Evidence of an improving national office market
In yet another indication that the national office market appears to have hit the bottom after three years of falling occupancies and rental rates, a recent study estimates that job creation has sprung ahead of office construction rates.
This phenomenon points towards office rents making an upturn in the near future.
A real estate research firm based in California, Green Street Advisors Inc., estimates that the U.S. economy needs to create 125,000 jobs a month to fill the additional 65 million square feet of office space a year created on average
during the 1990s. Recent figures show that during the first four months of 2004, new jobs were created at a rate of about 200,000 a month, far above the average needed to absorb new office space being created.
Backing this idea is data that shows office construction nationwide has dropped to its lowest level since the first quarter of 2001. Of course, in some markets such as in Dallas and Chicago, new construction remains active despite rising
vacancy rates. So conditions will vary by market, but on the whole, the downward pressure on the office market created by lack of demand after the dot-com bust and the recession of 2001 seem to now be reversing itself due to economic
recovery.
These are the kind of trends that ATR members keep an eye on nationally so we can better advise clients of future market conditions. If market conditions are improving, it may be a prime time to make your best deal on space.
Know your lease cancellation rights
By John Reynolds, ATR member, CoRE Partners, Denver, Colo.
A big advantage of leasing real estate instead of owning it is the ability to maintain flexibility. In addition to having options to expand or contract space under a lease, it is also possible to negotiate a cancellation option.
A tenant may decide to cancel a lease for a variety of reasons. Perhaps there is a need to expand or contract beyond what the lease allows, or perhaps the office needs to be closed altogether. Then again, the space might be just fine, but
lower rental rates in the market may make it attractive to renegotiate the lease to achieve lower payments. Whatever the unforeseen conditions, a tenant with a cancellation option can have significant negotiating leverage with a
landlord.
Landlords, of course, resist agreeing to cancellation options when negotiating leases. Furthermore, many brokers are reluctant to press the issue for fear of losing any chance of working with the building owner in the future. Because we
are exclusively a tenant and buyer advocate, we have no such worries. We have found that in many instances, building owners will agree to a right to cancel a lease if that is made a top priority in the negotiation.
There is generally no direct additional cost associated with having a right to cancel a lease, but there is often a cancellation fee that is due if the cancellation right is exercised. The fee is usually tied to the landlord's unamortized
investment into the space upon tenant move-in at a prenegotiated rate of interest.
CBD office net absorption
CBD Office Statistics - Class "A" and "B"
Source: CoStar Property
occupancy
Existing Buildings: 63
# Spaces: 798
Existing RBA: 39,433,416 sf
Vacant: <8,734,347>
sf; 22%
Occupied: 30,699,069 sf; 78%
Leased: 33,224,447 sf; 84%
availability
Vacant: 7,434,642 sf; 19%
Total: 8,369,631 sf; 21%
Direct: 7,249,263 sf; 18%
Sublet: 1,315,883 sf; 3%
leasing activity
Average Time: 16.1 months
Leasing YTD: 845,898 sf; 2%
Net Absorption YTD: (475,553) sf; (1%)
quoted direct gross rent
Office Range: $12.59-$33.38/yr
Candace S. Baggett
713 739 7777 x2
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Greenway Plaza office net absorption
Greenway Plaza Office Statistics - Class "A" and "B"
Source: CoStar Property
occupancy
Existing Buildings: 55 of 56
# Spaces: 316
Existing RBA: 10,405,665 sf
Vacant: <1,690,069>
sf; 16%
Occupied: 8,715,596 sf; 84%
Leased: 8,980,325 sf; 86%
availability
Vacant: 1,669,404 sf; 16%
Total: 2,415,813 sf; 23%
Direct: 1,473,642 sf; 14%
Sublet: 942,171 sf; 9%
leasing activity
Average Time: 11.5 months
Leasing YTD: 361,574 sf; 3%
Net Absorption YTD: 92,679 sf; 1%
quoted direct gross rent
Office Range: $15.00-$24.00/yr
Candace S. Baggett
713 739 7777 x2
Send Email
Galleria office net absorption
Galleria Office Statistics - Class "A and "B"
Source: CoStar Property
occupancy
Existing Buildings: 62
# Spaces: 621
Existing RBA: 17,373,848 sf
Vacant: <4,225,450>
sf; 24%
Occupied: 13,148,398 sf; 76%
Leased: 13,528,674 sf; 78%
availability
Vacant: 4,029,270 sf; 23%
Total: 4,262,477 sf; 25%
Direct: 3,931,592 sf; 23%
Sublet: 330,885 sf; 2%
leasing activity
Average Time: 22.3 months
Leasing YTD: 749,322 sf; 4%
Net Absorption YTD: (539,581) sf (3%)
quoted direct gross rent
Office Range: $13.50-$22.00/yr
Candace S. Baggett
713 739 7777 x2
Send Email
ATR president addresses national lawyer group
The Alliance of Tenant Representatives is pleased to announce that its Chairman, Eric C. Berson Esq. was invited by the Zeughauser Group to address its National Law Firm Managing Partner/Chairperson roundtable recently held in St. Helena,
California. Zeughauserâ's leadership roundtables meet twice a year for intensive, interactive programs exploring in-depth critical operational topics for large national law firms. Berson spoke on his proven model for the efficient delivery
and distribution of real estate services to national law firms. He also led a discussion on the general dynamics of law firm leasing and the real estate consultation and representation process.
As current Chairman of Washington Realty Group, a nationally recognized tenant representative firm, a former real estate developer, and a former editor on the Stanford Law Review, Berson uses his unique combination of experiences to serve
his law firm clients, including Wilson Sonsini Goodrich & Rosati PC; Gray Cary Ware & Freidenrich; Womble Carlyle Sandridge & Rice; Drinker Biddle; Dorsey & Whitney LLP; Dykema Gossett; McDermott, Will & Emery; and Sutherland Asbill.
This newsletter was designed to comply with the rules and regulations of the Texas Real Estate Commission. The Calibre Group, Inc. and Candace S. Baggett, real estate broker, are licensed by the Texas Real Estate Commission.
Copyright 2004 The Calibre Group, Inc.
"Intuition will tell the thinking mind where to look next."--Jonas Salk
