In Providence, 100 Westminster and One Financial Plaza still have ample true Class A space available, but GTECH Center has arguably produced the best return on its tenant investment, essentially leasing up all of its available space to four or five tenants. Consequently, the GTECH Building just sold for more than $50 million.
In addition, the new Blue Cross tower was successful in leasing half of its 20,000 square feet of available space. This activity has pushed rental rates for Class A space back over the $30 per square foot mark on new deals. The vacancy rate will dip just below 17 percent as Hasbro officially announced that it has leased approximately 135,900 square feet in the capital city. Finally, it looks like Ameriprise Financial will be moving from Cranston into One Citizens Plaza, which will help the Class A absorption.
However, the recent failure of game developer 38 Studios will negatively impact occupancy rates; the company occupied space at One Empire Plaza, a 104,000-square-foot office building in Providence.
Looking forward, Bank of America announced that it will vacate its headquarters located at 111 Westminster in April 2013. It is expected that 100 Westminster will absorb employees leaving this 340,000-square-foot office building that has not been fully utilized by Bank of America for some time.
The West Bay suburban office market remained quiet throughout 2011 but has shown a bit of activity during the first half of 2012. There are larger pockets of office space available for subdivision, offering ample opportunities for larger tenants to secure space at currently low market rents. A few of these are the New England Tech facilities in Warwick (up to 170,000 square feet); a number of buildings in Metro Center, including One Home Loan Plaza (15,000 square feet); Metro East (15,000 square feet) and going all the way up to 300,000 square feet at the former FM Global Headquarters in Johnston.
Some of the most notable deals in the West Bay office market this year include the leasing of 30,000 square feet to Atrion at 125 Metro Center in Warwick and the leasing of 25,000 square feet by ADP Payroll Services at 300 Jefferson Boulevard in Warwick. In addition, 301 Metro Center Boulevard has had success leasing spaces between 5,000 and 10,000 square feet, and Salve Regina University just leased 12,000 square feet at 144 Metro Center Blvd. With this absorption we expect vacancies to decrease below 20 percent with rents continuing to average in the mid- to high teens for B space and low $20s for A space.
The Northern Rhode Island suburban office market remained flat during 2011 and the first half of 2012 due to lack of demand and the low availability of office space. Most of the office leasing that has taken place in this submarket has been influenced by the proximity of CVS’s world headquarters, located in The Highland Corporate Park. For example, Colgate Palmolive secured 3,000 square feet at 42 Albion Road in Lincoln.
It is unlikely that we will see any further compression on pricing in the market. Pricing should remain at current levels at least through the end of the year, providing tenants continued opportunity to enjoy advantageous lease rates and concessions. While vacancy may be waning slightly, unemployment rates continue to drive market hesitation allowing tenants continued enjoyment of low rents and landlord concessions. Job growth will precipitate true market strengthening.
— Leeds Mitchell IV is vice president of Providence, Rhode Island-based MG Commercial Real Estate.