, many cities are pockmarked with iconic office towers whose owners are struggling to figure out a second act. As they sit dark year after year, they grow costlier to fix.

A developer group took control of New York’s Chrysler Building in 2019 with ambitions for a sweeping overhaul of the art deco landmark. But the tower’s landmark protections limited major alterations, and its irregular floor plates, low ceilings and obsolete systems drove up costs for the planned renovation. The developers walked away from the project after the pandemic cratered the office market and they couldn’t renegotiate a deal with the owner of the land under the building.

Cincinnati’s 1931 Carew Tower, which for years had a popular observation deck, has been largely deserted for years. The city and a developer hope to put the final touches on a $161 million residential conversion plan in the spring.

In Los Angeles, a developer won city approval in 2021 to create two towers in Times Mirror Square, which includes several landmarked buildings. Yet the developer, Vancouver-based Onni Group, hasn’t moved forward partly because inflation has driven costs higher, said chief of staff Duncan Wlodarczak. “Given market conditions, we’ve put that, among other projects, on hold," he said.

The Los Angeles Times Building, the newspaper’s former headquarters, is part of a complex that was slated to be redeveloped.

In some cities, entire downtown office districts face obsolescence. Chicago has been struggling to preserve its LaSalle Street corridor, the city’s historic financial district, which is burdened by high vacancy and financially distressed properties.

Maintaining such properties as office buildings rarely makes sense. Even though many businesses want employees back in the workplace most of the week, demand for office space remains sluggish, especially in older buildings. The U.S. office vacancy rate is 14%, down just a bit the record high hit earlier this year, according to data firm CoStar Group.

Once a building’s vacancy hits a certain point, its deterioration tends to accelerate, and its retail outlets often shut down. Ten years ago, about 15% of U.S. office buildings had a vacancy rate over 25%. Today it’s more than 20%. Buildings 25% or more vacant today account for nearly 80% of vacant U.S. office space, up from about 65% one decade ago, according to CoStar.

Many cities are exploring converting office space to much-needed housing. Some developers have been able to pull off conversions, especially in cities like New York where rents are high enough to justify the development risk.

But getting from blueprint to reality is a long and treacherous road in many places, particularly with inflation and high interest rates driving costs higher. Often conversion projects don’t pencil out unless governments provide generous subsidies.

These payouts are often a tough sell politically; critics call them a form of corporate welfare. Following public outcry, a venture of General Motors and billionaire Dan Gilbert scaled back its request for public support for their plan to overhaul Detroit’s Renaissance Center.

Michigan House Speaker Matt Hall said he is skeptical about the revised request. “We have other needs," he said. “We need to invest in roads and healthcare and public safety."

Dead downtown

Providence, a city of 190,000 about 50 miles south of Boston, has enjoyed a rebirth over the past 15 years. Its life-sciences sector connected to Brown University has expanded, and the population has grown.

But by all accounts the boarded-up Superman Building has dragged down the local economy, especially in the area near City Hall where it’s located. The tower used to be the hub of an area with lively stores and restaurants. Today many nearby retail locations are closed.

The vast banking hall in the Providence tower, originally called the Industrial Trust Company Building. It has been vacant since 2013.

At a 7-Eleven a few doors down from the Superman Building, a security barrier separates customers from cashiers. One recent afternoon in the plaza across from the tower, a group called Food Not Bombs was handing out bagels, muffins and other donated food to the homeless people in the area.

Carl Moore, 68, a retiree waiting for a bus, recalled visiting the tower—then called the Industrial Trust Company Building—as a boy. He was awed by the vaulted ceiling of the banking hall on the ground floor.

“This was a thriving place," he said. “It’s dead down here now."

When it opened nearly a century ago, the building was one of the tallest in New England. The Industrial Trust Co., Rhode Island’s largest bank, viewed its construction as a way for the company and the city to stand alongside New York, Boston and other major financial centers. Newspapers and magazines marveled at its rooftop lantern and dome ringed with eagles, and the vast banking hall illuminated by chandeliers.

For decades, the skyscraper stood at the heart of a flourishing business district. By 1982, after a series of mergers and acquisitions, Industrial Trust was known as Fleet Financial Group.

But like many industrial cities in the Northeast and Midwest, Providence declined in the late 20th century. Its status as a financial center suffered when Fleet moved its headquarters to Boston in the 1990s.

Charlotte, N.C.-based Bank of America acquired Fleet in 2004, moving decision-making farther away from Providence. Bank of America steadily reduced its occupancy of the Superman Building in the name of consolidation and efficiency.

Rescue mission

The developer Sweetser, a native of Andover, Mass., was regarded as a levelheaded businessman, unfailingly dressed in a suit and tie long after the style had faded, according to people who knew him.

He had played college football at Maine’s Bowdoin College, where his teammates called him “Sweets." His booming voice, in a thick Boston accent, earned him nicknames like the ‘King of the Beach’ in Kennebunk, Maine, where he often held court from his seaside porch.

Sweetser purchased the Superman Building in 2008 for $33.2 million, his first acquisition of a major downtown office building. Before then, he focused mainly on building shopping centers. But he fell in love with the Providence tower and its celebrated architecture. He showed off its banking hall to visitors, flicking the lights on one-by-one with the antique switches.

Developer David Sweetser, right, with his spokesman Bill Fischer at the Superman Tower in 2016.

At first, Sweetser planned to maintain the tower as an office building, with Bank of America its main tenant. In 2013, though, Bank of America pulled out of the tower, leaving it dark and empty for the first time in its history.

The departure blindsided Sweetser, who believed the bank would keep a presence in the 350,000 square foot tower. Instead, he faced the daunting challenge of breathing new life into the city’s tallest and most famous building.

The only logical conclusion, he decided, was to convert the office tower to housing. To move ahead, he needed buy-in from city and state officials—not only to approve its new use, but to provide the public subsidies Sweetser said he needed. Converting offices to apartments is costly because, among other things, numerous kitchens and bathrooms have to be added to what had been mere office space.

Getting official sign-off proved challenging. For years, city and state officials clung to the hope that the Superman Building would lure another corporate tenant and preserve its place as a major source of jobs at the heart of the business district.

Several large tenants, including Citizens Bank and luggage maker Samsonite, considered big deals but passed. “Anyone who wanted to take a look at it, we brought them in," recalled Bill Fischer, a spokesman for Sweetser’s firm, High Rock Development. “When they came in, they saw the challenges associated with it and the condition of its interior."

The office space has been vacant since Bank of America left the building in 2013.Industrial Trust viewed the building’s construction as a way for the bank and the city to stand alongside other major financial centers. The downstairs still contains old banking facilities.

Sweetser gradually built support for a conversion by courting locals. He opened the Superman Building to the public, hosting small tours and events in its banking hall. The events were especially popular with longtime Providence residents who used to work or bank in the tower during its golden years.

In 2022, the city and state agreed to subsidies worth $65 million. At the time, Sweetser estimated the cost of conversion at about $220 million, according to Fischer.

Then interest rates soared and inflation drove building costs higher. The projected cost skyrocketed to over $300 million, and Sweetser couldn’t make the math work without additional subsidies.

Momentum finally shifted earlier this year, when the federal Transportation Department issued a preliminary determination that the project qualified for a $236 million low-interest loan. A few months later, the state legislature and Gov. Dan McKee approved a sales tax exemption for the project, worth about $4.6 million.

“We checked a lot of boxes in the last six months," Fischer said.

Sweetser’s death of an undisclosed cause ground everything to a halt. His development firm, High Rock, was small and had no other major Providence investments or any known succession plan.

The long vacancy of the Superman Building has dragged down the local economy, especially in the area near City Hall.

Michael Crossen, a lawyer who had worked for Sweetser on the conversion, took over the top job in August. Crossen had been spearheading High Rock’s effort to obtain assistance from the U.S. Transportation Department, according to Fischer.

Crossen has decades of experience representing developers, but hasn’t been one himself. He remains committed, he said, to carrying the project through to completion.

Former Providence Mayor Joseph Paolino Jr. questioned whether the redevelopment can happen without its founder at the helm. “David Sweetser," he said, “was the heart and soul of the Superman Building."

Write to Peter Grant at peter.grant@wsj.com