Dell execs to return to office space with "regular folks"
[link|http://www.austin360.com/auto_docs/epaper/editions/friday/business_1.html|story]
Dell leaders to return to Round Rock
Computer leader finds itself with two buildings on Loop 360 it doesn't need
By John Pletz
American-Statesman Staff
Friday, March 8, 2002
Dell Computer Corp. is likely to change its corporate address again soon, moving its top executives back to the familiar scenery of its Round Rock campus from an upscale office park in Southwest Austin.
A little more than a year after it moved in, Dell is looking to sublease two buildings in the Las Cimas office park on Capital of Texas Highway (Loop 360) just south of Bee Cave Road, a spokeswoman confirmed Thursday.
After a business slowdown that forced heavy cutbacks in staffing and production capacity, Dell and other big companies have a lot more real estate than they need.
When business was booming in early 2000, Dell signed leases on an 80,000-square-foot building in Las Cimas and a second 140,000-square-foot building that just recently was completed. Dell declined to say how long the leases run or what it was paying in rent. However, new office space in the area is going for an average of $25.81 a square foot.
Las Cimas was intended to be home to top Dell executives, the company's venture capital arm and other corporate functions.
At the time, the company said it was running out of space in Round Rock and North Austin faster than it could put up new buildings. Dell had added more than 10,000 workers in Round Rock and Austin in the previous two years and was expecting to hire another 6,000 by the end of 2000.
Much of Dell's corporate staff -- including Chairman Michael Dell, President Kevin Rollins and others -- moved to a four-story building in Las Cimas by the end of 2000, just as computer demand began to slow.
In less than a year, Dell cut 5,700 jobs and closed several facilities in Central Texas. The company never filled more than half of the space in the first building at Las Cimas.
"We've been consolidating facilities, which includes moving from leased facilities into facilities that we own," spokeswoman Michele Glaze said.
Although Michael Dell and other executives have offices in Round Rock, they won't leave Las Cimas until the space is leased.
That could take awhile. The economic downturn left Austin with a glut of office space; the city office vacancy rate more than doubled to 18.8 percent, it highest level in a decade.
"It's a function of supply and demand, and demand isn't great," said John Childers, a principal with commercial real estate firm Colliers International. "If you're Dell, you're competing with a lot of space. There's half a million square feet in their own market of Class A space."
Northwest Austin was particularly hard-hit, with vacancy rates as high as 30 percent. So was the Loop 360 corridor, which had become the premier address for high-tech companies, many of which failed or cut back significantly when the economy slowed.
There aren't many buyers at a time when leaner and meaner also applies to office space.
"We are not seeing a lot of large deals," Childers said. "The 5,000- to 10,000-square-foot deals seem to be the market right now."
Fortunately for Dell, the vacancy rate at the south end of Loop 360 is about 15.4 percent, lower than in many other parts of the market.
Dell has some other factors working in its favor as well.
"What they do have going for them is great location, a beautiful building and flexibility," Childers said. "I'm confident they'll have success subletting their space.
"Whether deals get done is a question of whether they want the deals or not. They're better capitalized than most, so they can be a bit more more selective. They're not a dot-com that will take any tenant with a pulse at a highly reduced rate just to sublease the space."
======================================
My take: If Dell management is so wonderful, as everybody likes to pretend, why couldn't they foresee the LACK of need for additional office space right as the economy was heading into a recession? Simple: the bigwigs wanted a short commute, so they found office space just minutes from their homes, where they wouldn't be surrounded with the "ordinary folks"; you know, the reglar people who busted their asses to make the company what it is today. Meanwhile, these "brilliant" executives thought the gravy train would keep chugging at the same rate forever, never once understanding that multi-billion dollar corporations in a commodity market don't keep growing at 50% annually.
