For the past six months I have been collecting every article I could get my hands on regarding ‘Dot-Com Escape’ (a recent SF Chronicle front-page headline 9/18/2000), but while a handful of firms have relocated a portion or all of it’s operations to less expensive locales, saving on rent, housing, and paying lower wages, the aggregate number of these escapees is minute in comparison to the business growth in our area. Take just one sub-regional slice of the Bay Area, the Tri-Valley region including San Ramon, Pleasanton, Dublin and Livermore. Sybase, Commerce One and CISCO plan to build over 2,000,000 sf of campus office space in Dublin. KLA-Tencore Corporation is building 750,000 sf in Livermore. Perkin Elmer is planning a 960,000 sf campus in Pleasanton. Rumors abound with Sun, Oracle, Intel, and other names mentioned to be seeking large chunks of Tri-Valley office space. Within the next three years, just this one sub-region could add over 20,000 new jobs, so if a handful of firms relocate to Sacramento or Utah, we wish them the best of luck! Of course, the last time we felt invincible was back in the mid-1980’s right before the commercial real estate world turned upside down…

According to the Contra Costa Times 9/25/00, a number of Silicon Valley region cities are launching moratoriums restricting ‘Internet-based businesses’ from building, renovating, or leasing certain space. Redwood City and San Mateo have already done this, and Menlo Park and San Carlos are planning similar curbs. City leaders cite quality-of-life problems, like too much traffic, untaxable online sales, light industrial zones with BMW’s and Mercedes instead of trucks, and the ability of high-tech to outpay local long-established retail mom n’ pop businesses. Redwood City has almost 100 dotcoms, half of which moved to town since January. Remember the old days when cities fought to get jobs, especially non-polluting high-wage companies that brought spending dollars to local restaurants and stores, helped with local community charity and service events, and had city and chamber officials beaming with pride? Can’t you just see these officials now, sad, forlorn, and frowning that too many high-tech companies want to call their city home?

www.officetimes.com continues to lead the way for corporate real estate information. Hundreds of pages of relevant articles and links on rental rates, how to sublease, how to setup a telecommute program, one-page home price summaries, office wiring, how to buy every book we could locate on office leasing, corporate real estate job links, and much, much more. We are currently setting up an e-commerce section for corporate real estate professionals including tips for dotcom leasing, every relevant B-to-B website for CRE – all at www.officetimes.com!

I recently attended the annual NACORE symposium in Las Vegas earlier this week. NACORE, which stands for the International Association of Corporate Real Estate Executives, puts on the finest series of educational and networking programs in the world. There were over 95 speakers presenting topics such as ‘Strategic Planning in an ASAP Environment’ lead by senior managers of strategic planning from CISCO Systems and Sprint Corp, ‘The Impact of e-Business on Corporate Real Estate’, and dozens more eye-opening programs. Add to this, 1,700 corporate real estate directors and service providers with numerous networking opportunities, a ballroom of corporate real estate vendor booths with cutting edge products and services, standing ovation feature speakers, and you had one incredible program! NACORE and IDRC are planning to merge in early 2001 so the combined organization will be a ‘must join’ for every corporate real estate professional. I’m currently Vice-President Membership for NACORE Northern California so please call me if you’d like more information about our organization and programs. Also, on May 12–16, 2001 IDRC/NACORE will be co-hosting a major corporate real estate education/networking symposium in Seattle so again, please feel free to call or e-mail me for details.

CISCO System, which occupies or is building in San Jose over 9 million square feet, is moving ahead on a 6.5-million-sq-ft expansion in nearby Coyote Valley that will house 20,000 workers, as well as a proposed 1-million-sq-ft project in Dublin next door to Pleasanton, and is also looking at a portion of the 8.3-million-sq-ft Pacific Commons project in Fremont.

Along with CISCO Systems, Siebel Systems is eating gobs of office space. In San Mateo, they are moving into a 450,000 sf headquarters facility, in addition to 250,000 square feet of existing space they occupy there. Also in San Mateo, Siebel just signed 205,000 sf at the CONCAR project and is reported to be looking at 125,000 sf at The Center at Bay Meadows. During the first quarter of 2001, Siebel will expand into 300,000 sf in Emeryville.

A number of recent office building sales in downtown San Francisco in the $400/sf range illustrate the discount investors are giving to the current $85-100/sf annual rental rate when calculating building values. Does this mean long-term investors think rents will drop back down to $40-50/sf per annum (where the $400/sf make sense), and if so, why are they trying to get long-term leases at such high rental rates? According to Business Expansion Journal, July 2000, “Regional office rents have been spiked up so sharply in recent years that many investors have doubts that the increase is permanent. As a result, they have made a practice of heavily discounting rents when crunching their numbers.”

Deals and Rumors: In Point Richmond, Industrial Light and Magic leased 24,000 sf at Port Richmond TechCenter; In Berkeley, Bayer will be building 180,000 sf of lab space at a site it recently purchased at 7th & Dwight Way. In downtown Oakland, MimEcom.com leased 95,000 sf at 1945 Broadway, a former Capwells Department store, and Media Games Group will be taking 24,000 sf at 555 City Center, currently under construction. In San Leandro, TriNet leased 120,000 sf at Creekside Business Park. Down in Fremont at the Warm Springs Corporate Center, Asyst will be building a 600,000-sf R&D facility. In San Ramon, Calpine is rumored to be looking at 100,000 sf and Ernst & Young 40,000 sf, both at BR4. Intel just leased an estimated 20,000 sf at 2603 Camino Ramon in San Ramon. DPR leased 10,000 sf in Pleasanton at the Foothill Professional Center. In Livermore, Adaptec might be taking 20,000 sf in the Shea Business Park. In Marin County, GreenPoint Mortgage has leased 125,000 sf at Wood Hollow in Novato. At Pacific Shores in Redwood City, Nuance leased 141,000 sf and Broadvision is taking 115,000 sf In San Francisco, Thomas Weisel Partners leased 63,000 sf at 88 Kearny St., Simplexis took 23,000 sf in the South Beach area, and the Gladstone Institute is reportedly close to leasing 200,000 sf of lab space at Mission Bay.

In my last issue of OfficeTimes.com, July 1, 2000, I stuck my neck out and stated that the Bay Area office market in general peaked in March 2000, but several sub-regions are still experiencing rental rate increases as they catch up to San Francisco. Since then, a number of San Francisco brokers have affirmed this, and more than one broker has stated ‘No way we could get pre-April 2000 rents today’. A number of e-commerce blocks of space went back on the market around the Bay Area and are still awaiting replacement tenants. Sub-markets ‘catching up’ include Pleasanton, downtown Walnut Creek and San Ramon. Why shouldn’t Pleasanton Class A office rents be $5/sf or more, especially in light of the disappearance of almost every bit of future current and speculative office space by large high-tech users? Is Walnut Creek only worth 30-50% of San Francisco, especially in view of the huge employee payroll tax differential, as well as housing and employee cost differences?

In an article in the Contra Costa Times (7/30/2000), according to Site Selection Magazine, since 1996 corporate migration within the country has doubled to more than 11,000 moves a year. As labor shortages and competition for workers drive up wages in one city, companies have shifted work or have expanded in another location, where the same tasks can be done at lower pay.

A story in Today’s Facility Manager July 2000 discussed the standardization of Category 6 Cabling. Cat 6 will extend channel bandwidth to 200 MHz or more. It’s unlikely that all components stamped “Category 6” will be inter-operable, and components of one manufacturer mixed with another might result in Cat 5 performance. If you’re interested in a supplemental article on Cat 6, check out www.tfmgr.com.

A recent entitled office building site in San Francisco went for about $90 per buildable square foot, $1,466 per square foot of dirt, and when completed the 202,000-sf, 24-story office project will cost a total of $371/sf to develop. Thought you’d want to know…

Reported in The Las Vegas Review 9/27/00, the Federal Deposit Insurance Corp has listed 13 cities deemed at risk of overbuilding commercial properties: Denver, Fort Worth, Jacksonville, Sacramento, Seattle, Atlanta, Charlotte, Dallas, Las Vegas, Orlando, Phoenix, Portland and Salt Lake City.

Folks have asked me what the various initials after my name mean, and for any of you desiring to further enhance your knowledge and career through earning advanced designations, these three might be at the top of your list – MCRS.h is ‘Master of Corporate Real Estate Services, with honors’ awarded by NACORE’s Institute. It takes four courses, demonstrated work experience and either a capstone course at MIT or a thesis to earn the designation. CCIM is Certified Commercial Investment Member with approximately 4,500 current members who specialize in the leasing or sales of commercial property. Extensive week-long course work and testing takes the average applicant three to five years to complete the requirements for this designation. Lastly, SIOR is The Society of Industrial and Office Realtors, an organization born out of the war efforts of the 1940’s. A group of senior brokers from around the US helped the government determine the best facilities and locations to build tanks, ships and weapon. After W.W. II they formed a nationwide network of senior experienced industrial brokers. In 1985 they expanded the designation to include office specialists like myself. Again, coursework, demonstration of expertise and testing are required for membership. Further information on all programs can be found at www.nacore.com, www.ccim.com, and www.sior.com.

October 11 marks the beginning of my 26th year specializing in San Francisco/East Bay corporate real estate sales, leasing and consulting. When you start your first career on your birthday, it’s easy to keep track of time!

According to a recent study by the San Francisco Partnership, San Francisco’s dot-commerce generated $5.7 billion in revenue in 1999. San Francisco’s digital firms employ 40,000 workers in the city spread over 1,048 companies; 51 percent are profitable, 88 percent of all digital industry employees in SF receive stock options (versus 33 percent nationwide), and the biggest challenges facing these firms are recruiting and retaining employees. The study also projected 9,000 new Internet jobs will be added in San Francisco this year.

San Francisco ranked # 1 again this year on the Conde Naste Traveler top U.S. cities; # 1 for Travel & Leisure as the favorite city in the world thanks to it’s red-hot restaurant scene and booming economy; # 1 by Money Magazine as the best place to live among the 300 biggest U.S. metropolitan areas. However, in last weeks’ Dun & Bradstreet “Best U.S. Cities” for small business, San Francisco ranked only 32 out of 60 large metropolitan areas. Our high office rents and unaffordable housing prices probably didn’t do much to help out.

At a recent presentation by Alan White, Director of British Telecom Property, examples of recent test cases of a total wireless office were given. Rollable desk units with flat screens had the PC’s charging eight hours in a docking station, and then being usable for up to 16 hours. No wires whatsoever for phone or data, which meant 100% flexibility. Mr. White mentioned they are about to go to 1,000 workers without wiring, and other trends to watch are the increasing usage of Palm devices to carry out a number of functions, wearable computers with speech recognition, and more…. Jim Young, President of the Jamesan Group, mentioned that when corporations are considering trying out new technology ‘Don’t spend your time and resources trying to push the elephant up the hill’, but instead focus on young new groups who can buy into new concepts and are willing to try new technology.

In a NACORE program titled ‘The Impact of e-Business on Corporate Real Estate’, John McMahan, Executive Director of Centerprise, predicted the following: By 2006, technology will impact over 50% of all U.S. workers; there will be 10,000 new B-to-B companies within the next ten years: once suppliers/users convert to online B-to-B, it’s unlikely they will switch back in the future; the cost of losing key employees is much less than the cost of office space; call center demand for facilities may go down due to a transition to web-based customer service.

A major national institutional real estate investor recently stated that as an office building owner, there was a 20% spread between rent from a credit tenant vs. a non-credit dotcom due to exit-strategy analysis of the impact of the lease on building values at the time of sale. Also, he commented that in some of the hotter U.S. markets the turn-around time for the office lease process has gone from two to four months down to two to four weeks.

A few weeks ago I decided to give my wife Lisa a weekend off, so another buddy and I took our kids to Lake Tahoe for the weekend. Jordan (please click here to view his latest photos) is my three-year-old boy and my buddy’s daughter Ruth is four. We stopped at Placer County Fair on the way up, spending the late afternoon and evening panning for gold, watching actors dressed in 1850’s costumes perform magic tricks and comedy in the Gold Rush style. We did all the kids rides, checked out the large 4-H farm animal exhibits, then ended up at 10 p.m. watching in fascination at dirt-track motorcycle racing – the kids loved it! The next day on Saturday we visited Truckee where they had Railroad Days with ten locomotives from the 30’s and 40’s available for us to climb on and sit in the engineer’s seat, pretend we were engineers in the caboose, and in general, have a blast. In downtown Truckee, scores of heavily-costumed cowboys looking mean and tough were having mock gunfights, and to the surprised and delight of all when a ten-passenger car Amtrak Train pulled into town, all the cowboys banded together and held it up. The kids went crazy! Then off to the Tito Martinez Annual Picnic, with a live band, face painting, and tons of food in the nearby Truckee Regional Park. Next-to-last stop was five hours at the beach on Lake Tahoe, building a ten-foot sand castle (long, not high…) in 80 degree weather and still able to spot patches of snow across the lake. I won’t bore you with all the other stuff we did but what a great weekend for both the kids and their Dads. Hope your summer was also one of the best ever!

Sincerely,

Jeffrey S. Weil