AgdaPkt 2005-10-24 - Laserfiche WebLink

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CB RICHARD ELLIS CONSULTING Sedway Group Øf-47 CBRE C8 RICHARD ELLIS space) and in the South County (venture capital and law firms) do not have significant concentrations in Redwood City. Additionally, employers are showing a preference for locating near their employee base, a fact that is benefiting the northern Central County submarkets of San Mateo and Foster City. Their proximity to Highway 101, Interstate 280, and Route 92 has more appeal to employers than does a Redwood City location. During the last cycle, Redwood City was able to capitalize on its proximity to venture capital firms in Palo Alto and Menlo Park; however, this criterion has become less of a priority for office tenants. Supply. No new office development is currently under construction or planned in Redwood City. The same is true of the entire SFP; however, a number of build-to-suit opportunities exist that could potentially provide options for major office tenants in the market for space. High vacancy rates throughout the SFP submarkets translate into high levels of competition for tenants amongst landlords. A total of 25 blocks of contiguous space greater than 80,000 square feet in size were available in the SFP rtarket as of October 2004. The Excite@Home properties are likely to compete with properties such as Pacific Shores Center in Redwood City (800,000 square feet available) and Parkside Towers, the former Inktomi campus in Foster City (341,000 square feet available). An additional 985,000 square feet of space is available in newer, Redwood Shores product. Weak demand for office space has led some landlords to consider the conversion of their properties to other uses. One such example is Interland Corporation's decision to sell the 260,000-square-foot San Mateo Executive Park to a residential developer. The property, located north of Highway 92 near the College of San Mateo, was the former home of Yisa, prior to its relocation to Foster City. Faced with a dearth of interest from office users, Interland now has a short-list of potential residential developers willing to purchase the property contingent on rezoning approval from the City of San Mateo. The City is expected to closely scrutinize this deal; local broker sources believe San Mateo may require some commercial uses on the site, to generate taxable retail sales. Rent. According to Costar, the average asking lease rate (full service) for office space in Redwood City was $2.16 per square foot per month as of September 2004, equal to the average rent for the SFP as a whole. Two months free rent is typical on a five-year deal, thus effective rents are 10 to 20 percent lower than average asking lease rates. After peaking at more than $7.00 per square foot per month in 2000, rents in Redwood City have fallen below 1997 levels. According to CBRE's Torto Wheaton Research (TWR), long term average annual asking rent growth (1987 to 2003) in the Redwood City submarket is approximately 1.5 percent, less than inflation, but higher than the SFP as a whole. Rents can vary considerably, depending upon address, age of the building, floor, term and tenant credit. Local brokers estimate that space in relatively new, Class A product comparable to the Excite@Home campus would currently lease at $1.85 per square foot with $0.05 per square foot annual rent increases. Tenant improvement allowances for this type of space are typically $15 per square foot. Midpoint Technology Park and the Excite@Home Campus Mid-Point Technology Park (MTP), where the subject property is located, contains approximately 950,000 square feet of office space, or approximately nine percent of Redwood City's office inventory. As of October 2004, more than 60 percent of this park was available for lease, including the Excite@Home campus.