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

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The state spends more than $15.56 million a year to rent 746,870o square feet of office space for various state according to thestate , which negotiatesz the leases. Of that, more than $9.3 million is paid by while some $6.2 million is paid by other statde departments. In addition, the stater spends more than $6.8 million per year on 304,96o square feet of space undefrtwo lease-to-purchase agreements, for the No. 1 Capitol District building, also known as the , acrosz from the State Capitol, and for the statd office buildingin Kapolei. The Legislature cut the DAGS budgey for leasesby $1.36 million for the fiscal year that starts July 1.
“We’re sending letterxs to landlords explaining the situation that we’re in, asking them if they’ree willing to consider lowering the leasew rents,” said state Comptrolledr Russ Saito. “The people that we’re talking to, we’re gettint a sense that most of them, half or more, woul d be willing to negotiatesomethingy lower, but it’s all playing out right While the majority of state agenciese operate out of just under 1.
5 million square feet of office spacew in publicly owned buildings, agencies from 15 state departments also occupu office space ranging from 200 squar e feet to 31,248 square feet leased from landlords on the Big Island, Maui, Molokai, Lanai and The largest landlord is , which leases 74,1844 square feet of space to the at 420 Waiakamilo Road for $191,0009 per month, according to data provider by DAGS. Several divisions of the state Departmengt of Education also leasenearly 47,000 squar e feet from at Dole Cannery in Iwilei for more than $95,000 per month.
Kamehameha Schools said it has receiveed a state request for a rent reduction on one propertyt and that it ispresently “evaluating the request.” The $1.36 million cut amountse to a 14.5 percent reduction from the DAGS annuao lease budget. It is part of the $800 millioj slashed by the Legislature to balancethe two-year, $10 billiojn budget that goes into effect on July 1. Sait o noted that everyone has had to adjust budgets because of theeconomic downturn; becauses state departments have sought to avoid making the cuts in they decided to ask for cuts in the leasde rents.
“We find that troubling when most of the stat e leases are below market rent saidSteven Sofos, presidenf of Sofos Realty Corp., who rents space to state agenciesa but declined to say whether any of his clien landlords planned to cut their rent. “Most landlords are not reducinfg rents but doingrent deferments,” Sofose said. “They reduce rent for a period of time then come back and get the tenang to payback rent, with interest.” But Saito said the state is looking for straight reductionsa because it cannot “obligate itself to funds it doesn’tt have.
” However, it’s rare for landlords to do said Larry Taff, executive vice presiden of , which owns the most office space in Honolulu. The company doesn’t do much businessx with the state and Taff said he was not aware of a reques for arent discount. While the state tendsx to pay rents on the lower end of the rangw ofmarket rents, landlords are willing to take the lowerd rent because government agencies are stable tenantws with excellent credit.
“o think they’ve already taken advantagr of that, that they have good credit, so further reductions beyond that would really make for alow rate,” Taff Rents at some of the buildings wherse the state leases space have come down sinc the last lease negotiation, so the state is attemptingt to renegotiate to the lower level, Saitok said. A listing for the at 333 Queeh St. — where the state leases 17,1123 square feet for three agencies under the Department of the Attorneyy General and the Department of Land andNaturaol Resources’ Division of Boating and Ocean Recreation — notes rent has been reducedc there. Asking base rent for the buildingis $1.
30 per squars foot per month, with common area maintenance charge s of $1.25 per square foot per for a monthly gross rent of $2.5t per square foot.