News
Inland’s Cosenza: Tech Troubling Offices
January 11, 2012
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| Inland Group vice chair Joe Cosenza says it’s a good time to sell suburban offices. With lots of money seeking income, values are strong and landlords with good properties can make up what they lost in ’09 and ’10. (Inland owns about 90 US office buildings, 26 here, and they’re all suburban.) Joe says he’d even consider buying another one if it was leased for the long term to a healthy tenant. (And if the building asks him nicely.) His criteria: a below-market price and rents with some vacancy. Within ten years, he’d lease it up at rents lower than today’s rates, but appropriate for 2022. |
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| Inland buyers Mark Cosenza and Lou Quilic know that as a suburban owner, Joe also worries about technology possibly overtaking office use. Joe says that he sees it in his own life. With his iPad, he can do anything he can do at this desk, except motivate his staff. So he wonders: How many office workers won’t be around in ten years? “The horrible answer,” Joe says, is perhaps 10% to 15%. Also going forward, post-recession managers will be judged by how much they cut expenses, which would include eliminating underused offices. |
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| Due diligence officers Bob Brinkman and Sharon Anderson-Cox are part of the Inland team, which is trying to buck the trend by lowering rents a little and/or increasing TI by a lot. That’s what Inland did two weeks ago, when it renewed Sharp’s 100k SF lease in Oak Brook. Another way to spur leasing is to offer more amenities than the next guy: parking, restaurants, and perhaps a health club. But Joe still worries. He says delinquencies on US office mortgages were 8.29% last October versus 6.62% a year earlier. While office vacancy rates may be declining somewhat, Joe wonders if rates reflect actual demand. He asks: How many tenants are subleasing or have vacated space but still pay rent? Joe's word of the day: caution. |
