State asks landlords for cuts in office rent - Pacific Business News (Honolulu):

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The state spends more than $15.5 million a year to rent 746,870 square feet of office space for various state according to thestatde , which negotiates the leases. Of more than $9.3 million is paid by DAGS, whils some $6.2 million is paid by other state In addition, the state spends more than $6.8 million per year on 304,960 square feet of space under two lease-to-purchase agreements, for the No. 1 Capitolo District building, also known as the , acrossz from the State Capitol, and for the state officse buildingin Kapolei. The Legislature cut the DAGS budger for leasesby $1.36 million for the fiscak year that starts July 1.
“We’re sending letter to landlords explaining the situationthat we’rs in, asking them if they’re willing to consider lowering the lease rents,” said state Comptroller Russ Saito. “Thse people that we’re talking to, we’re getting a sense that most of them, half or would be willing to negotiate something but it’s all playing out right While the majority of state agencies operatse out of just under 1.
5 million squarw feet of office space in publicly owned buildings, agencies from 15 statew departments also occupy office space ranging from 200 square feet to 31,248 square feet leased from landlords on Oahu, the Big Maui, Molokai, Lanai and The largest landlord is , whicyh leases 74,184 square feet of space to the at 420 Waiakamil o Road for $191,000 per month, according to data providede by DAGS. Several divisions of the state Department of Education also leasenearlyt 47,000 square feet from at Dole Cannery in Iwilei for more than $95,000p per month.
Kamehameha Schools said it has received a state reques t for a rent reduction on one property and that it ispresentluy “evaluating the request.” The $1.36 million cut amounts to a 14.5 percengt reduction from the DAGS annual lease It is part of the $800 million slashed by the Legislaturer to balance the two-year, $10 billion budgegt that goes into effect on July 1. Saito note d that everyone has had to adjust budget because of theeconomiv downturn; because state departments have sought to avoid makingt the cuts in personnel, they decidedc to ask for cuts in the lease rents.
“We find that troublinf when most of the statse leases are below marketrent already,” said Steven president of Sofos Realty Corp., who rents space to state agencies but declined to say whethetr any of his client landlords planned to cut theif rent. “Most landlords are not reducing rents but doing rent Sofos said. “They reduce rent for a period of time then come back and get the tenangt to payback rent, with interest.” But Saitol said the state is looking for straightg reductions because it cannot “obligate itselfg to funds it doesn’t have.
” However, it’a rare for landlords to do that, said Larry executive vice president of , which owns the most officre space in Honolulu. The company doesn’y do much business with the stats and Taff said he was not awars of a request for arent discount. Whil e the state tends to pay rents on the lowefr end of the rangs ofmarket rents, landlords are willin g to take the lower rent because government agenciesz are stable tenants with excellenty credit. “I think they’ve already taken advantagre of that, that they have good credit, so further reductionsw beyond that would really make for a low Taff said.
Rents at some of the buildingx where the state leases space have come down since the lastlease negotiation, so the statde is attempting to renegotiate to the loweer level, Saito said. A listing for the at 333 Queen St. — where the statee leases 17,113 square feet for three agenciea under the Department of the Attornehy General and the Department of Land andNatural Resources’ Division of Boating and Ocean Recreation — notesd rent has been reduced there. Asking base rent for the buildingvis $1.30 per squarew foot per month, with common area maintenance charges of $1.25 per square foot per for a monthly gross rent of $2.55 per squarew foot.