A rendering of the renovations at 680 Folsom St.

Riverbed Technology, an IT firm in San Francisco, has just found itself a new home. Courtesy a transaction handled by TMG Partners and financial partner Rockwood Capital L.L.C., the firm just signed a 167,788-square-foot lease at 680 Folsom St. in the city’s SoMa district. Riverbed, which currently sits at 199 Fremont St., will move into the second through sixth floors of the soon-to-be 522,000-square-foot, Class A space with a 10-year lease term. Jones Lang LaSalle Inc. represented the tenant in the transaction.

The move was precipitated by both Riverbed’s increase in space needs – the firm pulled in more than $550 million in 2010 revenue despite being founded as recently as 2002 – but also due to 680 Folsom’s current $87 million renovation project. The modernization, which also extends to the adjacent three-story building at 50 Hawthorne St., is set to complete in 2013 and includes an increase of more than 100,000 square feet of space.

San Francisco’s mayor, Ed Lee, called the move a “successful real estate transaction that will create jobs and drive innovation in our city.” And, according to a fourth-quarter 2011 report by JLL, the tech sector is leading the way in that regard. Leasing activity exceeded 9.5 million square feet last year, and technology firms represented 35 percent of that total – with high-demand areas such as Mission Bay / China Basin and SoMa districts garnering the largest Class A asking rents in the city, at $56.69 and $54.00 per square foot, respectively.

“We’re making this investment to support our long-term growth and cement our commitment to the city of San Francisco, Jerry Kennelly, Riverbed’s co-founder & CEO, said. “We think the city is the right location to attract the best talent and provide a thriving environment for our current employees.”

“High-tech industry growth during 2011 drove the best market performance in more than a decade,” the JLL report noted. “Some are raising concerns about the market trajectory and depth of high-tech based demand. Data indicate more growth ahead and another strong year in 2012, but posting numbers achieved in 2011 may prove challenging considering the lack of expansion from other industries and the amount of new supply expected to enter the market.”

J.P. Morgan Asset Management has turned over to CBRE Group Inc. the property management and leasing of five buildings totaling 4.2 MSF in the Houston Center complex on the east side of downtown Houston, CBRE announced yesterday. J.P. Morgan acted on behalf of institutional investors it advises. The five buildings are Class A office buildings 1 Houston Center, 2 Houston Center, Fulbright Tower and 4 Houston Center, as well as retail-based The Shops at Houston Center.

Built between 1974 and 1984, Houston Center helped revitalize the east side downtown area, eventually encouraging the development of other large-scale buildings such as Minute Maid Park, Toyota Center, Discovery Park, Hilton Americas Hotel and Hess Tower.

CBRE provided Commercial Property Executive with additional particulars on the individual buildings. One Houston Center/LyondellBasell Tower, located at 1221 McKinney St., spans 1.1 million square feet across 46 stories. It was built in 1978 and is 93.9 percent leased. The building was renamed LyondellBasell Tower late last month after a lease extension by the Dutch-headquartered multinational chemical company.

Two Houston Center, located at 909 Fannin St., spans just more than 1 million square feet across 40 stories. It was built in 1974 and is 91.7 percent leased. Fulbright Tower — formerly Three Houston Center — is located at 1301 McKinney St. and spans 1.25 million square feet across 51 stories. It was built in 1982 and is 86.8 percent leased. The named tenant is Fulbright & Jaworski L.L.P., one of the 50 largest law firms in the country. The final office building, Four Houston Center, is located at 1221 Lamar Ave. and spans 674,000 square feet across 16 stories. It was built in 1983 and is 91.5 percent leased.

The retail component, The Shops at Houston Center — formerly known as Park Shops — is located at 1200 McKinney St. It spans 200,000 square feet. The Shops was built in 1982 and heavily renovated in 2003; it now stands at 80.4 percent leased. As is typical of downtown, service-center retail, it has no large anchors, instead mostly convenience and lunch-oriented tenants.

According to just-released figures from the Greater Houston Partnership, the city led Texas in job growth last year, accounting for one of every three jobs created in the state. The 10-county Houston area added 75,800 jobs, a 3.0 percent increase in metro-area employment over the previous year.

An artist's rendering of the Air Rights development.

Cassidy Turley becomes part of a landmark development in Washington, D.C., with Property Group Partners’ selection of the firm to serve as the exclusive leasing services provider for the I-395 Air rights Development. The premier mixed-use project, which will be erected on a platform above I-395, will produce 2.2 million square feet of commercial space with a focus on office accommodations.

“It’s going to have retail, it’s going to have restaurants, it’s going to have roof decks,” Art Santry, senior managing director with Cassidy Turley, told Commercial Property Executive. “It’s going to have everything that you’d ever want to have in an office environment.”

I-395 Air Rights will span three city blocks, sprouting up on what is the largest contiguous undeveloped site in downtown Washington, D.C. But it’s not your typical site. While the project’s five buildings will be anchored on terra firma, its pathways and roads will be above it all, above the Center Leg Freeway of I-395, to be precise. “You’re creating a space, you’re creating seven acres of land that don’t exist and that’s pretty unique,” he said.

The project’s office offerings will include four 12-story structures, among them, the 546,700-square-foot, tower at 250 Massachusetts Ave.; 200 Massachusetts Ave., featuring 407,000 square feet; the 297,300-square-foot 201 F St.; and 200 F St., a 685,400-square-foot building.

The development will also encompass a residential tower, the 180,400-square-foot, 13-story building at 600 Second St., as well as ground level retail and thousands of parking spaces. Additionally, I-395 Air Rights will be able to lure occupants with what has become a coveted feature for tenants: LEED Platinum certification by the U.S. Green Building Council.

Cutting-edge technology, top-of-the-line amenities, and buildings designed by prominent architects — as Kevin Roche John Dinkeloo & Associates, Kohn Pedersen Fox Associates and Skidmore, Owings & Merrill — will distinguish the project, as will another major factor. Size. Size does matter, and I-395 Air Rights will have it. Businesses seeking large accommodations and room for growth will be able to find a home there. Today, such users have limited options in the city. At the close of 2011, according to a Cassidy Turley report, there was only one new property with a large contiguous block of space available: the Capitol Hill submarket’s 414,200-square-foot building at 1015 Half St., where approximately 200,000 square feet is up for grabs.

The first office building at I-395 Air Rights could come online in roughly three years. In the meantime, tenants seeking anchor spaces can make their needs known to Cassidy Turley — and have them met. “We can modify the design, nothing is set in stone,” Santry affirmed. “Property Group Partners has been very specific about that. They’ve made it clear that, ‘Hey, we’ll do what the market demands.’”

And the demand, he believes, will certainly exist when the massive, multi-phase project, makes its debut. In the last few years, the Washington, D.C., office market has been buoyed by government agencies’ growth and their accompanying need for additional space. However, the government is unlikely to be a lead tenant at the state-of-the-art development. “Given the rental rates for this asset, it’s hard to make the government wok on this site, because the government has a ceiling on rent. It’s not our initial marketing focus.”

Service companies, medical industry businesses and law firms are the practical target market. “Twenty-five years ago, a big law firm deal was 100,000 or 150,000 square feet and that was a monster deal,” Santry explained. “Now they’re 350,000 and 400,000 and if you look at the average building in Washington D.C., it’s 200,000-plus square feet. So if you’re a big law firm it’s hard to get under one roof. The buildings at this development can provide a campus. It’s not crazy to think that a law firm will be 500,000 or 600,000 square feet in 10 years. So we can say, ‘Here’s your campus,’ and that is pretty unique.”

And with a low level of new product scheduled to deliver in the near future, demand is on track to increase in what is already one of the best-performing office markets in the country. According to the Cassidy Turley report, currently, new supply in the District is at its lowest level since the late 1990s and construction completions will likely remain light. It appears that I-395 Air Rights’ office towers will stand out, literally and figuratively. “They will be very high-end, forward-thinking, sustainable buildings,” Santry said. “The quality will be second to none.”

*This story was updated at 8:45 a.m. EST on Feb. 7, 2012.

Fountain Place in Dallas

Building on its “longstanding relationship with J.P. Morgan,” services firm Cassidy Turley has just landed a contract to lease and manage 2.5 million square feet of office space owned by the banking firm’s institutional investors. The assignment will span two properties: Dallas’ 1.2 million-square-foot, 60-story Fountain Place and Houston’s three-building, 1.3 million-square-foot Post Oak Central. J.P. Morgan Asset Management awarded the contract to Cassidy after a bidding process that was opened up to a number of firms, but signed the final arrangement within 60 days, Commercial Property Executive has learned.

“As a firm, we work with J.P. Morgan on multiple accounts,” Bret Bunnett, regional managing principal with Cassidy, told CPE. “And we are expanding our relationship with J.P. Morgan in a significant way with these two assignments.”

Fountain Place, at 720 feet, is the fifth-tallest building in Dallas. Its current tenant roll includes Hunton & Williams, L.L.P., Wells Fargo Bank, and Tenet Healthcare Corp. According to Bunnett, the property is 90 percent leased. Post Oak Central, which is 94 percent leased, houses Apache Corporation – which signed a nearly 600,000-square-foot lease renewal and extension earlier this week – Suez Energy North America Inc., Stewart Title and and Cox Radio.

Texas, as a whole, has fared well during the economic downturn of the last few years. According to a fourth-quarter report by services firm Marcus & Millichap Real Estate Services Inc., Houston will lead the nation in job growth in 2012, with employers adding 87,000 jobs for a 3.4 percent increase in employment levels. “Houston [led] the nation in hiring through the first three quarters [of 2011],” the report noted, “followed by nearby Dallas/Fort Worth.”

“We expect these buildings will continue their history of success,” Bunnett said. “We’re poised to take Fountain Place to at lease 96 percent [occupancy] and Post Oak all the way to 100.”

This contract brings Cassidy Turley’s Texas office management holdings to approximately 22 million square feet in Dallas and Houston alone.

One commercial real estate services firm’s loss is another one’s gain. CBRE Group Inc. has lured industry heavy-hitter Louis Christopher away from Cushman & Wakefield Inc., tapping the longtime real estate broker to play a key role in the firm’s tenant representation activities as a vice chairman.

Christopher comes to CBRE not only with nearly 25 years of experience in commercial real estate, but also with a clear-cut set of goals which are, as he explained to Commercial Property Executive, “to challenge myself, my clients and colleagues to always move the bar higher and never stop improving.”

Before joining CBRE, Christopher served as chairman of Cushman & Wakefield’s tenant advisory gGroup, where he was consistently noticed for stellar achievements. He earned the title of the firm’s top producer in the Greater Washington region for four consecutive years until his departure, and held the position as one of its top 10 brokers globally for three of the last four years.

While Christopher now calls CBRE’s Washington, D.C.-area office home base, his presence in the firm will be far-reaching. He will employ his well-honed skills to provide services for the firm’s current and potential real estate users locally, nationally and globally. “The services business is constantly changing,” Christopher noted. “It is trending toward more specialization but also toward more coordination across disciplines. Big is not by itself better, but in this day and age you do need scale to provide all of the resources corporate and law firm clients demand. I am so excited to be able to offer such a broad service offering with a global footprint.”

With Christopher having successfully delivered for clients through any number of real estate cycles — the good, the bad and the ugly — he is well positioned to identify and accommodate clients’ specific needs as the industry begins to recuperate from the ramifications of the Great Recession. “In this economy, nationally and locally, tenants and corporations want to limit capital expenditures and reduce expense,” he explained. “CFOs want to align their real estate portfolios with their business plan. All challenges can be addressed if a proactive strategy with standards, procedures and protocols is implemented.”

In a prepared statement, John Germano, CBRE executive managing director in the Baltimore/Washington market, said of Christopher, “Lou is the consummate professional with a proven track record of excellence and a strong commitment to providing his clients with the best real estate strategies and services.” CBRE sees him as a perfect fit for the firm, and the sentiment goes both ways.

“CBRE understands the service business — specifically where the occupier business stands today and where it is going,” Christopher said. “CBRE understands the multi-disciplined needs of clients and has invested in a robust global service platform. Management has done a great job of incorporating the best practices of Insignia ES Gordon, and Trammel Crow into the CBRE brand. CBRE’s culture is built around ethics and always putting the best team on the field for the client.”

Artist's rendering of ground-level retail at 530 Fifth Ave. after renovations.

While there have been some predictions for the cooling of the New York City office market, and even some talk of Downtown becoming the new hotspot of development, don’t ever count out Midtown. Near the close of yesterday’s markets, Jamestown Properties and Rockwood Capital announced the $390 million acquisition of 530 Fifth Ave. – also known as the Bank of New York Building – which is soon to undergo a $20 million renovation to bring the property to Class A standards. The purchase’s partnership also included Crown Acquisition and Murray Hill Properties.

“530 Fifth Ave. is considered an iconic building on Fifth Avenue and we look forward to restoring the property to prominence,” Michael Phillips, COO of Jamestown, said. “In addition, Fifth Avenue south of 48th Street has become a hot-bed of retail activity in the last year, and following the renovations at 530 Fifth Avenue, the building will be a stand-out option for retailers.”

A report in the third quarter of 2011 by Jones Lang LaSalle Inc. found that Fifth Avenue was the second-most-expensive street, on average, for domestic asking office rents at $97 per square foot. Similarly, Cushman & Wakefield Inc.’s data showed that the Midtown market, which ended 2010 with a 10.6 percent vacancy rate, saw that number fall to 9.6 percent by the end of 2011. Class A asking rents in the same time period increased from $67.27 to $71.22 per square foot.

The building’s office-leasing efforts will be led by Newmark Knight Frank’s president, David Falk. “When the building is re-introduced with the proposed renovations underway, I believe there will be tremendous interest from tenants that want the Grand Central location but are looking for a building that matches a company’s high-profile brand and image.”

Retail development and leasing will be handled by Jamestown and Crown, which will likely prove to be a fruitful initiative. According to Cushman, Upper Fifth Avenue saw a fourth-quarter 2011 average ground-floor asking rent of $2,338 per square foot, a 12 percent increase from the previous quarter. Lower Fifth Avenue, where the acquisition is located, increased 50 percent in the same timeframe to a record $865 per square foot.

Large-scale transactions are becoming the norm in the Washington, D.C. market. The latest purchase comes courtesy of Paramount Group Inc., on behalf of Paramount Group Real Estate Fund IV, which picked up the 12-story building at 2099 Pennsylvania Ave. The seller, Vico Capital, an Ireland-based real estate partnership led by Brian O’Donnell, acquired the building in 2008 as its sole asset in the American market.

While the purchase price was not disclosed, it was likely in line with other sales in the D.C. area of late. Two weeks ago, Japanese firm Mitsui Fudosan America Inc. spent $252 million on an 80 percent stake in The Homer Building from Investa Office Fund, the property’s owner since 2005. In December, The Rockefeller Group, in a joint venture with Mitsubishi Real Estate New York, purchased 1100 First St. NE from an affiliate of Tishman Speyer for a reported $180 million.

The 206,573 square feet of 2099 Pennsylvania, sitting four blocks from the U.S. Treasury, are positioned to take advantage of some market trends in the D.C. area. According to a fourth-quarter 2011 report by services firm Jones Lang LaSalle Inc., the lack of speculative construction in the city will balance the city’s office supply, favoring landlords. Market fundamentals, however, paint a less optimistic picture: “Reduced tenant demand, combined with stable rates of supply, produced a modest uptick in vacancy rates and a downward shift in net effective rents,” the report noted.

“The property’s architectural pedigree, asset quality and location in the heart of Washington, D.C. made it especially attractive to Paramount Group,” Albert Behler, president & CEO of Paramount Group, said. “The Washington office market weathered the recent recession exceptionally well.” Behler went on to mention that 131,000 square feet of space in the building is due to roll over in the next 12 months, which will provide his firm with “substantial near-term upside.”

After the acquisition, Paramount Group now holds five properties in the D.C. area, encompassing 1.5 million square feet.

The Internal Revenue Service, acting through Government Properties Income Trust, just signed a 10-year, 531,976-square-foot lease renewal at 5045 E. Butler Ave. in Fresno, Calif. Marcy Owens Test and William Hill of Jones Lang LaSalle Inc.’s Government Investor Services group represented the building owner, Government Properties Income Trust, while the GSA was self-represented.

“The owners, Government Properties Income Trust, have a long-standing relationship with the IRS and are pleased it will continue into the future,” Test, who is a senior vice president with JLL, said. “This lease is meaningful for the City of Fresno as the government is committing to another ten years and we appreciate their efforts in completing this lease renewal prior to its expiration.”

Additionally, Government Income Properties Trust closed a five-year, $350 million unsecured term loan on the same day as the closing of the Fresno deal. The loan matures on Jan. 17, 2017, and was signed at LIBOR plus 175 basis points. At the time of the deal, the agency said it would use the proceeds to repay part of its outstanding debts from an existing $550 million credit facility as well as to possibly fund future acquisitions.

A report by the Building Managers and Owners Association that was released earlier this month found Fresno to be the most inexpensive office market in the country – out of the 278 markets surveyed – on the basis of total fixed and operating expenses. Total operating expenses include all expenses incurred to operate office buildings, including utilities, repairs/maintenance, cleaning, administrative, security and roads and grounds. Fixed expenses include real estate taxes, property taxes and insurance. In Fresno, the average was $4.25 per square foot, defeating second-place finisher Jackson, Miss., which came in at $4.97.

Image courtesy Wikipedia user Averette

Eight months after The Miami Herald Co.’s Miami digs were sold in a short-term, quasi sale-leaseback transaction, the newspaper has signed a long-term lease for the 158,300-square-foot former U.S. Southern Command headquarters at Westpointe Business Park in neighboring Doral, Fla. The Herald also found a home for its production activities with the acquisition of an adjacent six-acre site that will soon deliver a 119,000-square-foot industrial facility.

“There were many options that we evaluated, and this particular situation was the closest to meeting all the client’s conditions,” Tere Blanca, president and CEO of Blanca Commercial Real Estate, the firm that represented the Herald in the lease transaction, told Commercial Property Executive.

“There was one important driver for Miami Herald and that was to do everything possible to maintain the office and production facility adjacent to each other, if not in the same building,” Blanca said. “Total occupancy cost of the project and the office space was another significant driver; we had to make sure that their financial objectives were aligned with the most efficient space in the best location.”

Carrying the address of 3511 NW 91st Avenue, the former SouthCom building will be renamed One Herald Plaza at Wespointe Business Park.

The Herald is in good company in Doral, which is one of the fastest growing cities in South Florida. Major businesses such as Univision are located in the city, as are more than a few Fortune 500 companies. “And certainly, it is the heart of international trade in Miami-Dade County and it’s a very progressive city, very business friendly and it offers a lot of amenities,” she noted.

And the area is easily accessible. “Another driver in terms of location is that Doral is a place where you have all the major expressways coming together, so it’s a very good location in terms of logistics and transportation.”

Allied Properties worked with Blanca Commercial on the Herald’s lease agreement, providing strategic counsel on the construction and development facets of the deal, and Fairchild Partners advised on the industrial segment. Commercial real estate services firm CB Richard Ellis represented the owner of Westpointe Business Park, GPA-I L.P., in the transaction.

The newspaper will relocate from its current downtown accommodations and start the presses in Doral in May 2013. When the Herald’s parent organization, the McClatchy Co. sold the Herald’s 750,000-square-foot headquarters building — along with a neighboring 14-acre parcel of land — for $236 million in 2011, as reported by CPE, a deal was made with the buyer for the newspaper to continue to occupy its space free of charge for as long as two years.

The Herald is presently delving into planning its move, and the build out of its future Westpointe home. The company may sublease some of the space once its needs are clearly determined.

A commitment can go a long way and in the case of LydondellBasell Tower, it’s going all the way to the top — the top of the 1 million-square-foot 1 Houston Tower office building in Houston. The plastics and chemical manufacturer has entered into an agreement to extend its 358,100-square-foot lease with Crescent Real Estate Holdings L.L.C., an agreement that will result in 1 Houston Tower being renamed LydondellBasell Tower.

LydondellBasell has called 1 Houston home for approximately 25 years. Carrying the address of 1221 McKinney St, the 46-story high-rise occupies a full city block in the city’s central business district. The building, which first opened its doors in 1978, is one of four office structures encompassing an aggregate 4.2 million square feet of Class A office space at the mixed-use Houston Center complex.

While LydondellBasell may or may not have been able to have its own namesake tower if it had chosen to leave its longtime home at Houston Center, the company did have options for office digs elsewhere in the city. The office vacancy rate in metropolitan Houston in the fourth quarter was 16 percent, according to a report by commercial real estate services firm Grubb & Ellis Co., and there were a few large blocks of space available for occupancy. Options included 370,000 square feet vacated by the Hess Corp. at One Allen Center and a 360,000-square-foot space at BG Group Place.

Financial details of LydondellBasell’s lease with Crescent have not been disclosed, but outside of what was certainly an agreement with favorable terms, the company had other reasons for staying put. “Houston Center is one of the foremost addresses in the Central Business District and we have a long history in this complex,” Kevin Brown, executive vice president with LydondellBasell, noted in a prepared statement.