Small Space Setting the Pace for EOP

SAN FRANCISCO-The nation’s largest REIT is making its money from the nation’s smallest businesses. Recent number crunching by the Chicago-based public company found that 72% of its new and renewal lease activity (170 deals/390,500 sf) during the first five months of the year was for spaces of 5,000 sf or less. Nationally, the number is closer to 75%.”Most of the leasing demand is coming from small businesses, which we believe are leading the economic recovery,” says Mark Geisreiter, senior vice president for the company’s San Francisco Region. “As more jobs are generated and venture capital spending continues to rise, we anticipate small business deals to continue to drive the majority of local leasing activity throughout the remainder of 2004.”The data helps validate the company’s year-old brokered-targeted national leasing promotion “Think Small,” which offers additional commissions for brokers bringing new small-space tenants into EOP’s portfolio. In the last half of 2003, EOP says the program generated 325 deals and 30% of the company’s office space tours across the country for the last half of 2003. Additionally, more than half of the brokers who qualified for the cash bonus had not completed a transaction with Equity Office within the past two years, which EOP says reflects the program’s success in broadening the company’s outreach to new brokers. The current “Think Small” promotion aims to fill up small spaces more quickly, with brokers eligible for an extra $2,500 commission if they place a tenant into an EOP building before the end of the third quarter (Sept. 30). “Although it’s too early to quantify 2004 results, we’re seeing a continued interest from the brokerage community in the program,” says Geisreiter.Also aimed at attracting small businesses is EOP’s “SpecSuites” program, where in the company builds out small spaces with carpeting, workstations, pre-erected walls and communications infrastructure before it has a specific tenant lined up. The strategy is to improve its chances of landing tenants who need to sign a lease agreement, move in and begin operations within days rather than the months it would take to build out the space after a lease is signed. In the San Francisco Region, where Equity Office controls 20 million sf in 199 buildings housing 1,600 tenants, Geisreiter says EOP took 166,000-sf over the past year and created 75 spec suites, of which 87% have been leased. Some of the spaces were created in buildings that were vacated by larger tenants, including PeopleSoft Inc. and ADP Inc. and their former namesake buildings in Pleasanton and San Ramon. The 278,000-sf former PeopleSoft Plaza in Pleasanton is now Hacienda Terrace, and the two 150,000-sf buildings that comprised ADP Plaza are now the Plaza at San Ramon.