Telecom Corridor's 30% Vacancy Doesn't Always Mean Free Ride

The traditional "big tenant" market definitely has its hefty lookers, a handful of shoppers each seeking 80,000 sf and above--deals that their brokers aren't willing as yet to label as done. The savvy negotiators ask for confidentiality as they work the available space of 1.5 million sf of sublease and 2.2 million sf of direct to get the best deal possible in a world-class inventory of high-tech product.

"The complexion of the market has changed," Scott Morse of the Morse Co. tells GlobeSt.com. "Our feeling is that it's clearly a tenant-oriented market."

In the past 60 days, Telecom Corridor terms are coming about on a deal-by-deal basis more so than ever before, Morse says. As a tenant rep, he says he would expect anywhere from four to six months of free rent for a five-year lease on 30,000 sf. These days, those kind of terms are being laid out practically at the onset more often than to make the close. Still, only "two or three" out of every 10 lookers have the credit and the capital to back their signatures on the deals with the big-ticket perks, according to Morse.

Tenant representative Evan Reynolds of the Reynolds Co. says Telecom Corridor building owners are definitely more "receptive" today than in years past. "The biggest concession is the proliferation and extension of free rent," he says. Still, tenant commitment isn't coming easy with the ups and downs of the stock market locking down the decision-making process.

Reynolds says it will get worse before it gets any better in the Telecom Corridor. He doesn't foresee any uptick for six to 12 months. "Net absorption is negative and the outlook is flat to declining," he says.

Recovery is, Morse believes, 18 months out. "It doesn't mean things aren't going to happen between now and then," says the upbeat Morse, "but it does mean things are going to be slow." He staunchly believes the proactive stances of elected and appointed officials along with brokers' desires to get the deals done will guide the market through the high-tech backlash.

As for rent, the going average is hugging $16 per sf. That, though, most likely will change by year's end when Nortel plunks 500,000 sf of its one million sf in the submarket onto the market, the biggest dark cloud now hanging over the corridor's 2002 outlook.