Report shows continued struggle for telecom markets

The nation’s telecom markets remain in the doldrums. Amid bankruptcies, corporate layoffs and reorganizations, the sector continues to struggle against the effects of the recent "dot-com crash."

Northbrook, Ill.-based Grubb & Ellis provided that assessment in its 2001 telecom market report. According the report, telecom vacancy levels around the nation trickled down to 38.9% in the second quarter from 44.6% in the first quarter. The report cites deliveries of new construction with significant amounts of pre-leasing as the main reason for the decline, but excess inventory still waits to be absorbed. At mid-year 2001, 5.4 million sq. ft. of telecom space was under construction, with 18.5% of it pre-leased.

Telecom sublease space soared by 89% during the second quarter to a total of 749,000 sq. ft as companies such as NorthPoint, PSINet, Teligent and Winstar declared bankruptcy and other companies in the process of downsizing placed space on the market to boost cash flow.

On the brighter side, the report points out that blue-chip telecom companies completed significant leases in key markets during the second quarter, including Sprint in Atlanta, Dallas and Los Angeles. In addition, the Network Access Point (NAP) opened in Miami and is considered to be a success. NAP houses 32 telecom, Internet and Web-hosting service providers, including AOL Time Warner and Qwest.

The report predicts that conditions in the telecom market condition will not change dramatically over the next 12 to 18 months, but strong, well-capitalized telecoms will continue to grow and take more space. Energy, finance and insurance companies also are in the market for data center space, improving the market’s future outlook.

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