For-sale office space in short supply

Several sizeable office buildings already have changed hands in 2008, and signs suggest there could be more deals hammered out before year’s end.

Most of the buildings sold this year were home to existing office tenants that are now leasing from new landlords. In July, for example, a Canada-based company sold the Chase call center at 303 E. Republic Road to a California outfit.

Los Angeles-based Fort Properties Inc. bought the 268,413-square-foot, three-story, Class A building for an undisclosed price from Toronto-based Brookfield Asset Management Inc.’s Brookfield Real Estate Opportunity Group, but JPMorgan Chase NA has a lease through August 2027. Fort Properties borrowed $11.2 million toward the purchase, according to Greene County property records.

And in February, a group of six local investors doing business as White Dog Properties LLC picked up the 36,000-square-foot Eleven Eleven Building at 1111 S. Glenstone Ave. from Eleven Eleven Development Co. for an undisclosed amount. White Dog borrowed about $2.85 million from Metropolitan National Bank toward the purchase of the three-story building, according to a Greene County deed of trust.

“It was a good value,” said Tom Goss, one of White Dog’s investors. “We got the building appraised and paid pretty close to the appraised value.”

Goss said leases carried over for all of the building’s tenants – a group that includes Pellham Phillips Architects Engineers, Safety Council of the Ozarks and AT&T Yellow Pages. Pellham Phillips principal Larry Phillips and his former business partner, commercial Realtor Galen Pellham, were among the investors who sold the Eleven Eleven Building – built in 1986 – to White Dog.

About 25 people employed by Goss’ human services management firm, WD Management, now occupy about 6,000 square feet on the building’s second floor. The growing company most recently leased space from Alternative Opportunities Inc. at 2626 W. College Ave.

Prior to striking a deal for the Eleven Eleven Building, Goss spent two years searching for available office space – mainly along South National Avenue between Battlefield Road and Primrose Street.

“There’s supply, but the further south you go and the newer the buildings are, the more per square foot it costs to occupy,” he said. “So (the Eleven Eleven Building) is kind of a blend between the brand-new stuff that’s $16, $18 a square foot and older space you can get for $6 or $8 a square foot.”

Realtors who spoke with Springfield Business Journal said a crop of potential buyer-users are on the prowl for office buildings.

Pellham, at Pellham Commercial Realtors, said three of his clients who have outgrown their existing space are negotiating to buy three separate office facilities in south Springfield, and he’s hopeful the deals will close in the coming weeks. List prices on the properties range from $500,000 to $1.5 million, he said.

“Things are slow and then everything hits you at one time,” Pellham said, noting that some developers are moving forward with plans for additional office space. “Sixty days ago, I would have thought that might be pushing their luck, but seeing how few office buildings there are on the market … Springfield will need additional office space.”

Pellham pointed to expansion of Claremont Commons on East Battlefield Road by Carleton & Co. developer Kevin Carleton and the new South National Office Plaza, a Reed Properties Inc. office park in the 4600 block of South National Avenue.

Mike Fusek, a commercial Realtor with Sperry Van Ness/Rankin Co., agreed that the for-sale supply of south-side office space isn’t keeping pace with the demand. Despite the amount of available office space for lease, Fusek said he routinely receives inquiries from businesses that want to buy buildings they can inhabit.

“Owners of businesses that I’ve talked to lately realize there’s an expectation that rents are going to go up, and they want to own their own business versus paying current rent or much higher rent,” he said. “They’re paying somebody’s building off either way. They might as well pay off their own.”

While many businesses are fixed on south Springfield, Fusek pointed to highly visible office buildings for sale on the city’s north side. One of his listings – the Protel Systems & Supplies building at 2929 N. Eastgate Drive – is a 17,500-square-foot, two-story, Class A building with access to a statewide fiber-optic network that’s situated near the U.S. Highway 65-Interstate 44 interchange.

“You have maybe 60,000 cars a day that drive by the sign,” Fusek said. “You have to spend a lot of money in advertising to get that kind of exposure.”[[In-content Ad]]