Downtown Amarillo Market Survey May 2014 By: Aaron Emerson, CCIM, SIOR (806) 373-3111 [email protected] Building Name Amarillo Building Plaza One Plaza II Atrium Plaza Happy State Bank Chase Tower Commerce Building Eagle Center Fifth & Polk Helm Plaza I Helm Plaza II Paramount Address 301 S. Polk 400 S. Taylor 500 S. Taylor 619 S. Tyler 701 S. Taylor 600 S. Tyler 720 S. Taylor 112 W. 8th 105 W. 5th 1105 S. Taylor 1104 S. Fillmore 819 S. Polk Building Class B A A B A A B B B A B A Built/Renovated 1925 / 2000 1972 / 2006 1983 1935 / 1982 1977 / 2002 1971 / 2007 1950 / 2001 1950 / 1988 1900 / 1985 1982 1982 / 2009 1915 / 2007 # of Stories 8 16 12 3 7 31 4 10 2 1 1 2 Leasable Square Footage 101,890 199,500 31,198 216,416 286,103 101,000 13,617 31,731 Rented Square Footage 93,044 168,300 31,198 209,924 275,851 82,820 11,918 21,527 Occupied % 91% 100% Owner Occupied 84% 100% 97% 96% 100% 82% 88% #DIV/0! 68% #DIV/0! Quoted Rate $13.00 $15-17 $12.00 $15-16 $14.00 $12.00 - $14.00 $10.00 $11.50 $11.50 $11 - $12 Net Absorption 1,336 0 (17,235) 6,509 2,044 0 0 2,402 Lease Terms Full Service Full Service Full Service Full Service Full Service Full Service Full Service Plus Utilities Plus Utilities Full Service Parking Type $40 Cvrd / $25 Srfc Covered / Surface Covered / Surface Surface Covered / Surface Covered / Surface Surface Covered / Surface Surface Surface Surface Covered Parking Notes 3 : 1,000 $35 - 50 $35 - 50 Free Surface 1.93 : 1,000 $40 covered 3 :1,000 / $40 covered 1 : 1,000 Surface Free Surface Free Surface Maximum Contiguous Space 12,000 sf N/A N/A 3,907 sf 10,000 sf 5,900 sf 9,200 1,699 0 10,204 4,500 sf Amenities/Comments On-site Owner and Building Engineer. Connected to Downtown Athletic Club via Tunnel. Executive Suites Starting @ 1st floor of the Paramount $350/mo The Ground Bldg is classified as "retail" Café (Coffee Shop), Amarillo Recently Sold to West Texas and is not considered in thie Health Club, Gift Shop, Restaurant. Across street Barber Shop. Bank. On- Club, Barber Shop, Bank, A&M University for its 1st Floor Space Available. report. The 2nd floor is Bank, restaurant Restaurant from The Ground Café Site Owner Conference Center Amarillo Campus. On-site Owner/Manager. Signage Available. "office". Building Name Maxor Building Place One Office Center Wells Fargo Building Taylor Building Coble Building AIG Buiding AT&T Building Santa Fe Building Data Center Police Station Petroleum Building TOTALS Address 320 S. Polk 801 S. Fillmore 905 S. Fillmore 11th & Polk 620 S. Taylor 205 SE 10th 815 S. Tyler 900 S. Polk 801 S. Pierce 200 SE 3rd 800 S. Tyler Building Class A A A A A B B A B B B Leasable Sq.ft. Built/Renovated 1960 1980 / 2006 1982 1926 / 2000 1914 1956 1927 1930 / 2000 1982 1957 1956 / 1980 1,435,399 # of Stories 10 7 7 2 3 5 3 13 3 8 6 Leasable Square Footage 101,571 110,165 117,646 24,000 100,562 Leased Sq.Ft. Rented Square Footage 101,571 105,637 116,146 22,700 90,506 1,331,142 Occupied % 100% 96% 99% 95% 100% 100% Owner Occupied 100% Owner Occupied 100% Government Occupied 100% Government Occupied 100% Government Occupied 90% Quoted Rate $12.50 $13.50 $13.50 - $15.00 $14.00 N/A N/A N/A N/A N/A $10.50 - $14.00 Current Occupancy Net Absorptoin 5,079 (561) 2,218 (1,100) 0 (5,022) 92.74% Lease Terms Neg Full Service Full Service Full Service N/A N/A N/A N/A N/A Leased Absorption 2013 Parking Type Covered / Surface Covered / Surface Covered / Surface Surface Surface Surface Surface Surface Surface Covered / Surface Surface Parking Notes Neg $35/covered (4,330) Maximum Contiguous Space 5,000 4,528 N/A N/A N/A N/A N/A N/A 8000 Amenities/Comments Tunnel to WFC, Happy State Bank, Place One, Data Downtown Athletic Club. Center. Common Conference Tunnel to Amarillo Building. Room (10 person) Bank Bank Bank The information contained in this office market survey is intended to illustrate the occupancy of downtown Amarillo. Not all buildings contained in this survey are represented by Emerson Commercial. Though we believe this information to be accurate, it is provided without warranty unless otherwise agreed in writing. Amarillo Central Business District 2013 – Q1 2014 For the period of 2013 through the 1st Quarter of 2014, occupancy in the Central Business District ended up about 1.5% at approximately 93% (not including owner occupied or government occupied buildings). We started the period with approximately 132,598 rentable square feet of vacancy in the market. We ended the period with approximately 104,257 rentable square feet of vacancy. Over the course of the year, the leasing activity was typical of a slow year in downtown Amarillo. After all of the period’s activity the central business district ended the year relatively flat with a negative absorption of 4,330 sq.ft. Occupancy increased by 1.5% from 91.35% up to 92.74%. The positive change in occupancy is the result of a few ownership changes downtown one of which resulted in a change of use for the property. An increased Occupancy Rate as a result of ownership changes gives a bit of a false sense of a thriving market. Regardless, this is good for the Amarillo leasing market regardless of how we arrive at the numbers. Commerce Building sells to West Texas A&M for its downtown campus. WT’s purchase of the Commerce Building is easily the most significant transaction of the period. WT will convert the Commerce Building from Office Use into a College Campus. The building consists of 72,234 sq.ft. (4.8%) of our overall 1,500,000 sq.ft. downtown market. What makes it such a significant transaction is that the Commerce Building accounted for roughly 50,000 sq.ft. of our total 132,797 sq.ft. market vacancy in 2012. Additionally, the Commerce Building was the cheapest rent in downtown. Not only did 1/3 of our office vacancy just come off of the market, but the $9-10 rental rate ship just sailed as well. The results are not all positive. The Chase Tower will have to fill a 30,000 sf vacancy when WTAMU relocates in 2-3 years. The market report in that year could look a little rough, but I feel that the positive effect of a new WTAMU campus next door to the Chase Tower will only help in filling that void in the market. Additionally the Chase Tower has a few years to plan for this vacancy. Wells Fargo Center The Wells Fargo Center has a new owner/user as well. What does that mean for the WFC? The new owner will continue to lease office space to tenants just like the building was intended. It also means that the owner of the building will occupy a large percentage of the building. I think the building is in for some top of the line upgrades. As far as I understand, the new owner is going to quickly make meaningful upgrades to the HVAC system, then continue to treat it like the Class A property that it is. With the new Toot n’ Totum across the street as well as the prospect of other downtown revitalization projects within walking distance, I don’t foresee the occupancy in this property going down any time soon. Over the past 10 years that I have tracked the downtown market, the market changes (listed below) that resulted in less supply, higher occupancy and increased rental rates were very similar to the changes that we have just seen. 1. Newcrest Management purchased the Fisk Building, changed the use, and converted the building into a Courtyard By Marriott, thereby removing 75,000 sq.ft. from our office supply. 2. City of Amarillo purchased the Data Center after Atmos Energy moved out of downtown. This took a large vacancy off of the market andprevented the data center from becoming a black hole in the middle of our downtown market. 3. Happy State Bank (HSB) purchased the B of A Building from Amarillo Tower Limited (ATL), thereby opening the door for ATL to purchase the Wells Fargo Center and The Chase Tower. a. HSB has made great improvements to the Happy State Bank Building (formerly B of A Building) and has occupied a share of what was vacant space in the property. b. ATL was successful in filling the Chase Tower and taking the Wells Fargo Center from 60% occupancy up to 99% occupancy. 4. Kevin and Ginger Nelson purchased and moved into the Amarillo Building. Thus far, the Nelson’s have done a great job in filling up the building and recreating the vibrant feel of the historic building. In addition to vast improvements to the properties, again, these events resulted in, a lower office supply, higher office occupancy rates and/or higher rental rates. The trading of the Commerce Building to WTAMU and the Wells Fargo Center selling to a local user will, no doubt, yield the same results. To put the size of the downtown Amarillo office market into perspective, we could fit every square inch of our rentable office space, occupied and vacant, into the Bank of America Plaza (the iconic green building) in downtown Dallas and we would only occupy 75% of the building.