Boston Landing Opening, Cambridge Climb, Seaport Continues To Draw - Busy CRE Summer Underway

With numerous companies moving in and out of Boston and new tenants supposedly relocating to the city’s most up-and-coming neighborhoods, the past quarter has been busy for the Greater Boston Commercial Real Estate Industry. Perry’s Node provides a brief perspective on the latest transaction trends and reports…

Optimism and confidence remain at high levels in the Greater Boston business community as of the second quarter of 2017 as the region continues to be increasingly competitive as a global center of the commercialization of technologies. Slight absorption of 20,000 sf reflected a quarter with some isolated consolidation activity and an absence of significant expansion events, such as those experienced in recent quarters and those anticipated with headquarters projects in the process of commencing for Akamai Technologies and General Electric. Relocation activity remains brisk with groups generally choosing facilities that offer an enhanced experience, though these moves are generally resulting in overall reductions in used space, with a 20 percent average savings seen in the first half of 2017. An urban influx continues to intensify with suburban tenants infiltrating the Urban core, and an increasing number of users from both the suburbs and the Core choosing to locate in Streetcar Ring infill locations, such as those in Brighton, Malden, Medford, and Somerville. With capital investment focusing on additional rail-accessible infill locations, such as the newly-former site of the Boston Globe, the racetracks at Suffolk Downs and Wonderland, the NECCO factory and Widett Circle, the ability to continually accommodate an increasing share of the region’s commercial activity within a dense central core may be about to expand.

Urban Boston

Vacancy rose 0.2 percent to 8.5 percent on negative absorption of 92,000 sf as Class A asking lease rates remained flat at $59.17 per sf. Partners pulled out of its 175,000 sf facility in the Seaport; their former building is believed to be the focus of a potential Amazon expansion.

Law firms are increasingly marketing discretionary space; K&L Gates and Locke Lord are newly marketing a combined 80,000 sf. A submarket migration trend continued as Brattle Group moved into 66,000 sf at One Beacon Street from Cambridge and Haug Partners took 15,000 sf at 101 Merrimac Street from Woburn.

The Boston Globe moved into 75,000 sf at 53 State Street in a relocation from a Dorchester facility it had occupied since 1959. General Electric held a groundbreaking ceremony for its 380,000 sf permanent headquarters facility at 6 Necco Street.

Deutsche Bank acquired 100 Northern Avenue ($447 million, 514,000 sf, $868 per sf) as Rockpoint Group bought the adjacent 100 High Street ($370 million, 546,000 sf, $677 per sf) and 160 Federal Street ($190 million,367,000 sf, $518 per sf); Syngery Investment & Development acquired Center Plaza ($125 million, 741,000 sf, $492 per sf).

Cambridge & Streetcar Belt

Cambridge vacancy further tightened from 3.0 percent to 2.8 percent despite 58,000 sf of negative absorption this quarter. However, the average Class A asking lease rates remained flat at $63.63 per sf. The scarcity of options continues to result in out-of-city relocations with both Brattle Group and Whole Foods leaving this quarter.

The amount of available space decreased by 80,000 sf as 145 Broadway was demolished to be redeveloped by Boston Properties as a 486,000 sf 19-floor headquarters tower for Akamai Technologies. CarGurus moved into 31,000 sf at 55 Cambridge Parkway in a move from 2 Canal Park as Draper Laboratories took occupancy of 14,000 sf at 141 Portland Street.

Ring vacancy increased 0.6 percent to 9.1 percent despite 73,000 sf of positive absorption as 186,000 sf of new inventory was introduced. Class A asking lease rates also remain flat at $40 per sf. First Marblehead vacated 107,000 sf in Malden in a relocation and substantial consolidation to Boston’s Back Bay. HYM Investment Group agreed to acquire the 161-acre redevelopment site currently home to the Suffolk Downs race track for $155 million.

128 & 495 Belts

Ring vacancy increased 0.6 percent to 10.8 percent on 320,000 sf of negative absorption as average Class A asking rents of $32.02 per sf are 1.4 percent above year-ago levels. Seventy-eight percent of the quarter’s negative demand was focused in Class B properties, as rents of $22.83 per sf are 0.5 percent below year-ago levels.

Patheon opened a 44,000 sf location in Needham as Eliassen moved Time payment expanded by 25,000 sf in Burlington and HTS completed a 19,000 sf move within Peabody. 495 Ring vacancy dipped 0.8 percent to 16.0 percent as tenants absorbed 417,000 sf and Class A rents rose $0.16 to $22.67 per sf.

Mercury Systems moved into 155,000 sf in Andover in a relocation from Chelmsford as Whole Foods moved its regional office into 50,000 sf in Marlborough, Globoforce moved into 52,000 sf in Framingham and ConforMIS moved into 45,000 sf in Billerica. Charter schools are becoming acquirers of Class B office buildings; Brockton Charter Schools and Crossroads School completed acquisitions in Foxborough and Marlborough, respectively, this quarter. READ THE FULL QUARTER REPORT (Node by Perry) HERE