OFFICE SPACE INTEREST SEEN AS GOOD SIGN

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, February 23, 1992                   TAG: 9202230039
SECTION: BUSINESS                    PAGE: E-1   EDITION: METRO 
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE:                                 LENGTH: Medium
OFFICE SPACE INTEREST SEEN AS GOOD SIGN
A flurry of business activity in the last 30 days has boosted the Roanoke Valley office occupancy rate by nearly 4 percentage points in the past year, according to a new report.
The market has a lot of buyers, who are mainly building users rather than investors, said Roanoke realty broker Dennis Cronk. Last week he released his firm's fifth annual Roanoke Office Market Report.
The study by Waldvogel, Poe & Cronk shows that nearly 90 percent of the region's office space is occupied.
"The market is a lot better off than I thought," Cronk said.
His figures contrast with an office vacancy rate of 16.9 percent - or 83.1 percent occupancy - for Roanoke's downtown central business district and 14.9 percent vacancy - 85.1 percent occupancy - in the city's suburbs, recently reported by the Society of Industrial and Office Realtors. Ed Hall, a commercial real estate broker, prepared that report in November.
Cronk's survey shows a decline of 3 percentage points in downtown office occupancy, an increase of 2 points in south Roanoke County and a jump of 12 points in north county from a year ago. The survey includes buildings with 10,000 square feet or more and lists as current occupancy rates what's reported by the owners.
The present vacancy rate "doesn't tell us it's time to build more offices," Cronk said. But based on the current absorption rate of space, he predicted that more offices will be needed in another 12 months.
Hall in his earlier report said he expected no office construction for at least a year to 18 months.
The region's newest major office building, Dominion Tower, reported 87 percent occupancy and its opening late last year did not materially affect the region's office vacancy rate, Cronk reported.
The annual survey will be out of date earlier than in previous years because of the increased activity in the office market, Cronk said.
For example, the forthcoming consolidation of Norfolk Southern Corp.'s regional offices in a new Williamson Road tower will leave considerable space in the Colonial Arms Building. Such space often takes a year to lease to other tenants, he said. Norfolk Southern has begun moving equipment into the new building and expects to have all of its former offices vacated by midspring.
Also, the Franklin Road building that formerly housed the Woods, Rogers Hazlegrove law firm building before the lawyers moved to Dominion Tower represents 36,000 square feet, one of the largest blocs of available space, Cronk said. There have been prospects for the building, he said.
A major move will be the location of 85 new Blue Cross and Blue Shield of Virginia employees, expected to occupy space in the Signet Bank Building. A lease contract has not been signed, however.
Among the changes in downtown office space in the last year, the Waldvogel firm reported gains of 17 percentage points in leased office space at the Shenandoah Building, 16 points at Crystal Tower, 4 points each in the Boxley Building, CorEast and the State and City Building and 3 points at Commonwealth Park.
They were partly offset by losses of 11 percentage points in the Crestar Bank Building and Franklin Plaza, 4 points at Dominion Bank Building and 3 points at First Campbell Square.
The biggest change in north Roanoke County was Dominion Bank's purchase of Valley Court, a strip shopping center, with 55,000 square feet of available space a year ago. It's fullly occupied now.
The new interest in offices is an indication the recession is slowly ending, Cronk said. The confidence level has increased and "we're coming out of it, from the activity we see in new tenants and potential buyers."
Commercial real estate is not tied to a season, he said. Some deals are better in December and some are good in July.
Financing is tight, Cronk said, "but if you're a user and a good customer, the banks will take care of you. . . . But financial investment [in real estate] is almost non-existent."
The Dominion Tower's rental rate of $23 a square foot is setting a new level for rents, Cronk said. He expects other increases, "closing the gap." The next highest downtown rates are $16 a square foot for Franklin Plaza, and then the rates fall to the range of $13 to $14.50 Dominion Bank Building, Colonial Arms, Marketplace Center and Jefferson Plaza.

by Bhavesh Jinadra by CNB