Wide open spaces , High-tech and merging companies forgo some offices, flooding North Texas' sublease market with cut-rate deals
dallasnews.com
05/18/2001
By Steve Brown / The Dallas Morning News
If everything weren't so neat, it would look like the office workers on the top floor of the One Hickory Centre building had just stepped out to lunch or gone home early for the weekend.
But the rows of new furniture and office cubicles have never been used.
Aperian, an Austin-based Internet company, leased and furnished the 25,000-square-foot top floor of the new Farmers Branch building in January, then decided against moving in.
Now, the space is among the millions of square feet on the North Texas sublease market. Such space is often perfect for businesses that are hunting for a cut-rate office deal.
The Aperian space is "state-of-the-art ... with vaulted ceilings and high-tech workstations," said broker Wayne Swearingen. "You could be in business there in a week."
And more important, it's available "for 2 or 3 bucks per square foot below the market rate," Mr. Swearingen said.
Such deals are becoming commonplace because of cutbacks at high-tech companies and corporate mergers and consolidations.
Companies that just a year ago signed up for five-year leases now find themselves with no need for the space. The answer, usually, is to hire a broker to sublet the space.
"We think there is at least 5 million square feet of sublease space in the Dallas market and probably more," said Paul Whitman, an executive vice president with Staubach Co.
That total is equivalent to about five downtown skyscrapers, and "we think there will be even more sublease space coming on the market," Mr. Whitman said.
The size of the sublease market was highlighted during the recent Boeing headquarters sweepstakes, brokers say. Dozens of offices – many of which brokers didn't even know were available – were offered to the aerospace company.
This year "is proving to be a shakeout ... for companies, and more office space will be turned back," Mr. Whitman said.
Broker Pat O'Keefe, with CB Richard Ellis' Dallas office, says the supply of office sublease space has "doubled in each of the last 30 days."
"We probably have 20 sublease assignments right now, and most of it is high-tech," Mr. O'Keefe said.
The flood of secondhand office space couldn't come at a worse time for the Dallas property market. Developers have just completed dozens of new suburban office buildings, and at least 5 million square feet is under construction.
At the same time, tenants gave back about 600,000 square feet of first-class office space during the first three months of 2001. It's the first time that's happened in 10 years.
"What makes it worse is no one really has a good handle on just how much sublease space there really is," developer Marc Myers said. "It makes it hard to figure out just what is going on."
There may be no precise numbers, but a quick look at some of the available sublease space indicates the problem's scope.
Real estate brokers Jim Strubble and Myra Maher-Martin are hunting for a tenant to fill almost 20,000 square feet in the Univision Tower in downtown Dallas. The space came on the market after accounting firm Belew Averitt LLP merged with BDO Seidman.
"It's first-class, headquarters-style office space and there is five years and nine months left on the lease," Ms. Maher-Martin said. "You get the entire floor."
And with an asking price of $16 per square foot annually, it's more than $4 per foot below the average office rent in the Dallas area.
Such low-cost office deals have been a sore spot with building owners, who sometimes wind up competing against their own tenants for business.
"So far it hasn't been a big problem for us, but we are trying to keep an eye on it," said Michael Dardick, president of Granite Properties. "It's in our interest to work with our tenants when we can."
To sweeten the deal, many sublease landlords are offering the space complete with furniture. That's the case with the Aperian space.
"You can also get the computer equipment and telecommunications equipment," said broker Erick Fulkerson, who is marketing the space with Mr. Swearingen. "There are a lot of sublease deals in the market, but not many are for this long term [five years] and with brand-new furniture.
"The sublease tenant can also get their name on the building."
Broker Jay Annand also is including furniture as he tries to peddle almost 100,000 square feet of sublease space along the Dallas North Tollway in Addison.
"It's the old PageNet headquarters space," said Mr. Annand, who works for Insignia/ESG Inc. "I have three floors, and there are about 28 months left on the lease. This space should be a good fit for somebody." |
