BIG PICTURE: Dot-Com Bloodbath Not so Bloody for Wary Brokers

NEW YORK CITY-Timing is everything. Just as the record upcycle maxed out and began its current slip, the dot-com industry proved that as a tenant class, it wasn’t all it had been cracked up to be. These simultaneous events–both marked by closings, consolidations and layoffs, returned square footage to inventories around the country. But brokers are saying that for all the play new technology got on its way up and on its way down, the dot-coms’ role in the downturn was not the major factor in the Great Space Return. What’s more, rather than being lured by the early promise made by this new breed of start-up, old-fashioned business practices shielded the brokerage community from trusting more than credit would allow.

“Most of the property owners who completed deals with dot-coms were well aware of the risks associated,” and took steps to protect their product, CB Richard Ellis Inc. office-industrial specialist David Murphy tells GlobeSt.com’s Southeast bureau chief Alex Finkelstein. “Fortunately for Central Florida, our limited exposure to Internet companies circumvented an even worse situation by adding failing Internet companies to the ranks of space being dumped on the market,” Murphy says.

What steps did they take? Large security deposits and advance rent added some insulation, he reports, and it wasn’t uncommon for building owners to refuse to pay for improvements. “Protecting our clients from tenants with questionable creditworthiness” is a major concern for brokers these days, Murphy concludes.