Office Space 50% Off -- Only $40 Per Square Foot(!)

The Sublease Monster... I know that this sounds crazy in most parts of the country.   But brokers in San Francisco are now touting "bargain" $40 per square foot (sub) lease rates.  That's the message from a front-page article in the San Francisco Business Times, "Dot-com Diet Gives Highrises Empty Feeling" (Mar 23-29, 2001).   In April 2000, TishmanSpeyer Properties paid $190 million (about $250 per square foot) for the former Chevron Buildings at 555 and 575 Market and renamed them Market Center.  Now according to the Times, the buildings are "half empty" with about 294,000 square feet of sublease space.  As the Times reports: "Atlanta-based iXL Enterprises has halved the amount it's asking for its roughly 100,000 square feet of space at 575 Market from its cost of $82 a square foot to around $40, said iXL broker Kevin Brennan of Staubach Co."

Of course, if you visit TishmanSpeyer's web site, you will not see anything about sublease space.  But you will see about 43,000 square feet of direct lease space available.  Hmm.  I wonder at what rate? ... Compare this with an article in the SF Business Times last year (August 7, 2000): "In the overheated San Francisco economy, it took TishmanSpeyer just six months to refill Chevron's offices with high-tech companies. These high-rent paying firms include, eGroups, Headlands Digital Media CMGI, Proxicom and iXL." ... But NASDAQ kept plunging.  That very August, eGroups merged with Yahoo, whose stock is down in the last year from a high of $205 to $13; CMGI is down from $129 to $2; Proxicom stock is down from $57 to $2; and iXL is down from $40 to $1.  That's an average drop of 96.5%.  So much for the high-tech bonanza. 

Now check out CityFeet's San Francisco listings, and you'll find 92 spaces with over 20,000 square feet, many of which I'm guessing are subleases.   At Market Center, Mike McCarthy with Colliers International has two floors available at 555 Market for about $70 and Brad Werner with Cushman Realty has three floors available at 575 Market -- "rent upon request." ... Wow, this could get ugly for sublessors and landlords.   But it's a great time to be a tenant. 

PikeNet Forum ... Yep, there's a connection.  The Palace Hotel in San Francisco is only one block from TishmanSpeyer's Market Center!  So register now at the Early Bird Rate, which expires on March 31.  Learn how to harness the power of the Internet to grow your business.  Likewise reserve your room before the room block expires on April 1 and book your tickets on United at cheap midweek fares. ... PikeNet Forum / May 2-4. ... Complete info available at www.pikenet.com/forum.

--Peter Pike / ppike@pikenet.com