Boston’s metro west office market continued to move along at a steady clip in 2018. Many of the trends seen in the west market have been consistent over the past few years.
One of the most prominent trends is that tenants continue to prefer high-quality properties. Class A product has benefited from the demand, resulting in a limited supply of Class A large blocks. In contrast, commodity space is still lagging from a demand standpoint. Additionally, many landlords have been performing gut renovations on older properties and have been reaping the rewards of their investments.
The west market has also benefited from tenants migrating from Cambridge and life science demand, which are two closely related trends. Cambridge, particularly Kendall Square, is well known as the national hub of the life science industry. With that pedigree, pricing there has grown tremendously, and available space is scarce. As such, many life science occupiers are looking west to fulfill their needs, and the Cambridge market conditions have pushed other non-life science occupiers west as well. A proximity to the inner urban core makes towns like Watertown and Waltham particularly attractive.
The above trends are not new, but one is. New economy tenants, who frequently look for space with a combination of uses rather than straight office, have begun driving demand for single-story flex product. These tenants need good clear heights and loading space in addition to office space and are looking for a desirable location, such as Hilco Redevelopment Partners’ The Gauge in Waltham. New economy tenants include companies like Humatics, Panasonic and ClearMotion.
Metro South
Demand in the metro south office market was steady from 2017-2018. Large blocks of space coming back on the market softened the numbers, but well-located assets continued to push rental rates up. Properties along the MBTA Red Line continued to perform well, as they have done the last few years.
There was not as much migration from the urban core as there was in 2016 and 2017, and assets in less desirable locations continued to have minimal rent appreciation year-over-year. Demand has come from a steady mix of different industries, which is usual for the south market.
The metro south saw some successful building repositions in 2018. One was a former Medtronic/Covidien building at 9-11 Hampshire St. in Mansfield that secured a 93,000-square-foot lease with restaurant supply company TriMark. Another, 100 Tech Center Drive in Stoughton, had leases signed by Collegium Pharmaceutical and Shields Health Solutions that comprise about half of the building. Repositions are a good way to reinvigorate properties as there has not been much in the way of new construction in the market. That will change in the next few years, however, as The Park at Patriot Place—a new development site adjacent to Patriot Place in Foxboro—gets underway.
Metro North
While the Metro North market achieved strong absorption for the year at 682,000 square feet, most of that absorption was enjoyed by large block buildings, which were able to accommodate specialized requirements from tenants. In Billerica, 805 Middlesex Turnpike landed automotive technology company ClearMotion due to the property’s high clear heights and 900 Middlesex Turnpike benefited from extensive lab infrastructure left behind by Millipore to attract science research company Quanterix, which moved from locations in Lexington and Billerica.
Another notable example is genetic medicines company Homology Medicines, which committed to 70,000 square feet at 1 Patriots Park in Bedford, given the base building lab infrastructure offered by landlord Longfellow Real Estate Partners.
In Burlington, asking rents are finally on the move, climbing to an average of $30 per-square-foot and in some cases breaking the $40 per-square-foot mark. Fewer large blocks of available space are left in Burlington, and a growing delta in rents of approximately $15 per-square-foot will position the Route 3 corridor well for larger requirements in the market and will be attractive for tenants looking for rent relief.
Trades of office buildings include: The Exchange in Bedford, purchased by Jumbo Capital from The Davis Cos.; the recapitalization of Cross Point in Lowell with CrossHarbor Capital; the recapitalization of 1 Radcliff Road in Tewksbury; the purchase of 150 Minuteman Road in Andover by SunLife Financial and the acquisition of two, 100,000-square-foot office buildings formerly occupied by Mercury Systems by Brady Sullivan Properties.