November 29, 2005

SUBJECT:       Office Lease Renewal for the Department of Employment Development at 465 S. Mathilda Avenue

REPORT IN BRIEF

City Council is requested to approve a lease agreement for rental of office space for the City's Department of Employment Development (NOVA), as follows:

Location: 465 S. Mathilda Avenue, Sunnyvale

Description: 3rd Floor  (suite 300)

Lease Term: January 1, 2006 through December 31, 2006 + option to extend

Square Footage: 5,351 sq ft

Lease Rate / Sq. Ft.: $1.75 per sq ft

Current Lease Rate / Sq. Ft.: $2.15

Current Lease Expiration Date: December 31, 2005

It is recommended by staff that the Sunnyvale City Council approve the proposed lease agreement and authorize the City Manager to execute the lease agreement with Ms. Judith Owen Burns, the owner of the property.

BACKGROUND

The City's Department of Employment Development has rented office space at 465 S. Mathilda Avenue since 1994. Some of the reasons NOVA has stayed so many years at this location include:

a.       the proximity to City Hall,

b.       the competitive lease cost,

c.       the lack of available office space near City Hall, and

d.       the option to configure the internal office space to meet changing program needs.

NOVA began leasing this space when adequate space was not available at the Sunnyvale Office Center at 505 W. Olive Avenue.  For most of the time, NOVA leased space on both the second and third floors and subleased space to Sc[i]3.  With Sc[i]3’s relocation to the Library and with the movement of some NOVA staff to the Center, NOVA has been able to consolidate and occupy only the third floor. This space is used for workforce publication services, business support operations, and NOVA’s Professional Effectiveness Program.

EXISTING POLICY

The proposed activities are consistent with the City of Sunnyvale's Socio-Economic Goal 5.1F: Provide job training and employment services within constraints of operative, federal regulations and available federal funding, to address the locally-determined employment and training needs of economically disadvantaged residents and others with special needs.

DISCUSSION

Vacant office space in Sunnyvale currently rents in the range of $1.29 to $2.35 per square foot, depending on size, location, load factors, maintenance and utilities, and amenities, with an average asking rate of $2.25 per square foot in the third quarter of 2005 (BT Commercial.com).  Staff believes the $1.75 per square foot rate being charged at 465 S. Mathilda is a fair and reasonable amount given the fact that this office building is in superior condition and that the owner has recently completed several major improvements.  The lease is "full service,” which means janitorial services, utilities, taxes and other operational expenses are to be paid by the owner.

The proposed lease agreement is for one year, from January 1, 2006 through December 31, 2006. NOVA has the option to request a six-month extension through June 30, 2007.

FISCAL IMPACT

Federal and state grant funds will be used to pay for this lease. Funds will be allocated as part of the Department of Employment Development budget.

CONCLUSION

NOVA seeks authorization to renew its lease for office space at 465 S. Mathilda Avenue for a one-year period beginning January 1, 2006, with an option for an additional six months.  The rate of $1.75 is considered fair and reasonable for this space, considering its excellent location and condition.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City's official notice bulletin board, posting of the agenda and report on the City's web page and the availability of the report in the Library and City Clerk's Office.

ALTERNATIVES

Authorize the City Manager to execute the lease agreement for office space at 465 S. Mathilda Avenue, Sunnyvale, for one year beginning January 1, 2006 with an option for an additional six months.

Identify other facility options and return to Council for further direction.

Other action as determined by Council.

RECOMMENDATION

It is recommended by staff that the Sunnyvale City Council approve alternative number 1:  Authorize the City Manager to execute the lease agreement for office space at 465 S. Mathilda Avenue, Sunnyvale, for one year beginning January 1, 2006 with an option for an additional six months.

Reviewed by
Michael J. Curran, Director
Department of Employment Development
Prepared by:  Jeanette Langdell, Employment Training Manager

Approved by:
Amy Chan
City Manager

Attachment:  Lease Agreement