Only 15 months ago, developers were scurrying to put up new towers to feed the frenzied demand. Vacancies were between 1% and 2%, rents were rapidly escalating, and new leases were being measured in the tens of thousands of square feet. Now, Clise says, developers and owners are "hunkered down and hoping they're not too leveraged."
Today's strategy for landlords, according to Clise, is a mix of efficiency and working hard to get vacant spaces filled. "That means making deals that produce rents -- even if they're not the best deals," he says. "It's better to have something than empty space."
While Clise says some landlords are becoming more flexible in signing tenants, it's not as prevalent as he expects it will be because with the majority of sublets in the market there is still someone paying the rent.
Clise says lower interest rates are helping some, but only if a developer can get the financing. "There are rates out there in the low 7's, and that's terrific -- but, a lot of lenders aren't interested in lending money on buildings with lots of vacant space," he says.
As for Clise Properties, the CEO says its cornerstone property, 1700 Seventh, is doing well. With Nordstrom's national corporate offices taking up 80% of the 538,000 sf, together with other stable tenants such as Merrill Lynch, Clise says the tower is around 94% leased, with occupancy also close to that number. "It's good to be lucky," says Clise.
On the flip side, he says the company has about 600,000 sf of office projects that are in the end of the permitting stage -- projects Clise Properties won't be constructing any time soon. "We won't be going forward without significant pre-leasing commitments from AAA tenants," he says, adding that he doesn't expect that will happen anytime soon.
"I am optimistic, though," Clise says. "While no one knows how the war on terrorism is going to affect us, this (current market) is part of a cycle. Seattle is a terrific urban center, and I do believe we'll come out the other end."
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