CPN - February 2009 - (Page 8)

OFFICE MARKET INTELLIGENCE Flex Time As the Economy Softens, Landlord Concessions Rise By Eugene Gilligan A s Variety’s Los Angeles lease approached its June 2008 expiration, one important factor played into the publication’s decision about whether to stay put or relocate. The entertainment trade paper had gone to market for a 10-year lease but changed its requirement to a shorter term because its parent company was considering selling it. The magazine’s landlord refused the shorter term, but The Ratkovich Co. jumped at the offer. Variety was just the type of tenant the owner wanted at its 5900 Wilshire Blvd. building, located along Los Angeles’ Miracle Mile, and the owner/developer signed Variety to a 55,000square-foot, five-year lease.“Our focus was to have a tenant roster of media and entertainment tenants,” said Ratkovich executive vice president & COO Clare DeBriere.The building also houses LA Magazine and public relations firm Edelman. “They wanted a short-term lease, and we wanted to get them in the building,” she noted.“We feel confident that they will want to stay here.” Economic conditions have required many landlords to exhibit greater flexibility on lease terms, lease rates and space requirements in order to retain and attract tenants. Landlords will likely have to continue in that frame of mind,at least in the near term. According to the Bureau of Labor Statistics, the U.S. economy shed 2.5 million jobs in 2008,more than a million of those falling away in November and December. According to a Grubb & Ellis Co. report, the national office vacancy rate reached 14.8 percent at yearend, up 180 basis points from the end of 2007. Most economists predict significant job losses in 2009, as well, so rising vacancy and expanding sublease space will be a fact of life for office building owners. At Hall Office Park, a 15-building office complex in Frisco, Texas, north of Dallas, Flexibility on lease length was a key factor in enticing Variety to sign a lease for 55,000 square feet of space at 5900 Wilshire in Los Angeles. landlord Hall Financial Group is meeting with tenants well ahead of their lease expirations, according to director of leasing Jean Farris. “We’re hearing our tenants say, ‘I want to stay, but I may need to downsize,” she said.“A lot of corporations are unsure about their future.” Half of both new and existing tenants, which typically would seek five-year lease terms, are asking for three-year terms, she noted. Landlords, influenced by factors like planned hold time, vary their strategies,but they generally focus on keeping tenants in place,said Jones Lang LaSalle Inc. director of national agency leasing Mike Ellis. “The general attitude is, ‘Do what you need to do,’”he said,noting that landlords are increasing tenant improvement dollars. At Arbor, we take being your financial partner seriously.With our unsurpassed range of unique lending solutions, you can count on us for whatever you need, whenever you need it.And there is no dealing with third party lenders – just Arbor.We’ll custom design your financing and fund it too. We believe in growing financial partnerships, that's why most of our clients are repeat borrowers. FANNIE MAE • FHA • CMBS • BRIDGE • MEZZANINE • PREFERRED EQUITY 1-800-ARBOR-10 • www.arbor.com http://www.arbor.com

Table of Contents Feed for the Digital Edition of CPN - February 2009

CPN - February 2009 Contents Starting Line Buzzworthy Office Data/Analysis Washington, D.C., Market Profile Ranking: Mortgage Banks & Brokerage Firms Top Deals of 2008 Mortgage Banking Mexico Brokerage Sustainability CPN-Nielsen Claritas Special Report Resource Guide

CPN - February 2009

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