"Since December, approximately 700,000 sf of sublease space has been made available throughout the Austin market. This is a significant amount," says Derek Silva of NAI. "However, much of it is in smaller parcels and it is unclear as to how much is due to companies downsizing or closing up shop, postponing expansion plans, like Janus and CSC, or outgrowing their existing space," says Silva.
Garden.com, drkoop.com, carorder.com, living.com and mall.com are but a few companies that have closed up shop and made space available. Larger high-tech companies such as Globeset with 103,000 sf, Computer Sciences Corp. with 100,000 sf, Janus with 92,000, Vectris with 35,000 sf and Netpliance with 30,000 sf, have recently released or vacated space for sublease, says Silva.
While sublease space has popped up all around the city, the bulk of it is in the northwest Austin submarket, according to sources from NAI, Insignia/ESG and CarrAmerica.Figures from Insignia/ESG show about 80% of the available sublet space is from dot.coms.
But, as Bart Matheney of Insignia points out, a number of dot.coms may be failing, but funding is plentiful for other Internet-related companies. "Internet infrastructure companies, chip-design firms, wireless technology companies--they're all getting funded now," says Matheney, emphasizing that Austin still maintains a 98% occupancy rate."Factor in the subleases and we have about 96% occupancy. It seems that the space coming on the market is being absorbed." Matheney says the large spaces for sublet are seeing a lot of activity and staying on the market for an average of two to four months.
A source from CarrAmerica agrees that the space available to sublease is being quickly absorbed, but says there are other concerns evolving from the dot.com failures. "The other impact is the uncertainty caused by the dot.com fall-out and how it relates to broader questions about the economy. This affects prospective new development, lending practices, leasing assumptions, etc.," says Jeff Pace, managing director of CarrAmerica's Austin office.
The dot.coms' misfortune isn't always translating into discounts for tenants looking for space. Most brokers say Austin's occupancy rate is too high for discounts. "It depends on who controls the space," says Silva. "If the vacated space is offered as a sublease by the current tenant, then often the property is offered at below current market rates. However, if the owner has recapture rights, or the current tenant negotiates to return control of the property to the owner, then a new lease will likely be offered at a higher rate than the original lease to match current market rates."
Offices2Share.com helps match sublease space with the people in need of it. "We want people to learn about us and know that we are a resource," says Jeff Landers, president of the New York City-based operation. "We are all about short-term office space."
The website allows landlords to post a description of an available space by opening an on-line account with Offices2Share. A password allows access to change the listing. Space seekers can search the database free and contact the listing agent directly. Offices2Share.com has nearly 1,000 listings in 150 cities throughout the US, including six in Austin.
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