Route 128 Central Bounces Back With Fresh Velocity, Purchase of Bay Colony Corporate Center

WALTHAM—Brian Hines does not play a doctor on TV, but the FHO Partners principal is diagnosing a faster recovery than anticipated for the long-ailing Route 128 Central office market, joining Boston and Cambridge in a rebound that continues to elude most suburban communities. Deals such as the blockbuster 320,000-sf Dassault Systemes pact at 175 Wyman St. in Waltham bolstered the core submarket’s mien over the summer, observes Hines, whose firm estimates 540,000 sf of positive net absorption YTD for Route 128 Central’s inventory of 30.7 million sf.

“It is much healthier today,” says Hines. “The worm is turning rather quickly.” The summer leasing surge and a robust $185 million bid for Waltham’s flagship Bay Colony Corporate Center by Boston Properties were good medicine for Route 128 Central, explains Hines, reaffirming a belief that the submarket will continue to lead in corporate cache and rental rates as the economy recovers. Record rents achieved in the boom period from 2005 to 2007 have eroded substantially, but Hines says the freefall has seemingly ended.

At 23.9 percent, availability in the dozen communities that FHO Partners includes in its Route 128 Central review remains unacceptably high, accedes Hines, but the figure has eased down from 24.8 percent to begin 2010, and the veteran broker stresses that Class A product is closer to the 10 to 12 percent level. “It’s really a matter of haves and have nots,” he says of properties in such communities as Bedford, Burlington, Lexington, Waltham, Wayland, Wellesley and Weston.

One of the “haves” would have to be landlord Hobbs Brook Management, which scored the Dassault commitment at its speculatively constructed 175 Wyman St. to close out the third quarter, and this week unveiled a lease next door at 404 Wyman St. in which Computer Sciences Corp. took 26,650 sf. “We look forward to welcoming CSC to the Hobbs Brook Office Park,” FVP of real estate Donald Oldmixon says in a press release announcing the lease, an agreement negotiated by Chip Batchelder of Wyman Street Advisors for the landlord and Jones Lang LaSalle broker Alex Dauria on behalf of CSC.

Besides the landlord’s solid reputation, CSC was indeed lured to 404 Wyman St. by the park’s Class A environment, relays office manager Lisa Rogier. “We found the amenities within the building and the office park to be exceptional,” she says. “Given the fact that employees spend an ample amount of time at the office, it is a bonus to be able to inhabit a building with covered parking, a fitness center and a quality cafeteria . . . Hands-down, 404 Wyman St. was our first choice.”

CBRE/New England’s Q3 report supports the flight-to-quality movement playing well for office assets offering “premium amenities, increased efficiency and superior location.” That firm’s survey estimates 378,000 sf of positive net absorption in the Route 128 Central submarket during the third quarter. Along with the Dassault lease that will bring hundreds of new employees into Waltham, battery maker A123 Systems took 90,000 sf at 200 West St., while 880 Winter St. secured ACI Worldwide for 62,000 sf and Patientkeeper for 44,000 sf.

Several other promising requirements are circulating in Route 128 Central, and Hines anticipates a continued trend towards stabilization. Even so, he and colleagues such as FHO Partners principal John Boyle caution that there is potential for the recovery to ease back. Hines notes aggressive acquisitions of firms such as Oracle buying Phase Forward could open up blocks of space in the market, with Phase Forward headquartered at 77 Fourth Ave. in
Waltham. And Boyle says the sale of assets such as Bay Colony, 266 Second Ave. and 400 Fifth Ave. could keep rent accretion in check as the new landlords are able to offer space more cheaply than their debt-burdened predecessors. “It should keep rents flat,” says Boyle, although he concurs with others that further erosion in core submarkets is less likely to occur.

As companies seek out better locales, Route 128 Central will be the beneficiary, says Hines, anticipating Interstate 495 and other fringe markets will see tenants eyeing addresses closer to the urban core. “There’s a different dynamic out there,” he says of I-495, from which Dassault Systemes will be relocating hundreds of employees to Waltham. “It’s a little more desperate.”