Bigger is not always better, or so it would seem these days for suburban office properties, especially the corporate campuses which became so popular locally in the late 1990s.
From Boxborough to Burlington, high-flying technology companies gorged themselves on land sites throughout Greater Boston to create employee-luring office meccas, but just a few years after that movement took hold, such firms are reversing their stance in a major way. Cisco Systems, EMC Corp. and Sun Microsystems have put the brakes on additional construction, for example, while others are attempting to sublease excess space or dispose of their unneeded assets outright.
In the latter category is California-based 3Com Corp., which announced in June that it was selling its 127-acre complex in Marlborough. The firm opened the $100 million facility in 1999 with four buildings and nearly 550,000 square feet of space. The parcel is permitted for another 600,000 square feet.
One issue stemming from the proposed sale is whether the property is marketable for multi-tenanted use, with one veteran broker maintaining last week that 3Com resisted initial suggestions by architect ADD Inc. to make the buildings more adaptable.
They are not designed well for a downsizing scenario, said the broker. Those buildings will be difficult to subdivide.
As a result, the broker said the marketing agent, Cushman & Wakefield, has been restricted in pursuing potential suitors, opining that developers are less likely to make an offer on the 3Com site as a repositioning play. Instead, the broker said, efforts to date have focused on potential users.
I don’t think they have come to grips with reality, said the broker. There are no 500,000- or 600,000-square-foot users out there, and there aren’t going to be any for awhile.
ADD Inc. President Wilson Pollock acknowledged last week that 3Com had a powerful cultural statement they wanted to make for the campus that may not align with the prototypical multi-tenanted office park. The complex is compressed, he said, with parking spaces placed around the perimeter and the buildings all interconnected.
Nonetheless, Pollock also insists that the development could work for multiple companies, especially given that each building has a stand-alone entry and lobby, while the floor plates provide for efficient layout. It’s fairly flexible, he said. It does have a campus distinction to it, but it could be subdividable … I don’t think that’s a problem at all.
Interestingly, Pollock said ADD Inc. does typically advise companies to consider an exit strategy when designing a building, taking into consideration ways to alter its function should the owner’s needs change. We definitely feel we are serving the client by bringing the [flexibility] issue up, he said.
Scott Hughes, president of Hughes Properties Corp., said 3Com would have a difficult time leasing space to tenants needing 5,000 to 10,000 square feet, largely due to logistical issues such as metering utility costs. But while the MetroWest market is well-represented by small-sized companies, Hughes nonetheless said he believes the property could accommodate multiple tenants, especially those needing 40,000 square feet or more. He noted, for example, that 3Com has already subleased 135,000 square feet at the property to Cereva Networks.
Hughes agreed that Cushman & Wakefield is fighting to sell the asset at a difficult time in the cycle, acknowledging that there are virtually no prospective users to pursue. At the same time, he added that the development has a number of strong points that should ultimately lead to a deal, including the recent opening of a new interchange to Route 495 that is located just one-half mile down the road.
It’s in a good location and has beautifully designed and well-built buildings, Hughes said. It’s a very desirable property.
‘Stronger Time’
Still, any developer looking to subdivide 3Com would likely only do so with a tenant in tow, Hughes said, unless they got a deep discount on the asking price. But while 3Com has supposedly adjusted its expectations somewhat in recent months, Hughes said he doubts the communications-equipment firm would accept a bargain-basement deal simply in order to dispose of the property.
This is a much stronger time for the market, Hughes said.
Others said it is possible 3Com might accept a sale/leaseback arrangement with an investor. Calls to Cushman & Wakefield to discuss the matter were not returned by Banker & Tradesman’s press deadline.
While 3Com is looking to sell its campus, other suburban high-tech companies are hunkering down in hopes of improved conditions during 2002. In Burlington, Sun Microsystems has acknowledged a delay in its aggressive $100 million expansion plans at its campus, putting its latest project on hold for at least the next six months. Site work is proceeding for several other buildings there, but it is unclear whether development of those facilities will move beyond that stage.
In Boxborough, Cisco Systems has mothballed three buildings that were getting underway just as the technology bubble burst. The firm has said it will reevaluate its plans for the campus in 2002. EMC Corp. was also in the midst of a building boom, having purchased several hundred acres in Southborough and Westborough. Construction for those parcels is on hold until permitting is finalized.