Not good news I'm afraid...
http://www.bizjournals.com/sanfranci...6800%5E1753540
Developer Jack Myers hits brakes on 2nd tower in South S.F.San Francisco Business Times - by J.K. Dineen
Developer Jack Myers has stopped construction on the second tower of his $300 million Centennial Towers project in South San Francisco, another victim of the financial crisis that has hammered both leasing and development activity across the Bay Area.
The move comes as Myers Development nears completion of the first building, a 330,000-square-foot speculative structure at the foot of San Bruno Mountain that has no leases signed so far.
Myers said he has been “disappointed with the velocity of the leasing activity, but remains optimistic about the long-term prospects.” The developer has reportedly been in talks with a number of tenants, including Sony, but thus far no deal is imminent.
“Certainly, you can’t miss the inactivity as you look over the marketplace. It’s unlike anything I’ve ever witnessed,” said Myers. “Yet there are pockets of activity for larger tenants who have a particular need to make a decision. Big tenants need big time for planning.”
Myers said he made the decision to postpone tower two in November after contractor Hathaway Dinwiddie had completed the foundation work on the building.
“We’re just being judicious,” said Myers. “We were pressing ahead with the idea of completing it by December of next year, yet there simply is not a reason to do this.”
Thus far, the recession has not had as big an impact on the Peninsula marketplace as it has in San Francisco, according to brokers. The vacancy rate on the Peninsula increased 1.3 percentage points in the fourth quarter from 12.5 percent to 13.8 percent, according to Timothy Grant of CB Richard Ellis. But the increase has largely been driven by three large blocks of space, totaling 800,000 square feet, that all became available in the fourth quarter.
The biggest of these is the first Myers building in South San Francisco. The other two are Lowe Enterprises’ redevelopment of the 270,000-square-foot Clearview Business Park in San Mateo and a 220,000-square-foot building at 395 Page Mill Road that Google is trying to sublease in Palo Alto.
Clearview has already signed on one tenant for the San Mateo project — an extensive rehab of the former Visa headquarters campus. Akamai Technologies took 67,000 square feet at Clearview and has already moved in. Daisy Hatch, vice president of Lowe Enterprises Real Estate Group, said Clearview benefitted from the fact that it was a rehab of an existing complex, rather than new ground-up construction. That allowed Lowe to bring the project online more rapidly and land a tenant before the severe economic downturn. She said leasing activity has slowed — but not entirely.
“We have had a couple of lease negotiations going on for months that are still active,” she said. “It is not dead in the water by any means.”
Along with Amgen, which is trying to unload more than 300,000 square feet in South San Francisco, Google’s Palo Alto space is the only significant block of sublease space on the Peninsula market, according to Grant. While 1.2 million square feet of sublease space became available in San Francisco in the last six months, the Peninsula has only had 350,000 square feet. The direct vacancy rate on the Peninsula is just under 10 percent, with another 3.8 percent of sublease vacancy. Grant said tenants on the tech-heavy Peninsula, badly burned by speculative leasing in the aftermath of the Internet bubble of 2000, were conservative in the recent economic upswing.
“None of the big boys took more space than they needed this time around,” said Grant.
Grant is expecting the vacancy rate to inch up one or two percentage points during another two quarters of indecision and low deal volume. Grant, who is part of a team of brokers attempting to lease the Centennial Towers, said he is not optimistic that a lease will be signed on the Myers property until March at the earliest.
“There are a lot of tenants we are tracking, but nobody we feel is going to pull the trigger in the next three months,” said Grant. “It’s a frustrating time to be a broker because people are not making decisions.”
Myers said the second building will take 13 months to construct. He said construction crews could crank back up next spring if they land a tenant, or by late 2009 at the latest.
“The steel is bought, the glass is bought, the elevators are bought — everything is bought,” said Myers. “As soon as we have a tenant in tow, we’ll go hell bent to get the second tower built.”
The asking rate in the new Myers building has been around $60 a square foot, and Myers said he does not see dropping rates on the swanky Centennial, designed by Skidmore Owings and Merrill.
“The market has fallen away, we recognize that, but we are not going to go out and discount our lease space,” he said. “This building will be a beautiful home for a company for decades to come.”
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