Office Rents Growing, But Opex is Skyrocketing
Parkway Properties managing director Mike Fransen (snapped with Cousins’ Bubba Harkins at Bisnow’s State of the Market last week) says we might see some major office rent leaps over the next three years, as leases signed in ’10 and ’11 (our trough for rents) roll. He says absorption is down because occupancy is up, but he’s started seeing lots of 5,000 SF to 15k SF tenants hit the market this year, looking to expand. (Music to any broker's ears. On that topic, we asked Mike his favorite concert: Weezer in Montreal.)
Planned Community Developers EVP Don Janssen (whose all-time favorite concert was ZZ Top in ’75) says Class-A office occupancy cost has gone up 67% since 2005. Despite our strong rent growth recently, most of that is from opex. (We assume most of that is faster Wi-Fi so people can stream Orange is the New Black.) Allied Advisors prez Richard Rudd says his expenses alone at BG Group Place are $16/SF. He forecasts a slowdown in office investment sales—most investors have spent their allocations, and most of our trophy product has already transacted. (Now most investors want industrial, followed by retail.)
We snapped our sponsor Alston Construction (a rename from Panattoni Construction in February): here, its Radie Stroud, Scott Picard, and Stephen de Jongh. The team just broke ground on Beltway Crossing, a 663k SF spec distribution/warehouse facility. The site was challenging, with lots of easements, wetlands, and floodplain issues to work through. It also just completed 300k SF for Medline and Room’s To Go’s 300k SF expansion.
Our sponsor Hartman Income REIT’s Richard Maloof, Jennifer Rabon, Ami Figg, and Trey Young were looking dapper and are focused on revitalizing the Northbelt area. The firm owns three buildings totaling 165k SF there and is offering increased broker incentives to lease them up.