It’s a tough time in commercial real estate to be either a landlord or a tenant because of the coronavirus-induced economic tailspin.

The Teacher Retirement System of Texas is facing the challenges of both.

The taxpayer-funded state agency that oversees retirement benefits for about 1.6 million Texas teachers and school employees is angling to find a taker to sublease 100,000 square feet it has rented in Indeed Tower — the luxury high-rise under construction on West Sixth Street in which it also has an indirect but substantial ownership stake through an investment partnership.

The retirement system’s managers initially intended to move the agency’s investment division into the office space when Indeed Tower opens next year, but they abruptly scrapped those plans in February after publicly disclosing some of the costs — more than six months after the American-Statesman first asked for the information — and retired teachers and state lawmakers balked at the price tag.

The retirement system’s starting base rent for its 10-year Indeed Tower lease, which begins in June 2021, is about $326,000 a month, or $3.9 million annually.

But finding another tenant interested in taking on that expense for upscale offices in the heart of downtown looks more challenging now than it did just eight weeks ago before the pandemic.

"My confidence, as well as the real estate teams confidence, in subleasing the space has decreased some since we last talked in February," Eric Lang, a senior managing director for the retirement system, told the agency’s board during a recent meeting.

Concerns have arisen "about the timing of subleasing the space and the potential cost of subleasing the space, depending on what rental rates do," Lang said. "So we need to reevaluate all that."

Meanwhile, the retirement system has been in negotiations for additional office space at 816 Congress, where its investment division currently is located. It also has been exploring the prospect of building a new headquarters complex outside of downtown, most likely in the mixed-use Mueller development, as well as the possibility of putting its existing headquarters building, at 1000 Red River St., on the market.

The coronavirus crisis has the bulk of those plans on hold, however, at least for the next few months.

"It’ll probably be midsummer before we ever have a sense of what the new normal will look like and what the markets will look like based upon the economic downturn that we have been experiencing as a result of the (coronavirus) pandemic," retirement system Executive Director Brian Guthrie said during the board meeting.

The economy "has essentially hit the pause button, not only here in Texas but also around the world," Guthrie said. "As a result, our efforts in regards to long-term facilities have also been paused for the most part."

He said it remains a priority for the retirement system to address its office needs because it has been growing substantially. But it’s unclear now how much space the agency will require once the coronavirus crisis subsides and everyday life begins to return to normal, he said, partly because work-from-home efforts necessitated by the virus have been successful.

Tim Lee, executive director of the Texas Retired Teachers Association, said he and his organization are concerned about the retirement system’s ability to find a tenant to sublease the Indeed Tower space.

In addition, Lee said, the retirement system should consider putting together a focus group of its members to help weigh in on its overall facilities needs. He was among those who questioned the optics of an agency charged with overseeing teacher retirement money having luxury offices in Indeed Tower, which is expected to be among Austin’s premier buildings.

"So many variables are in flux now, except the (Indeed Tower) lease payment coming due" beginning in summer 2021, Lee said. "I think it will be very tricky for TRS to find a tenant" to take it over.

Despite being on the hook for the lease, the retirement system owns an indirect stake in Indeed Tower, apparently through an entity it formed with Iowa-based company Principal Real Estate Investors, which partnered with Trammell Crow on the building. The retirement system is prohibited from investing directly in real estate, although it can do so through limited partnerships with third parties.

The Teacher Retirement System has repeatedly declined to confirm its ownership stake to the Statesman, citing a state law that prevents it from doing so. Instead, it has spent much of the past year publicly portraying itself as an arms-length tenant in the building.

But a person with direct knowledge of the matter told the Statesman in February that executives privately revealed to state lawmakers that the agency has a large Indeed Tower ownership stake, a disclosure intended to blunt some of the criticism of the high-dollar rent it had agreed to pay there.

The retirement system signed its lease for office space at Indeed Tower in February 2019, but it resisted disclosing any financial details about it until it released the base lease rates three months ago — well after the Statesman first asked for financial information about the lease in a formal public information request in June last year.

The agency still hasn’t disclosed the total it has agreed to pay, however, which would include estimates of shared operating costs for the building, such as property taxes and maintenance of amenities. The agency is seeking an opinion from Texas Attorney General Ken Paxton’s office as to whether it’s required to do so.