The city, which signed a 10-year master lease for the seven-story Old Town building, began paying $96,270 per month in rent in August 2001. According to the report, the building's 50,000 rsf are now 22% occupied, reportedly at annual full-service rents in the mid-to-high teens per sf.
There is reason to be encouraged, PDC Executive Director Don Mazziotti reported to the commission. "Despite very sluggish real estate market conditions and additional space continuing to come on the market, recent interest in the CSC has been encouraging," he writes. "We have seen a mix of full-floor and small-space prospects."
Indeed, in the last week of October, Mazziotti says the PDC responded to three proposals with counter offers: 750 sf on the second floor, the entire seventh floor and 1,500 sf on the ground floor for a food service operation. "We expect a proposal for the entire seventh floor and a 'first right' for the sixth floor from a very credible group soon," he writes. "We also have significant preliminary interest from three parties who have just recently been exposed to the CSC; two are interested in a full floor, while the third would like between 900 sf and 1,200 sf.
The city's goal is to sublease the space to software developers, electronic commerce businesses, advertising and public relations agencies and film and video companies. The project is part of the city's effort to support the industry and keep companies from fleeing to the suburbs. To promote additional interest, Mazziotti says an open house for real estate brokers is scheduled for Dec. 4. At the end of his report, Mazziotti tempered his previously mentioned "encouragement."
"Though we are currently experiencing respectable interest in the building, it is difficult to predict how much of this will translate into new tenants and at what lease rates," he wrote. "Given the struggling economy and the current real estate market we must appreciate each and every prospect and be flexible in meeting their needs.
"The challenge is significant and manageable."
In cooperation with the city, the Kalberer Company spent several million dollars to have Venerable Properties turn the raw warehouse into an office building. The building is the home base for Oregon Creative Services Alliance, which provides individual offices and common meeting rooms for industry associations, including "fully wired" communal conference rooms.
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