BJ’s Wholesale Club is laying plans to move its corporate headquarters from Natick to the former National Grid campus in Westborough, according to multiple industry sources.
The game-changing move would allow National Grid to unload its 300,000-square-foot Westborough campus, which has sat vacant since the utility moved its headquarters to Waltham earlier this year. The deal would also represent one of the largest suburban leases of the past year.
“They’re going to get the lease done, and then flip the property with the lease in place,” said one source with knowledge of the negotiations.
BJ’s is eyeing 250,000 square feet of office space in Westborough, with face rents in the range of $18-$19 per square foot. After tenant improvements, taxes and operating costs, the deal would be throwing off net income in the low- to mid-single digits.
The BJ’s lease will bring occupancy at the nearly-vacant Westborough campus to near 90 percent. That should allow National Grid to quickly unload the sprawling 68-acre complex. The utility put its former home on the market nearly a year ago, but it has found no takers, thanks to an economic slump and an extremely tight lending environment.
Suburban Crawl
The downturn in greater Boston’s office market has hit the outlying suburbs especially hard. Total availability in the 495-Mass. Pike submarket stood at more than 27 percent at the end of the third quarter, according to data from Jones Lang LaSalle. Rising vacancies, declining rents and an aversion to risk have sent investors running to stable, cash-flowing assets. That, in turn, has sent pricing on assets without cash flow crashing down.
That’s the value of the BJ’s lease to the property’s current owner. The site was originally marketed, in part, for its location and long-term development potential. But with even stable assets in the 495-Mass. Pike region pricing well below replacement costs, few investors are willing to pay real money for speculative development plays that might be years down the road.
Without a tenant, “it could have sat for awhile,” said one broker.
“It’s un-saleable without that lease in place,” added another.
Sources with knowledge of the deal believe the property’s sale is being priced with a ceiling of $60 per square foot. That would cap any sale price around $18 million. The same sources also said the deal is being structured so any transaction costs associated with the lease will flow to the campus’s future owner. The property last traded in 1999 for $8 million.
A spokesperson for BJ’s said while the company is in the market for a new headquarters, it has not narrowed down a location yet. The spokesperson termed the company’s search “very, very preliminary."
