Biotechnology giant Genzyme Corp. leased a total of nearly 100,000 square feet in Cambridge over the summer at 55 Cambridge Parkway (above) and 675 West Kendall St.
Perhaps some math whiz from the Massachusetts Institute of Technology could be called in to unscramble the equation, but the results did not quite add up for Cambridge’s commercial real estate market in the third quarter, with office net absorption ranging from minus-27,000 square feet in one research report to a Lincoln Property Co. calculation nearly 185,000 square feet on the plus side.
Despite such vagaries, the message was uniformly optimistic from Cambridge specialists interviewed, even as Biogen and Hewlett-Packard prepare to forsake nearly 150,000 square feet in Kendall Square and two erstwhile Cambridge companies settled into new digs across the Charles River in Boston.
“I think we’re going to have a great stretch,” said Richards Barry Joyce & Partners principal Steven M. Purpura, whose firm delivered the most dour third-quarter figures of those reports produced locally. Reflecting the lease terminations and defections to the Hub, RBJ’s overview actually supports the idea that Cambridge is seeing robust leasing in 2005, offered Purpura, maintaining the outcome could have been even more difficult given the upheaval. Along with colleague Robert B. Richards Jr., Purpura represents several prominent properties in the market, including Cambridge Discovery Park and 141 Portland St.
“I would characterize it more as a blip on the screen than a trend,” Purpura said of the negative quarterly outcome. “The market felt more active than the numbers might [indicate].” RBJ Research Director Brendan J. Carroll stressed that 19 buildings in Cambridge saw gains in occupancy during the quarter vs. just 11 hit by declines. Small- to mid-sized tenants dominated the leasing landscape over the summer, although biotechnology giant Genzyme Corp. took nearly 100,000 square feet collectively at 55 Cambridge Parkway and 675 West Kendall St., a property which had been originally developed on behalf of Vertex Pharmaceuticals. In the Lincoln Property Co. report, Research Director Emily Schwartz listed such pacts as a 27,000-square-foot renewal at One Main St. by CSG Systems and ARC Inc.’s 18,000-square-foot lease at Five Cambridge Center as noteworthy transactions during the quarter.
Encouraging Pace
According to RBJ, vacancy rates rose slightly to 16.2 percent in the third quarter, but average Class A asking rents stayed firm at $28.63 per square foot. Lincoln Property Co. recorded a 19-cent jump per square foot for office space. The direct vacancy rate barely budged in Lincoln’s survey, dropping from 15.2 percent to 15.1 percent.
Trammell Crow Co. principal Joseph P. Fallon, who brokered the Genzyme leases for the tenant, said he is encouraged by the pace in Cambridge, especially on the laboratory end. Following a slow start to the year, laboratory leasing has been impressive, said Fallon, eliminating many of the opportunities for users requiring 50,000 square feet or higher. “The large blocks are definitely fewer and farther between,” said Fallon, who cited just two existing buildings offering 100,000 square feet or more of contiguous space, those being 640 Memorial Drive and 320 Bent St.
Although it did not provide a third-quarter breakdown, Trammell Crow puts net absorption of laboratory space in Cambridge at 228,000 square feet positive during the first nine months of 2005, dropping the direct vacancy rate of the 6.7 million-square-foot inventory from 10.7 percent to 8.8 percent and the availability mark from 21.4 percent to 18 percent. There are three to four large laboratory requirements circulating in the city needing 60,000 square feet or more, including Schering-Plough Corp., which Fallon is representing.
In the office market, Cambridge has had 147,000 square feet of positive absorption to date in 2005, according to Trammell Crow, although both Alewife and Harvard Square are in the red by nearly 100,000 square feet between the two submarkets. That has dragged down gains in the East Cambridge market, which has seen 240,000 square feet of net absorption and a drop in its vacancy rate of 2 percent to 20.7 percent, Trammell Crow said.
Spaulding & Slye Colliers registered 61,000 square feet of net absorption during the quarter for Cambridge office space and an impressive 265,000 square feet of net absorption in the laboratory market. Those outcomes give the city 337,000 square feet of positive net absorption for the year in the office sector and a gain of 371,000 square feet in lab space.
Vice President Benjamin Breslau of Spaulding & Slye’s Research Division said life sciences companies generated the greatest demand for both office and lab space, with the velocity so solid that it brought Cambridge’s availability rate for the combined markets down by nearly 3 percent in the quarter, from 19.5 percent to 16.7 percent. That was the biggest drop of any Greater Boston submarket reviewed by Spaulding & Slye, noted Breslau. A decision by Vertex Pharmaceuticals to pull 150,000 square feet of sublease space off the market played a key role in dropping the supply substantially, according to Spaulding & Slye, which noted that the year-to-date absorption figures are well above the annual average for Cambridge as the leasing market enters the final two months of 2005.
