The New Route 128
Vacancy, market could mean boom times for I-495 office landlords
Every industry has its trend watchers looking for the next big thing, and commercial real estate gurus say the boroughs of MetroWest could be the next Waltham and I-495 could be the next Route 128.
Prospective tenants looking for Class A office space are being drawn to the I-495 corridor by the price and availability of space there and by dwindling supply in cities and towns along Route 128 like Waltham.
"They're looking for value," said Matt Giffune, a broker with Boston commercial broker CB Richard Ellis. "Good organizations grow, but as tenants, they're still able to realize some value" in places like the boroughs or even Natick or Framingham, where, he noted, Netezza is extending its lease on its corporate headquarters.
But so far, "we haven't seen too many companies (from the Route 128 area) land out there yet," Giffune said. And in some cases, companies are making the opposite move. In December, utility company National Grid announced that it would leave its regional operations center in Westborough in order to consolidate in a new building at the Reservoir Office Park in Waltham.
David Suprenant, managing partner, Mirick OˆConnell. Testing The Waters
Giffune said, "We're seeing companies starting to kick the tires." And brokers are pushing the opportunities that high vacancy offers, such as space where a company can start small, but have room to grow.
That was the case for business law firm Mirick O'Connell, which in 2001 opened a three-attorney office in 3,000 square feet at West Park Drive in Westborough. Since then, the firm has grown to nearly 10,000 square feet and 17 attorneys at that office and has moved from the first floor to the third.
"I don't know if I can make a comparison to Waltham, but it certainly is warming up," said David Suprenant, managing partner at the firm.
"We see it in the building we're in," he said. "Two years ago, it was probably 70 percent vacant. Since then, that's changed tremendously and space is being taken around us constantly."
Suprenant said the location helps the firm recruit attorneys from Boston who probably already live in the MetroWest area, but would be unwilling to work in downtown Worcester. He also noted that companies moving into the I-495 corridor aren't just companies moving west for a better deal; they're companies moving east to get closer to Boston.
In all of greater Boston, there's 1.3 million square feet of Class A space under construction; 1.2 million square feet of which is being built along Route 128 and 611,000 square feet in Waltham, said Brendan Carroll, vice president of research at Richards Barry Joyce & Partners, a commercial real estate broker based in Boston.
Carroll said the boroughs have seen steady demand for Class A office space for nearly four years. In that time, 1.9 million square feet of previously vacant space has been leased, and the area's vacancy rate has dipped to 21.4 percent, which in general is nothing to brag about, but is much better than it was in 2002 when the vacancy rate nearly reached 40 percent.
Class A space in the boroughs leases for between $17.50 per square foot and $23.50 per square foot. That's significantly less than the high $30 to $48 range along Route 128. It used to be that even the Route 128 corridor was considered too far from Boston to be suitable for business development, Carroll said, "but in the last robust economy, 128 gained acceptance as a business destination, not just as a place to go to save some money. People wanted the Waltham name."
The same trend "is favorable for 495," Carroll said.
"In general, there has been an absolute bristling pace for demand, particularly in the 128 market and Waltham," Carroll said. "But over the past couple of years, supply in Waltham was being occupied, creating peripheral demand patterns in the boroughs, Burlington and Woburn."
For now, there's just one Class A office under construction along I-495, a 75,000-square-foot office being built in Westford for North Carolina-based software vendor Red Hat Inc.
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