1.1M SF With Short Shelf Life Prods Expenses Only Dealing

AUSTIN-In January, about 1.1 million sf or one-third of Austin’s office sublease space will have an average shelf life of two years. The “aged” space has brought a return of “expenses only” deal making for the first time since the real estate bust of the late 1980s, says the city’s acknowledged sublease watcher.

Austin’s scenario is much the same as elsewhere as commercial real estate forecasters start prepping the industry for large quantities of space returns to building owners. Admittedly, there will be fewer competitors courting tenants when building owners get control of their space, particularly as the pendulum swings in the Austin CBD. The downside is the Austin market is rubbing shoulders with an “expenses only” margin for the finished deal due to a space glut and ongoing fierce battle to win the tenant, says Mike Buls of Buls Hodge Consulting of Austin. “The tendency in this market is to go for a turnkey deal.”

Eighty-two leases account for the 1.1 million sf. To make matters worse, 43 of those leases or 748,000 sf have less than a year to go before they expire, Buls tells GlobeSt.com. In comparison, the average term citywide for direct and sublease is 58.4 months.