Intercontinental Real Estate Corp., which is based in Boston, has purchased 48 Woerd Ave. in Waltham for $18.8 million. Boston’s Trammell Crow Co. exclusively brokered the sale.
Boston-based Intercontinental Real Estate Corp. recently purchased 48 Woerd Ave. in Waltham for $18.8 million, a move that could be signaling the start of a brighter period for the city’s struggling commercial market.
According to one industry watcher, investors making purchases in the existing slumped market are biding their time until the market shifts. In the case of Woerd Avenue transaction, the landlord has until 2009, when the building’s Cisco lease expires.
There’s a lot of capital floating around the market, with investors looking for deals that hold promise in the future. “It has some people scratching their head, but it could look really smart five years from now. That’s the game of real estate – only time will tell,” the industry watcher said. “It takes a lot of guts to put down money and say, ‘this is going to turn.'”
Waltham, situated between Route 128 and Interstate 495, did not escape the soaring vacancy rates and plummeting rental rates that enveloped the entire Boston region in 2003. Despite a sluggish economy, transactions are still occurring. While Intercontinental finalized its deal, there also was talk of General Electrics Panametrics closing in on a 150,000-square-foot lease in the same neighborhood. Phase Forward upgraded from 63,000 square feet to 100,000 square feet at Waltham Woods, The Brass Ring expanded from 43,000 square feet to 65,000 square feet and signed a lease along Winter Street and Oasis Semiconductor upgraded from 7,000 square feet to 30,000 square feet at Waltham’s Weston Corporate Center.
Microsoft, IBM and Hewlett Packard branches in Waltham solidify the city’s reputation as a desirable location for commercial real estate, a fact attributed to its proximity to Route 128, I-495 and downtown Boston. But while the industry watcher said that the increased activity and positive growth is comforting, rental rates are still well below average – an obvious problem for new landlords. Despite Waltham’s recent activity, there may still be a long way to go before the city, and the surrounding suburbs, bounce back. With an availability rate of 29.1 percent, 22 million square feet of space must be absorbed before the Greater Boston suburban market reaches equilibrium. In 1980, the entire suburban market consisted of 22 million square feet of space, the size of Hartford, Conn.’s, metro market. Last month, Burlington’s availability rate remained at 40 percent, while Waltham came in close behind at 37 percent.
“There’s been relatively little activity in the suburbs in general, as opposed to a couple of years ago,” said Scott Jamieson, senior vice president of the Boston office of Spaulding & Slye Colliers. “A lot of that can be attributed to a much greater degree of REIT [real estate investment trust] ownership, which tend to be longer-term owners. Combine that with the current high availability and the lack of leasing velocity and it makes it difficult for buyers to forecast the current and future market rents.”
‘Adaptive Location’
The building at 48 Woerd Ave., fully leased by Imagitas and Cisco, which renewed its lease through the next five years, made it an attractive building for investors, said Peter Joseph, principal of Boston-based Trammell Crow Co. Joseph exclusively brokered the sale along with principal James F. McCaffrey, Vice President Christopher Phaneuf and Senior Associate Jordan Berns.
“The attractiveness of this building is that it’s securely leased through 2009 and it provides good cash flow to contemplate a variety of uses – office or its redevelopment into multifamily,” Joseph said. “It’s an adaptive location.”
Waltham City Councilor Stephen Rourke said that the office vacancies are hurting the city’s coffers.
“We rely pretty heavily on the commercial tax base in Waltham,” he said. “During this current cycle, there’s been an increase in vacancies – even though we’ve maximized the commercial rate to benefit the residents, the valuation of residents has been continuing to rise and the burden is shifting to the residents.”
In 2003, the residential tax rate was $9.67 per $1,000 of assessed value while the commercial rate was $23.65 per $1,000, according to the Waltham Assessor’s Office.
But Rourke, like many brokers in Greater Boston, believes that the end may be in sight.
“We’re close to, if not now, turning the corner,” he said. “I anticipate that the business cycle will continue and the pendulum will swing in the other direction and we will again have a strong commercial base.”
Waltham’s grip on a healthy commercial real estate market began slipping when the high-tech bubble burst in the 1990s. Dozens of companies closed their doors, leaving dark, vacant windows in many of Waltham’s business properties.
But Rourke said that high-tech may be coming back. Peppercoin, a new start-up company that’s making headlines in Boston and across the country – in media such as The New York Times, The Boulder County Business Reporter, Wired News and MercuryNews.com – is based in Waltham. The 12-member company, which secured $4.3 million in funding as of September 2003, expects to double in size by September.
“Waltham’s a prime location – it’s along Route 128, the [Massachusetts Turnpike], eight or nine miles from Boston and is convenient to nearby residential communities,” Rourke said. “As the economy improves, we’ll see vacancy rates go down and maybe see more commercial development, which for now, has been put on hold.”
Kristie DiSalvo may be reached at kdisalvo@thewarrengroup.com.
