Currently based at Lexington’s Ledgemont Center (above), Fresenius Medical Care has leased more than 200,000 square feet in Waltham and reportedly is searching for more space in suburban Boston.
Despite already leasing more than 200,000 square feet at Reservoir Woods in Waltham, Fresenius Medical Care reportedly is conducting a search for even more space to meet its needs in suburban Boston, with industry sources claiming last week that the Germany-based health care concern is close to signing another sizable transaction, most likely in Lexington.
Although those directly involved remain mum on the matter, Fresenius reportedly is seeking to lease more than 50,000 square feet of office and computer space in the central Route 128 area. Several sources maintained that the firm is close to striking a deal at 32 Hartwell Ave. in Lexington, possibly negotiating to take the entire 70,000-square-foot building, which is owned by Boston Properties.
“That’s the buzz,” one source told Banker & Tradesman last week. The broker could not say whether a deal has actually been completed, but insisted that Fresenius and Boston Properties have been in “serious” negotiations in recent weeks. “I think that’s where they are going to wind up,” predicted the source, who requested anonymity. Another observer tracking the situation seconded that notion, adding that a data center function is part of the company’s requirement.
“It looks good right now,” the second source said of a Fresenius lease happening at 32 Hartwell Ave. Calls to Boston Properties were not returned by Banker & Tradesman’s press deadline, while Fresenius broker Andrew Majewski of CBRE/New England also did not respond to inquiries. One of the country’s largest real estate investment trusts, Boston Properties has owned 32 Hartwell Ave. since the 1970s. The single-story building is located on a 5.8-acre site adjacent to Hanscom Air Force Base and just off Route 128.
‘Growing Fast’
It is unclear why Fresenius would not take additional space at Reservoir Woods, a one-time Polaroid Corp. campus being renovated into a multi-tenanted office park by Davis Marcus Partners. Officials for that Boston-based real estate firm were unavailable for comment last week. One source suggested the firm might want an alternative location for its data center for backup purposes, a strategy many firms have employed in the post-911 corporate environment. Pricing might be another consideration, with Reservoir Woods among the better-quality assets being developed in suburban Boston.
Currently based in Lexington at Ledgemont Center, Fresenius will occupy 210,000 square feet at Reservoir Woods upon the project’s completion later this year. The $300 million office/research campus is anchored by a 451,000-square-foot Class A office building at 920-940 Winter St., while the entire build-out will total more than 850,000 square feet.
One potential reason for the added space requirement might be the aggressive expansion mode that Fresenius is currently in, with the company earlier this year acquiring Renal Care Group for an estimated $4 billion. “They are definitely growing fast,” noted one source. Fresenius recently bought another rival in German for an estimated $1.8 billion. Not only could the property be used to house Fresenius’ computer capabilities, 32 Hartwell Ave. could be made available for back-office operations or other ancillary purposes, according to one broker.
Besides the typical cadre of corporate and technology companies that have long populated the central Route 128 commercial real estate market, the strip certainly has benefited from the region’s reliance on medical-related companies in recent years. Many such firms have migrated into the submarket, with Lexington and Waltham sporting a slew of well-known life sciences and related operations. Current tenants in the area include Praecis Pharmaceuticals and AstraZenica in Waltham and Cubist Pharmaceuticals, NitroMed Inc. and Antigenics in Lexington.
If Fresenius does commit to 32 Hartwell Ave. or another nearby property, the deal would continue the strong leasing activity that the submarket has enjoyed during the past 18 months, a surge in stark contrast to the difficult times that gripped Waltham and surrounding communities after the technology crash that began in 2001 and lingered on for several years. With a vacancy rate once approaching 30 percent, the submarket has returned to its traditional position as the suburban market’s most desired destination.
In its recent midyear market overview, Lincoln Property Co. pegged the central Route 128 office market at 10.9 percent vacancy, compared to 15.4 percent for the suburban sector overall. The average asking rental rate for office space in central Route 128 is now at $25.06 per square foot, according to Lincoln, a rate substantially above the $19.63 per-square-foot average for all of suburban Boston.
