Normandy Real Estate Partners is marketing nearly 500,000 square feet of build-to-suit office space at three sites within its Founders Park development in Needham, including up to 220,000 square feet at 380 First Ave.
Can America’s Technology Highway survive as an economic force in an era when employers are willing to pay big premiums for a downtown Boston address?
The stakes are high in the office parks off Route 128 in communities such as Needham, Waltham and Lexington, where Mimecast, NBCUniversal and Simpson, Gumpertz & Heger recently inked long-term leases.
The deals illustrate the importance of ground-up construction and major rehab projects in the suburbs, said Joseph Doyle, a principal at tenant representation brokerage Cresa Boston.
“We’ve seen companies that are paying up for quality,” Doyle said. “Sometimes they’re paying $10 to $15 (per square foot) more for a building next door that offers either new construction, on-site amenities that have been recently added or a renovation that creates an environment that allows them to attract new talent.”
Demand for space in traditional office parks, with their 1970s designs and bare-bones common areas, remains tepid, according to commercial brokers.
“The properties that are still sitting out in the middle of the trees surrounded by a bunch of surface parking are not doing as well,” said Duncan Gratton, an executive director at Cushman & Wakefield.
The suburban development strategy appears to be a contrarian bet for developers, given a series of high-profile migrations to downtown Boston by large office tenants including Canton-based Reebok International, Waltham-based Autodesk and PTC of Needham.
Former suburban tenants accounted for more than 1.4 million square feet of absorption downtown between 2012 and 2017, according to Newmark Knight Frank research. Waltham alone accounted for 181,000 square feet of the migration.
In addition to the temporary disruption associated with a move to the city, tenants are willing to write big rent checks to do so, NKF noted in a recent report. Downtown Boston office rents were nearly $32 per square foot higher than the suburbs at the end of 2017, the widest spread of any major market in the U.S.
But recent build-to-suit projects and gut rehabs of aging buildings in the central Route 128 submarket have been well received, prompting other developers to test the waters.
“You need to have the amenities or the walkability,” said Mark Roth, an executive managing director for Newmark Knight Frank. “Tenants appear to be willing to pay up for the new and special features.”
Pioneered by such projects as redevelopment of the former Polaroid property as 1265 Main St. in Waltham, the “urban-suburban” strategy infusing retail and even housing into office parks has become the new norm.
“The community was waiting for it to happen,” said Michael O’Leary, a managing director at Cushman & Wakefield. “It started to happen slowly, but that theme came to life as owners saw the reaction of the tenant base and the life that had been brought to those projects.”
Steve Adams
Postal Facility Conversion Set for Delivery
Waltham continues to be the epicenter of Boston suburban office development. The largest such availability is 200 Post, Anchor Line Partners’ 430,000-square-foot conversion of a former mail sorting facility into a sprawling commercial complex. Completion of the core and shell is expected this fall.
“It’s unique because it’s so big and given the bones of the building, you can accommodate really any type of use: lab, office or high-tech manufacturing,” O’Leary said.
A 70,000-square-foot lease by Waltham engineering firm Simpson, Gumpertz & Heger launched construction of 20 CityPoint in Waltham, a 211,000-square-foot office building being developed by Boston Properties for completion in the second half of 2019.
At 152 Grove St. in Waltham, Hilco Development Partners recently completed The Gauge, a conversion of the former Standard Thomson Co. headquarters into 130,000 square feet of creative office and research space in three buildings.
Woburn-based ClearMotion, which makes high-tech vehicle suspension systems, has leased 70,000 square feet at The Gauge for a new headquarters, according to real estate industry sources. ClearMotion declined to comment.
And in a rare recent example of outward migration, Boston Properties lured the North American headquarters of expanding cloud security firm Mimecast to Lexington. In January, approximately 300 employees relocated from Watertown’s Riverworks into 80,000 square feet in the newly renovated former Wolverine Worldwide offices at 191 Spring St., with room for expansion to 800.
Two of the largest active requirements in the suburbs could kickstart construction of build-to-suit projects.
Waltham-based cancer researcher Tesaro is likely on the move from 1000 Winter St. in Boston Properties’ Bay Colony Complex, and is looking for up to 400,000 square feet with a focus on the Waltham area, according to brokers.
And Irish pharmaceutical company Alkermes, which has local offices at 852 Winter St. in Waltham’s Reservoir Woods, is seeking up to 250,000 square feet in the central Route 128 market, according to brokerage research reports.
Some of the largest build-to-suit opportunities are in Normandy Real Estate Partners’ Founders Park in Needham, which is marketing three development pads totaling nearly 475,000 square feet.
