1. LANDLORDS SKEPTICAL ABOUT NET STARTUPS 2. NORRIS BEGGS NEARS THE EXIT 6. SUBSCRIBING, CANCELING AND FEEDBACK
1. Landlords
skeptical about Net Startups Excerpts
from an article by May Wong, AP Technology Writer The days of love at first sight are over
for Internet startups in their search for office space. As recently as four months ago, practically
anything related to the Internet had tremendous appeal to commercial
landlords, who accepted stock options as rent and sometimes didn't even seek
letters of credit. The online industry still holds sex-symbol
status in the economy, but mere looks aren't everything anymore in
California. Since the tech-heavy NASDAQ cooled, landlords have begun to worry
they could be left in the lurch if today's hot dot-com company bottoms out. Now commercial property owners are taking
the time to carefully size up a potential Internet business tenant, seeing if
it has a good head on its shoulders and a profitable business plan. And in some cases, landlords are just
saying no from the start. "Landlords were happy to take dot-coms
if they delivered stock options. Now landlords are getting more concerned.
They're asking for more financial data. They're also looking at financial
projections. They're almost acting like Wall Street financial analysts,"
said David Oppenheimer, chief financial officer of Digital Impact, a San
Mateo, Calif.-based e-mail marketing company that went public Nov. 22. Oppenheimer, who is always shopping for
more space for his growing 2-year-old Internet company, said landlords or
their agents are demanding more than business plans. Some also want
face-to-face meetings with company principals. "Space doesn't lease overnight like it
did before," said Meade Boutwell, a director in the San Francisco office
of Cushman & Wakefield, an
international property management firm. "Things have taken a more
reasoned, calm approach instead of the rampant got-to-have-it-tomorrow
approach." As a result, some Internet tenants are
being forced to give up must-have California addresses and shop for space in
less attractive areas. "Dot-com tenants are starting to look
at other submarkets like downtown L.A., where there's still a double-digit
vacancy rate, one of the few places in the country that still has that,"
said Hunt Barnett, a senior managing director for Insignia/ESG, one of the nation's
leading commercial real estate services providers. The love affair ended around April after
NASDAQ stocks took a plunge and the tech-heavy stock market sobered up,
bringing about a more cautious approach in all high-tech deals. "The NASDAQ correction threw cold
water on it, and everybody said, `What are we doing here?"' Barnett said. The correction has done nothing to ease
pressures on the commercial leasing market. Single-digit vacancy rates have
driven rents in the San Francisco region to as high as $70 to $85 per square
foot per year. "The real challenge for the young
company is getting selected to lease space," said David Churton, senior
managing director for the San Francisco region for Insignia/ESG.
"Historically, the person who pays the most or the one who pays the most
options would get selected, but now it's whoever has the strongest company
with the secondary focus on who pays the most." Some buildings have pulled themselves off the
dot-com market completely. "Even though we have excellent
tech-company clients, we've been told, `We're not going to deal with the tech
companies anymore," Churton said. The chilling effect certainly didn't help
Thirsty.com, an infotainment Web site geared for teens. The Los Angeles-area startup had been looking for
office space since late 1999. It moved into a building in Westwood this
month, but only after a bit of strong persuasion. "The landlord was saying we have had
enough of the dot-coms, and I said, `No.' I told him we deserved a day in
court," said Barnett, who set up a meeting where Thirsty.com had to make
a pitch similar to one it made to its angel investors. "My client is personable and persuasive," Barnett said, "so it went well."
2.
Norris Beggs nears the exit Norris Beggs &
Simpson, Portland's largest commercial brokerage, is about to concede that
its 13-year struggle to make it in the Puget Sound area is a bust. The firm is negotiating to place the last six
brokers in its Bellevue office with another brokerage and plans to then
retreat from this market, said H. Roger Qualman, a Norris Beggs principal and
executive vice president who came up from Portland almost two years ago to
make yet another stab at this market. Norris Beggs wants to keep its three
property managers and two real estate finance employees in place in the
Bellevue office but leave brokering to others. "It's a very difficult recruiting
environment and we just have to make a business decision," Qualman said
in an interview. "You would think when times are as good as they are
that there's plenty of business, but actually with the markets as tight as
they are (due to record low vacancy rates), there's not. ... For us, this is
a very tough business decision to make." The firm "isn't abandoning our
customers," Qualman said. He is trying to move the Bellevue-based
brokers to another firm where they can keep serving existing customers, but
he has a "fall-back position" that will keep those brokers in
action. Qualman declined to name which company his
firm is negotiating with. He also didn't provide a schedule for when the
changes may occur but spoke of them as likely to happen soon. Veteran Bellevue real estate executive Bob
Wallace said other shakeouts in area brokerages likely will occur in the
coming months as firms that haven't capitalized as much on the sizzling
market move boldly to reverse that before the sizzle cools. "We'll see a lot of activity in the
next few months," Wallace said. Low stock prices for some publicly traded
big firms like CB Richard Ellis
likely will drive those firms to make some moves, Wallace said. In other
cases, some young firms formed earlier in this hot cycle by experience
brokers who pulled out of big firms have established themselves and will
acquire others that haven't fared so well, he said. One young Seattle-based firm of this sort
is actively negotiating to expand to the Eastside by buying an established
small Bellevue-based firm headed by a seasoned broker who's growing
interested in slowing down a bit. Norris Beggs employs about 40 brokers, and
a total staff of about 170, in Portland. Norris Beggs' President, J. Clayton
Hering said in a March 1998 interview that the firm was shoring up its
struggling, then-11-year-old Bellevue office for an all-out push to succeed
in the Seattle-area. Qualman took charge of the office, which
moved to the 21st floor of Rainier
Plaza in downtown Bellevue. He made a lot of public appearances and
Norris Beggs sponsored events to boost its profile. But Qualman kept his home
in Portland, commuting on weekends. To succeed in the market, Norris Beggs had
to lure experienced brokers away from other firms. Office investment and
leasing broker Craig Hill jumped over from Grubb & Ellis. But Hill recently
returned to Grubb. Possibly the most telling blow came
recently when Matt Wood, son of a Norris Beggs principal, left the family
firm to join Kidder. "For whatever reason it has just been
a frustration for them here," said Wallace. "My sense is the niche
they are pursuing is fairly crowded and tough to break into."
Unico Properties is proud to announce the promotion of Larry Klatt and Pat McCabe to regional vice president. Klatt's title includes "suburban group manager" while McCabe is downtown group manager. Klatt, a two-year Unico property manager, oversees 2.3 million square feet in Bellevue, Tacoma, Renton and Boise, Idaho. McCabe, also with about two years at Unico, heads management of 3.5 million square feet in downtown Seattle Fisher Properties
is pleased to announce the promotion of Tina Pappas to director of marketing
and leasing. Pappas, who worked previously as a broker for Colliers
International, will concentrate first on leasing the new Fisher Plaza next to
Seattle Center and the Fisher Industrial Technology Center in Auburn. Wright
Runstad is happy to announce the return of leasing whiz Susan
Murphy. Murphy’s stint in the
dot-com world lasted seven month.
She left as Seattle-based Wright Runstad's leasing manager at the
start of this year to work as Amazon.com's senior program manager for global
real estate, in charge of finding office and distribution space in various
locations around the world. Wright Runstad's peers then said the firm
suffered a blow in losing Murphy. Since then, Amazon.com's stock has plunged,
turning up the pressure on the e-tailing giant to become profitable and
ratcheting down the need to find more office and distribution space. Kidder,
Mathews & Segner has been busy over the past six months, as we
continue to add seasoned professionals to our team. Some of the new faces include: Rachel Corp, formerly with JSH Properties (Retail specialist), Brian Adams, formerly with CB Richard
Ellis (Eastside office/high tech specialist), Matt Wood, SIOR, formerly with Norris, Beggs & Simpson (Kent
Valley industrial specialist), Linn
Larsen, SIOR, formerly with Larsen Real Estate Services (Pierce County
industrial specialist), Zach
Vall-Spinosa, formerly with CB Richard Ellis (Eastside office/high tech
specialist), Joe Lynch, formerly
with CB Richard Ellis (Eastside office/high tech specialist), Pete Norman, formerly with Windermere
(Pierce County investment specialist) , Harry
Harkaway, formerly with a firm in upstate New York (Seattle office
specialist) , Tom Robison, formerly
with Regency Group (Eastside industrial/office specialist), Tim O’Kane, formerly with NW Retail
Partners (Retail specialist), Brian
Nelson, formerly with NW Retail Partners (Retail specialist), Steve McKinney, formerly with
Flannigan & Ewing (Pierce County office specialist). KMS brokerage division now totals 87 professionals.
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