Guest Post by Arlon Brown of the Parsons Commercial Group, Framingham, Mass.
The commercial office market in the Boroughs (Marlborough, Northborough, Southborough and Westborough) is improving with declining vacancies and rising rental rates. This can be attributed to an expanding economy with an improving job outlook and a reduced unemployment rate. With fewer office options and high rents, tenants from the Framingham and Natick market view the Boroughs as a viable option as they seek out value through efficiency, technology and amenities.
Boroughs Office Space Analysis
In Class A office buildings, which are the highest quality and best located, the vacancy rate is 16.3 percent with direct availability of 723,375 square feet, with an average asking rate of $19.23 per square foot. In Class B office buildings, typically more utilitarian without special amenities, the vacancy rate is 22.2 percent with 1,479,260 square feet, with an average asking rate of $17.42 per square foot. In Class C office buildings, often older properties without amenities, the vacancy rate is 6.1 percent with 68,874 square feet available and an average asking rate of $16.09 per square foot.
Boroughs Lease Transaction Updates
The combination of higher quality buildings with lower occupancy costs, an excellent road network and more affordable housing are making the Boroughs an attractive location. As a result of this, the Boroughs continue to be leaders in attracting some of the largest suburban Boston leases, including Genzyme taking 114,151 square feet at One Research Drive in Westborough and San Disk leasing 57,664 square feet at 200 Donald Lynch Boulevard in Marlborough. In addition, one of the largest leases signed this year occurred at 200 Forest Street in Marlborough with GE Healthcare taking 288,101 square feet.
Significant sales transactions in the Boroughs were completed by Ferris Development in the purchase of One Research Drive in Westborough for $21,568,000 or $73 per square foot and the acquisition of Four and Eight Technology Park in Westborough by the same firm for $24,000,000 or $108 per square foot.
Arlon’s Key Take-Aways on the Boroughs Commercial Market
- With the compression of yields across all major asset classes the ability to find high quality product will be more difficult this year.
- More multi-family projects will be coming on line in the Boroughs in 2015 – an example is Avalon in Marlborough.
- The continued decline in inventory and increase in demand, for both rental and sale properties, will increase price.
- The Boroughs are very attractive to expanding companies, price sensitive companies, start-up and firms concerned with employees’ housing costs.
- I believe that given the declining vacancy rate and increased rental rates, construction of new spec office buildings in the Boroughs is on the horizon.
- We will see continued repositioning of assets through redevelopment of older properties. A good example of this is the Atlantic Management project on Puritan Way in Marlborough where existing buildings were renovated and repositioned and land was sold for a hotel and apartments.
Given the strong fundamentals and continued low interest rates, our firm continues to be bullish on the Boroughs.
About Arlon I. Brown, SIOR and the Parsons Commercial Group: Parsons Commercial Group, Inc. also known as PCG in our market is dedicated to providing clients with far-reaching solutions to their diverse commercial real estate needs. With a broad expertise that spans the many disciplines of commercial real estate, PCG delivers on its promise of excellence in brokerage, management, development, and real estate advisory services.
Arlon is a Senior Vice President for PCG based in Framingham, Massachusetts. With over 32 years of commercial real estate experience, Arlon is a valuable asset to servicing real estate needs. He focuses on brokerage activities including investment sales, leasing and consulting as both a tenant and owner’s representative throughout the Suburban Boston markets. He focuses on the major real estate sectors office, industrial, retail and development properties.
Arlon has held the distinctive SIOR (Society of Industrial & Office Realtors) designation for over 24 years.