Work is nearing completion for the 12-story South Tower, whichis fully available and has 303,612 square feet of office space,12,000 square feet of retail space, a 200-seat conference centerand a 100-person childcare facility. Work on the 21-story,358,000-square-foot North Tower stopped after its foundation waspoured in November. The project also includes a two-phase2,000-slip parking structure, the first phase of which is complete,and 50 surface parking spots.

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"We have constructed a very unique product in terms of qualityand market position but it's a difficult time," Myers Developmentchief Jack Myers tells GlobeSt.com. "A lot of tenants have taken aseat and we'd like to not get too far ahead of ourselves when comesto the market place. At the same time, we think that the worst ofall that's been going on is behind us and have an abiding beliefand respect for the Peninsula market. While these are disappointingtimes when it comes to leasing the market, the fundamentals overtime are pretty solid, and despite this malaise, stemming fromquestions about the economy, that has given us pause, we remainoptimistic that we have built the right product type for the rightmarket group, and that there are a group of tenants out there thatwould work very nicely in this building."

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The development site fronts Highway 101 between Downtown SanFrancisco and San Francisco International Airport. Skidmore, Owings& Merrill LLP designed the towers. Hathaway DinwiddieConstruction Co. is the general contractor. Phil Tippet, James Leesand Tim Grant of CB Richard Ellis have the office leasingassignment. Kazuko Morgan and Courtney Griffen of Cushman &Wakefield control the retail listing. A Call to Stockbridge onMonday morning had not been returned as of Monday afternoon.

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The initial plan had been to complete the second tower by theend of 2009. Now the plan is to start work again by that time—andsooner if an anchor tenant comes along--and complete it no laterthan early 2011. Myers says the first building is shell completeand that the steel, glass and elevators for the second toweralready have been purchased such that it could be ready for tenantsin as little as 13 months. In addition, Myers says one silverlining to the situation is that there is "reason to believe" costsfor the project can be significantly contained--"and perhaps evensomewhat reduced"--by the lack of demand in the constructionindustry and the willingness of principal subs an others to sharpentheir pencils and make prices even more attractive to make surejobs get going.

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"We could start TIs tomorrow [in the South Tower] if we had atenant in hand," office leasing agent Tim Grant tells GlobeSt.com."The reason the South Tower went first is because its larger floorplates [29,000 square feet versus 17,000 square feet] are moreideally suited for a larger tenant; the plan has been to land alarge tenant for the first building and then multi-tenant thesecond, but in this economy it has been hard to find large userswilling to commit."

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Indeed, Grant says tenants who had been looking to upgrade orexpand have been taking every opportunity to delay theirdecision-making process. Instead of relocating or inking along-term renewal, they are extending their leases for six monthsor a year while they wait for the economy to turn around. "Andevery landlord out there is willing to cooperate because they arein the same boat," he says.

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Things will change, Grant says, and when they do they likelywill change quickly, but no one's sure whether that change willoccur sometime in 2009 or be delayed until 2010. "Once people see acouple of bigger, more public players pull the trigger it mightopen a bit of a flood gate of companies that had been sitting onthe sidelines," he says. "It may be three-, six-, nine-months away,but we have seen it happen here before.

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For someone who wants 100,000 square feet of new, high qualityspace on the Peninsula in a single building with signage rights andgreat exposure to Highway 101, there are few competitors toCentennial Towers, which is one of the big reasons Grant says Myerswent ahead with the project. It's also one of the reasons there isinterest in the building despite the economy.

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"When we started construction it was a pretty safe bet we wouldfind an anchor tenant and while we are behind our initialexpectations we are well on our way," Grant says. "There are fourgroups we are talking to, two we are trading paper (negotiating)with and two that have taken multiple tours."

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Sony is said to be one of the four interested parties; Grantdeclined comment. While there's no official asking lease rate forspace in the building, one can reportedly expect to beginnegotiations at approximately $50 per square foot per year, triplenet, including a $50 per square foot allowance for TIs. Myerswillingness to work with prospective anchor tenants has keptinterest higher than it otherwise would be, Grant says. Myers hasreportedly offered to redesign ingress and egress to the firstfloor retail and lobby area to make it more appropriate forprospective full-building users, Grant says.

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"We're looking for a tenant that values the quality andvisibility and what that can do for their identity," he says."Every major corporation has an executive that comes to SanFrancisco every year for something; on their way there they willdrive right by this building."

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