Cases in point: One office tenant here is getting free furniture, Washington, DC office landlords may find demand for their space great enough to at least maintain equilibrium, and the FDIC's lease of 200,000 square feet for a foreclosure-oriented center is providing a shot in the arm to a beleaguered Orange County office market.

The office tenant in line for free furniture is Kofax, a publicly held document imaging and technology company that is traded on the London Stock Exchange. As reported on GlobeSt.com recently, Kofax will relocate and expand its world headquarters to 90,000 square feet at 15211 Laguna Canyon Rd. in the Irvine Spectrum in a seven-year lease with the Irvine Co. Gary Allen, a senior vice president in the Newport Beach office of Grubb & Ellis Co. who represented Kofax, tells GlobeSt.com that document imaging company will get free office furniture as part of the deal when it moves into the new space in April.

Allen explains that the Irvine Co. and a number of other office building owners in Orange County have furniture left behind in their buildings by failed financial services firms and are willing to include the furniture at no cost as one of the bargaining chips in attracting tenants. The office furniture that Kofax will inherit, which Allen describes as high-quality and very lightly used, is from a failed financial services company in Irvine. The only cost to Kofax will be the expense of relocating the furniture into its new building.

Kofax is not the only tenant that might ultimately realize a benefit, in the form of free furniture, as a result of the collapse of the subprime mortgage industry. Now defunct subprime mortgage specialist New Century Financial Corp. left behind floors of furniture when it vacated hundreds of thousands of square feet of space in Orange County. Ditto for Ameriquest and other failed financial services firms, so their losses may turn out to be the gains of future tenants. As Allen tells GlobeSt.com, a number of landlords who own buildings vacated by the financial services firms are adding free furniture to the list of concessions and incentives they are offering these days to entice tenants.

In terms of benefits for office landlords in the Washington, DC area, the financial crisis has generated estimates that the government is going to need between 500,000 square feet to one million square feet of additional space to handle the crisis. As a recent GlobeSt.com report pointed out, the good news for the DC area is that the implosion of the financial sector will have only a limited impact on space usage in the office market because it is not heavily weighted toward financial services firms, as New York City is.

Besides the potential for growth in office space demand from existing government agencies like the FDIC and the Treasury Department, the financial crisis could generate demand from any new agencies established to cope with the problems. While experts aren't predicting that the demand for office space in DC will be anything like a boom year, it may enable landlords there to at least maintain the status quo, which could be considered an accomplishment in light of the rising vacancies and generally weakening conditions in many if not most other office markets.

Among the most beleaguered of US office markets is Orange County, which once enjoyed low vacancy along with steadily growing absorption and rental rates. But the subprime mortgage fiasco plunged the county's office market into negative net absorption, so it was something of an irony recently when one of the county's biggest office leases in years turned out to be a deal between the FDIC and the Irvine Co. The FDIC signed a three-year lease with two one-year options for 200,000 square feet at the Irvine Co.'s new 40 Pacifica building in the Irvine Spectrum, where the federal agency will open what it describes as a temporary office to manage receiverships and to liquidate assets from failed financial institutions primarily located in the Western US.

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Market Misfortunes Produce Unexpected Benefits

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