The incredible has happened – leasing activity in the Interstate 495 market has been resurrected.
Deals are still modest, with 30,000 square feet the largest reported to Banker & Tradesman. And office space is not exactly flying off the shelves. But absorption is happening, and that, according to industry experts, likely signals better days coming for the vacancy-rich submarket.
But the modest lease deals, which we’ll talk some more about later, are not the big story for I-495 West. The big story, of course, is that the TJX Cos. has closed on its deal to buy 300 and 400 Puritan Way in Marlborough from Fidelity Investments. TJX will create a new headquarters complex at the Fidelity properties.
Together, the properties total about 717,000 square feet of space. TJX Cos. is paying about $95 per square foot for the buildings, roughly $70 million when all is said and done. The company said it expects to move into the properties in late summer/early fall 2013.
The acquisition is a boon to the I-495 West market, where the vacancy rate has settled to about 17 percent as of the first quarter, according to Richards Barry Joyce & Partners.
If TJX did not pick up those properties, it’s unclear who, if anyone, would have bought the site because the buildings cannot be subdivided, said Kevin Hanna, principal with Cassidy Turley FHO.
“Those two buildings didn’t compete with 90 percent of the market because they’re so large and not able to be subdivided,” Hanna said in a recent interview. “Truth be told, when we’re out in the market with tenants looking for space, for 90 percent of those tenants, the Puritan Way buildings weren’t even on the list. So this deal is really huge for that market.”
Former TJX Space Eyed
The company is vacating 273,000 square feet of space it occupies at 500 Old Connecticut Path in Framingham. And TJX will leave about 160,000 square feet at 118 Flanders Road in Westborough. But the move is still a net gain in absorption for the submarket, and those two buildings can be subdivided, so they’ll compete in the local real estate market, Hanna said. He declined to talk about potential tenants in the market looking at the two buildings TJX is leaving.
However, industry sources that asked for anonymity told Banker & Tradesman that Northborough-based Pall Corp. is in the market for about 100,000 square feet of space. And the same goes for EMC. Cavium Networks is looking in the Framingham/Natick area for about 40,000 to 50,000 square feet of space. So, it’s possible the space being vacated by the TJX move could be at least partly scooped up before too long.
And the good news doesn’t end with one large transaction. While small and not frequent, the amount of leasing activity has been picking up in the area. Insurance software products provider OneShield has inked a deal to lease about 30,000 square feet of space at 62 Forest St. in Marlborough, according to industry sources. PAID Inc. recently moved into 26,000 square feet of space in Westborough, according to information provided by Richards Barry Joyce & Partners.
“[The I-495 West submarket] was as slow as I’ve seen it in 24 years last year,” Hanna mused. “But this year there’s been a lot of activity, real activity. Leases are starting to get signed. There are users in the market with real requirements and not just looking around with uncertainty.”
And with properties along I-495 West currently trading at well below replacement costs, the time could be right for chief executives to make a move toward consolidating or expanding into one of the many empty buildings in the region, according to industry sources.
“Buildings that lease for relatively low rents compared to other parts of the cycle are attractive to tenants,” said Frank Petz, executive vice president for Richards Barry Joyce and Partners, which is marketing the former Qteros campus in Marlborough that offers the potential for more than 2 million square feet of industrial development.
