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The flagging economy has already stopped—at least for the moment—one of the two tallest new buildings planned for downtown Berkeley. 

The Berkeley Charles Hotel is no more, Mayor Tom Bates told his City Council colleagues Tuesday, June 2. 

The hotel was to have been one of two 225-foot high-rise hotels permitted under both drafts of the Downtown Area Plan now before the City Council. The council has scheduled adoption of a final plan at their July 7 meeting. 

The hotel began as a dream of UC Berkeley, which wanted an upscale hotel in the city center to house campus visitors and host conventions related to the university. 

“I hope that we get a hotel, I do,” Mayor Tom Bates told his council colleagues June 2. “But what has happened is the Carpenter Company (sic) has pulled back. 

“Right now there is no hotel prospect,” he said. “I guess the university is looking at going out, again, and getting somebody to start over.This is like a glint in somebody’s eye. It may come about. And it may not.” 

But UC Berkeley says reports of the project’s death may be somewhat exaggerated. 

“The project is not canceled,” Christine Shaff, spokesperson for the universities Facilities Services department, said Wednesday. “The university is still pursuing the project.” 

And Carpenter & Company remains the school’s choice for the project’s developer, she said.  

The hotel was one of two major construction projects slated for the north side of the block-long stretch of Center Street between Shattuck Avenue and Oxford Street. 

The other project, the UC Berkeley Art Museum/Pacific Fine Arts project, is still moving forward, said Jesse Arreguín, the councilmember who represents the downtown district. 

Carpenter & Company, a Massachusetts-based developer, had been tapped by the university to develop the hotel project, which was to have added about 210 hotel rooms and 50 upscale condominium units along with conference, retail and restaurant space. 

“It’s a bad time to build things right now,” said Arreguín, who said reports of the pullout had been circulating “for a month or two. I knew they were having trouble getting financing. They had been moving ahead, and then they put it on hold.” 

“Obviously, the economy has changed since the initial proposal,” said city Economic Development Manager Michael Caplan. “The project has been moribund for a long time.” 

The councilmember said that the Massachusetts hotelier had been a good fit for the city, and had been willing to implement many of the recommendations of the city’s Hotel Task Force, a committee of citizens and planning commissioners which spent months formulating goals for the university-backed project in 2004. 

Arreguín said a second possible new high-rise of similar height had been projected for the rehabilitated Shattuck Hotel, “but I hear that’s been pulled back as well.” 

The hotel industry nationally has been caught up in the same economic contraction as the rest of the economy, the trends quantifiable in both rising vacancy rates and a dramatic decrease in new construction. 

The Claremont Resort and Spa on the Berkeley-Oakland border, owned by Morgan Stanley Real Estate, announced 77 layoffs in March, and the owners of another major luxury property in the southern part of the state have simply walked away from the building. 

The Wall Street Journal reported Monday that the Sunstone Real Estate Investment Trust (REIT) had simply walked away from the W San Diego, unable to renegotiate a $65 million dollar mortgage on the 259-room upscale hostelry.  

According to Smith Travel Research, national occupancy rates for the week of May 17-23 were down 11.1 percent from the year before, while revenues per available room were down 19.4 percent, with average daily room rates dropping to $93. 

Caplan said Berkeley has been doing better than most East Bay communities, thanks in part to the steady demand generated by the university, both for events that draw parents and for conferences and other gatherings,  

According to a June 8 article by Hotel Network News, Evangelos Simos, chief economist of e-forecasting.com, said chances of business expansion were rated as 4.7 percent in May, compared with a recession risk of 95.3 percent. 

In April, Lodging Econometrics, a consulting firm specializing in the hotel trade, reported that projected construction starts for the next 12 months “have declined precipitously from the Q2 2008 peak, down 23 percent by projects and 29 percent by rooms. The slump is a result of the rise in cancellations and postponements, which is expected to continue.” The firm reported “a large backup of projects that lack the financing to start construction.” 

“Lending is practically non-existent for hotels greater than 200 rooms,” the company reported. 

Shaff agreed with the conclusions of the industry experts. 

“Because of the economy, financing in the near term is problematic,” she said. But the campus still believes that a hotel and conference center would be a positive addition, and we will continue to work with the city in ways to make it possible.”