$5M Lobby Redo Helping Boost Occupancy at BofA Tower

SEATTLE-Equity Office Properties is attributing its recent leasing activity at Bank of America Tower to a $5-million renovation of the 76-story Downtown landmark’s Fifth Avenue lobby. EOP senior vice president Pat Callahan tells GlobeSt.com that so far this year five new tenants have signed on for about 100,000 sf in the 1.5-million-sf building, three existing tenants are in the process of expanding and another 90,000 sf of deals are in the “prospect pipeline.”"The consequence of the remodel has been dramatic,” says Callahan. “We have been on people’s list when previously they might not have even looked at the building.”Occupancy in the building hit a low of 70% early last year after the locally based law firm Preston Gates & Ellis vacated 167,000 sf and relocated to 240,000 sf in the new IDX Tower developed by Hines Interests LP. Another major contributing factor is that BofA has been decreasing its presence in the building over the past few years. Despite those events, by meeting the market and marketing its lobby work, EOP has raised occupancy at BofA tower back up to 76%, says Callahan. Looking ahead, Callahan says he expects to see occupancy at 79% by the end of the year and into the 80s by the end of 2005. “Whether vacancy is at 15% by the end of 2005 is hard to say,” he says.Callahan says the increased leasing activity started while the lobby renovation was under way, and included a 23,000-sf commitment for the 37th floor by Chubb Insurance, which will relocate from Two Union Square at the end of April. “People understood (what we were doing) through the renderings and design work,” he says. “Chubb Insurance wasn’t even going to look at the building, but because of the upgrades we were making we got them to look and then ended up completing the transaction.”Another reason Callahan is optimistic about lowering vacancy is that job growth is expected to be between 2% and 3% in 2004, which is better than last year and up significantly from 2002. Moreover, Callahan says the recent I-90 building sales have attracted multiple offers. “A year ago that wasn’t happening,” he says. “That is the kind of thing that brings a market back to balance.”As for meeting the market, Callahan says leases are being signed at full-service rates that range from $28 to $33 per sf, depending on where the space is in the building and how long of a commitment the tenant is making. With regard to concessions, Callahan says he expects to see the value of concessions packages slowly decrease throughout the year.”Free rent is starting to go away already and, historically, a balanced market is one where tenant improvement allowances range from $5- to $15 per sf on a five-year deal, depending on the value of existing improvements,” says Callahan. “It’s gone above that in the downturn, but by the end of the year it should have returned to a balance.”Designed by the Seattle office of Zimmer Gunsul Frasca Partnership, the Fifth Avenue lobby renovation included: replacing interior granite wall surfaces with light-toned wood; replacing dark reflective glass with light-colored surfaces; relocating and enlarging the revolving door entries; reducing the size of the two atrium openings to the lower levels of retail to provide more direct travel routes within the main lobby; commissioning two original sculptures by prominent local artists, and; adding approximately 12 computerized tenant directories throughout the lobby and atrium levels. Additional improvements included: installation of a state-of-the-art fire and life safety system; refurbishment of the retail atrium; the addition of ADA features in the Tower’s elevators; a more efficient parking system, and; a refurbishment of the lobby conference center.”I really think we wanted our lobby to communicate a sense of elegance and importance consistent with the quality of our customer base, and to be a warm and inviting public space that is easy to navigate,” says Callahan. “I think we accomplished our objectives.”In April 2003, Fitch Ratings downgraded $195 million in debt securities tied to BofA Tower, in part due to above-average vacancy. “The lower market rents, increased vacancy and limited new leasing activity, may affect the borrower’s ability to refinance the loan at maturity in December 2004,” said the ratings agency.