S&P: Spieker's development pipeline is of modest concern

Spieker Properties' $424 million, two-year construction pipeline and the additional 157 acres of developable land it owns are raising some concerns in the industry. After completion of the merger, the combined pipeline will carry a total cost of $1.12 billion (Equity Office's share is approximately $1 billion) and encompass a potential 4.5 million sq. ft., nearly 4 million sq. ft. of which is located in the San Francisco Bay area.

Standard & Poor's (S&P) said while there is healthy preleasing associated with the projects — Spieker reports they are 69% preleased — ongoing uncertainty over near-term demand in the development markets is of “modest” concern. The rating service also said the impact of increasing energy costs, which are especially severe in California, will be a factor with such a geographically concentrated pipeline.

At the close of 2000, Spieker had six office properties, representing nearly 1.6 million sq. ft., under construction in all of its regions. Included in that pipeline are: Watergate Tower IV, a 344,433 sq. ft. office building in Emeryville, Calif.; Santa Monica Gateway, a 76,000 sq. ft. redevelopment project in Santa Monica, Calif.; Skyport I, a 598,913 sq. ft. project near the airport in San Jose, Calif.; The Towers at Shores Center, a 334,754 sq.ft. office building in Redwood Shores, Calif.; Skyway Landing II, a 121,171 sq. ft. building in San Carlos, Calif.; and Kruse Oaks I, an 80,769 sq. ft. building in Portland, Ore.

Spieker completed 14 development and redevelopment properties in 2000, which added up to approximately 2 million sq. ft. at a cost of about $346 million. S&P expects that the current pipeline will be completed successfully, suggesting Spieker's experienced development team is critical to that success.

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