NORTHEAST SNAPSHOT, OCTOBER 2008
Metrowest – Massachusetts Office Market
With Boston’s trophy towers and Waltham’s top Class A office locations continuing to quote high asking rents, the more economical rates of the Interstate 495/Mass Pike (Metrowest) market are looking attractive. Proposals from top-quality buildings in Natick and Framingham have asking rents that are approaching a $30 per square foot gross, while prominent buildings in Southborough and Westborough are achieving rents in the mid-$20 range.
The deltas in rents in the Metrowest market provide savings in excess of $10 to $15 per square foot over buildings along Route 128, and substantially more compared to Boston and Cambridge locations. We expect to see rents remain firm or increase slightly from Southborough west to Marlborough, as there have been at least two leases signed recently in Marlborough exceeding $23 per square foot gross. Cost competitive rental rates will make the far-western suburbs, including the Worcester area, increasingly attractive, as companies become ever more cost-conscious in today’s uncertain economy.
There has also been a shift toward looking at demographics when choosing an office location. The ability to recruit additional, qualified staff is critical, and some tenants are considering relocating into urban centers from the suburbs to attract some of the younger work force. For suburban offices wanting to compete with this draw, the presence of on-site amenities such as fitness facilities, cafeterias, day care, laundries and retail space is critical. Less time out of the office and shorter commute times translate directly into a more efficient workforce.
Direct access to Route 495 and to the Mass Turnpike has and will continue to drive development in the Metrowest. Highway visibility is important, but quick accessibility for employees to and from these major arteries of transportation is more important. At the same time, increasing energy and gasoline prices will likely enhance the desirability of projects in downtown Worcester, which benefits from local transit and commuter rail services.
For example, Berkeley Investments, which has owned and developed properties along I-495, is currently working on CitySquare, a 2.1 million-square-foot mixed-use redevelopment project located in the heart of downtown Worcester that aims to leverage the many existing area amenities and direct access to transit. The project currently has several interested tenant prospects, and demolition and early road infrastructure work will begin as soon as the leasing goals are reached for this pre-permitted project. This submarket draws looks from employers, due to a significant employee talent pool and a very desirable quality of living.
In the second quarter, the Metrowest office market posted 78,717 square feet of positive absorption, primarily due to Netezza’s occupancy of 58,693 square feet of space at 26 Forest Street in Marlborough. For the most part, organic growth from the local tenant base, primarily from small to mid-size companies, drives absorption in the Metrowest area. We expect that activity will pick up in the third quarter. Jones Lang LaSalle, for example, recently renewed Computer Associates for 120,000 square feet at 100 Staples Drive in Framingham.
During the first 6 months of the year, the 14.9 percent vacancy rate and the 22 percent availability rate remained relatively unchanged in the 12.1 million-square-foot Metrowest market. Overall market conditions were healthy and vacancy remains just above the 6-year low of 13 percent. Based on leasing activity in the pipeline and assuming that the regional economy continues to hold up despite the current national malaise, little change in vacancy is expected through the end of the year.
— Philip DeSimone is managing director of the Boston office of Jones Lang LaSalle.
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