Posted Jan 18, 2008, 6:11 PM
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Join Date: Jun 2006
Location: San Francisco & Tucson
Posts: 24,088
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Friday, January 18, 2008
Tishman tower bags DLA Piper
Law firm set to go first
San Francisco Business Times - by J.K. Dineen
International law firm DLA Piper has tentatively agreed to be the anchor tenant at 555 Mission St., the speculative office tower Tishman Speyer is developing in downtown San Francisco.
DLA Piper signed a letter of intent to take 85,000 square feet in the 550,000-square-foot building. Under the deal, expected to close by the end of the quarter, DLA Piper would occupy floors 22-26 of the 33-story glass tower, which will be ready for occupancy by late 2008.
Leasing rates on a 10-year deal are approximately $75 a square foot, with the landlord providing about a $65-a-square-foot tenant improvement allowance, according to sources familiar with negotiations.
Neither Tishman Speyer nor DLA Piper would comment on the preliminary agreement. Brokers from Jones Lang LaSalle, which represents the tenant, also declined to comment.
The greenish glass-curtain tower rising at 555 Mission St. is San Francisco's first speculative office tower built since 2002, when Myers Development completed 101 Second St.
Since Tishman Speyer quietly began construction on the $357 million tower in spring of 2006, a number of other developers have jumped into the speculative office game. No fewer than three spec projects are going up in Mission Bay: 500 Terry Francois Blvd., 1500 Owens St., and a 175,000-square-foot addition at 185 Berry St.
In addition, Lincoln Property Co. plans to break ground this winter on the 350,000-square-foot 350 Bush St., and Beacon Capital reportedly will start construction in May on a 290,000-square-foot tower at 535 Mission St.
In breaking ground without fanfare more than 18 months ago, Tishman Speyer made an expensive gamble -- the building will cost at least $350 million to build -- that the city's vacancy rates would continue to drop while rents inch up. They have been mostly right. Since the beginning of 2006, vacancy rates in the central business district have dropped from 11.8 percent to 7.9 percent, while average rents have jumped from $33 to $50 a square foot.
DLA Piper leases 56,000 square feet at 153 Townsend St., space that would be subleased until 2012 when the firm's lease expires. The law firm has 3,600 lawyers in 64 offices in 25 countries and revenue of more than $1.5 billion.
The new building was designed by Kohn Pedersen Fox and Heller Manus Architects. Its exterior is glass curtain walls which incorporate a glass-and-metal fin into the vertical mullion. The building will feature an 11,000-square-foot plaza at street level. Tishman Speyer has registered the building for silver designation under the Leadership in Energy and Environmental Design criteria.
"The Tishman guys are very smart and professional -- they saw the market improving and committed early," said Jeffrey Heller of Heller Manus Architects. He said together with 560 Mission St. and 101 Second St., 555 Mission creates a "checkerboard" of distinctive office towers and street level open spaces.
"If you're going to have a lot of big buildings, you need to have open space to relieve it," he said. "This is going to be a really great sunny plaza."
Managing Partner Paul Stein of SKS Investments, which has completed a number of speculative development over the past decade, said "building spec is not for the faint of heart."
"The first deal is always the hardest," he said. "It's cold and there has to be somebody willing to jump in first."
Cornish & Carey Commercial Senior Vice President Nick Slonek said he has two tenants looking carefully at 555 Mission St., which he called "one of the nicest buildings in town."
"There are a lot of people waiting for the first deal to occur," he said. "Instead of Lewis and Clarking it, it's easier to listen to what Lewis and Clark have to say and go in after that."
With the tight credit markets and the economy possibly heading into a recession, Slonek doesn't see a flood of new speculative projects.
"I don't think anyone is going to build spec again anytime soon," he said.
jkdineen@bizjournals.com / (415) 288-4971
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Source: http://www.bizjournals.com/sanfranci...ml?t=printable
This is very good news from so many perspectives. If this building can get leased, it will encourage other spec buildings to break ground. And then there's the mention of some of those buildings.
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