On the heels of a 30,000-sf lease by Minnesota-based United Healthcare announced in April, Grubb & Ellis broker Steve Marcy tells GlobeSt.com that Allstate Insurance has signed a 10-year, $11-million lease for 48,000 sf, leaving less than 10,000 sf available in a building slated for delivery next quarter. To boot, Marcy says negotiations are underway to fill the remaining space with a Fortune 100 tenant.
Alas, this does not mean the office market is back on its feet. "The market has dramatically dropped off, and we're feeling it," says Marcy, who brokered the deal with partners Cliff Finnell and Mike Thomas. "There are not near as many deals as there were, so you just have to be a little more aggressive; instead of three people pursuing one spot, you might get one, and you've got to make the deal."
Its price point may in part explain the success of Southwest Center. At $23.50 per sf, it falls well below Kruse Way, where rates have dropped from above $30 to between $27 and $29, and Highway 217's Lincoln Centre, where price reductions have leveled off at between $25 and $27.
The lower rate is a result of both its location and its construction. Southwest Center is a three-story tilt-up structure, which allows it to be delivered more quickly and less expensively than traditional office product. In addition, the development site is not in a proven office environment, standing alone on a site in a void between the Kruse Way and Highway 217 submarkets.
"Once you're inside, there's no difference from a class A office structure except for the rental rate and the number of floors," says Marcy. "We've actually had to turn away some deals we could have made because we didn't have the square footage."
Not a bad problem to have these days.
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