Techspace

Next Corporate Dinosaur: Office Leases?

Who’d be buying office space today? Well, one company–  TechSpace Holdings — just bought an LA office building (it already owned in Aliso Viejo) for its burgeoning business of flexible renting to companies that don’t want to commit to long-term office leases. Victor Memenas, Chief Operating Officer, explains …

Victor: Our clients are typically small business owners and branches of Fortune 500 companies from various industries ranging from technology (established and start-ups), to media and marketing to finance and sales. Companies typically average five to 15 employees, however, we have many firms that have 20 to 80 employees as well. Given today’s uncertain markets, savvy business people are more than ever utilizing our offering because the last thing a businessperson wants to be is tethered to a long-term lease liability that effectively renders them inflexible and unable to adapt to a changing marketplace. The TechSpace alternative eliminates capital expenditures and startup costs on furniture, fixtures and IT equipment. It also virtually eliminates long-term contracts for voice, internet and data networking. Users realize, especially amidst economic challenges, making a long-term commitment to a fixed amount of space is an impractical way to effectively manage a business.

Us: What does this say about the state of the office market in Orange County and/or SoCal?

Victor: The choice of adding a site in Los Angeles should not be viewed as us favoring the Los Angeles market over the Orange County market, only as a result of fulfilling part of our expansion strategy. From a macro viewpoint the commercial office market in 2010 will remain relatively weak, both in pricing and absorption — in Orange County and Los Angeles. We feel our model of delivering office space is growing in demand and we are focused on further expansion both Orange County and Los Angeles.

Us: Is this the future of leasing – or simply a down-market strategy. Why?

Victor: I strongly believe that for a significant portion of the market this is — and will continue to be — a very efficient way of delivering office space. As the (small business) market continues to become a larger part of our overall economy, both in terms of hiring workers and a greater percentage of business spending, flexible and scalable office space solutions will only become more desirable. Additionally, corporations of all sizes have begun to realize that a portion of their real estate can and should be utilized in a similar fashion as more employees become virtual, work from home or are located in regions where a large corporate presence is not practical.

Us: Does your LA purchase suggest that you think there’s a firming of the market – or opportunity for this flexible space you provide?

Victor: This year the office market will continue to be challenging. Lack of significant job growth and continued economic uncertainty will result in a further decline in office lease rates and a continued decline in building values. Given this volatility, occupants of office space will be more reluctant than ever to make long-term lease commitments or acquire new office building product. That said, I believe this model of delivering office space will continue to grow. Bringing efficiency to the marketplace will always drive demand, and combined with the continued growth in the small and medium sized business market, there is great opportunity in this space.

Us: When do you think the OC/SoCal office market will bottom?

Victor: I think it will be a tumultuous year for commercial real estate. Building values will continue to decline as owners and banks continue to struggle. From all of our research and the information available to us, I believe the office market in Orange County will remain a challenged one. I foresee this continuing throughout 2010, optimistically bottoming out late 3rd or 4th quarter. This is mainly due to the economy in general, flat job growth, and the large negative net absorption we experienced in 2009.

http://lansner.ocregister.com/2010/01/23/next-corporate-dinosaur-office-leases/53227/

Post on January 23 ,2010 at 10:30 am