Cushman & Wakefield has been retained to sell the 3Com campus in Marlborough. The multibuilding property features 500,000 square feet of space and development rights for another 6 million square feet.

In a deal that offers a faint glimmer of hope for the region’s struggling commercial real estate industry, a local investment partnership has agreed to purchase the Lucent Technologies corporate campus in Marlborough, industry sources told Banker & Tradesman last week.

It’s off the market, reported one Hub broker, maintaining that Hall Properties and Ian Gillespie have placed the property under agreement. Another source concurred, and estimated that the sales price is in the $55 million range.

Located on Fairbanks Boulevard near Route 85, the complex features about 500,000 square feet of existing space and development rights for another 500,000 square feet. The property had initially been offered as part of a portfolio being sold through Cushman & Wakefield’s New Jersey office, but sources said the owner has now agreed to break up the package.

One unresolved question regarding the sale is whether Lucent will continue to occupy space in the property. While such a scenario was said to have been part of the original negotiations, one source said that carrot may now be in jeopardy given the high-tech company’s lingering financial difficulties.

Calls to Gillespie and Hall principals John and Denison Hall were not returned by Banker & Tradesman’s press deadline. The two firms have previously teamed up on other suburban Boston projects, including the successful conversion of the former GenRad headquarters in Concord. In that deal, the partnership paid $6.2 million for the 400,000-square-foot property in 1996, repositioned it and sold the building to Metropolitan Life in 1999 for a healthy $47 million.

One source likened the Concord opportunity at 300 Baker Ave. to the Lucent deal, maintaining that the Marlborough complex has the needed fundamentals to attract tenants once the economy rebounds.

There is a lot of vacancy out there right now, but I think those guys believe they are getting a well-located campus property at a pretty nice price per square foot, said the source. They have a plan they are very comfortable with, and believe they can become the low-cost provider in that market.

At the very least, the purchase does seem contrary to the direction the suburban Boston office sector has been headed during the past year. After enjoying an unprecedented surge of growth by high-tech and financial services companies in the late 1990s and 2000, the area saw vacancies balloon and rental rates plummet through most of 2001. Marlborough has been one of the leading centers during the boom, with such projects as Lake Williams Corporate Center and Marlborough Business Center enjoying robust activity that has led to new construction, at times even speculative projects.

Today, however, large blocks of sublease space have halted all talk of additional development, with the handful of tenants that are circulating in the market now able to select from a variety of options. Availability rates throughout the Greater Boston suburbs are now hitting close to 20 percent, while vacancies are also in double figures.

One source familiar with the Lucent deal predicted that the engines of growth will continue to attract companies to the central Interstate 495 area. That is particularly true, said the source, given the area’s broad high-tech employment base, one which has existed since the days when Digital Equipment Corp. dominated the market in the early 1980s. The Lucent campus itself is the former home of Stratus Computer, for example.

‘Best Deals’
Another source was less optimistic about the MetroWest region, however, especially over the near term. Every one of the big companies out there is still laying off people, said the broker, citing such established firms as Lucent, EMC Corp., 3Com, Cisco and Nortel Networks as giants who have all been downsizing during the past several months.

Not only are those players retrenching, they are also competing with commercial landlords in the area, and some observers predict high-tech companies will begin aggressively pricing their space in the coming months or sell their properties at a bargain price simply to improve their financial position. If that bears out, it could put further downward pressure on asking rents.

There currently are few signs of larger companies seeking new space in the Marlborough area, agreed Scott R. Hughes, president of Hughes Properties Corp. But Hughes said he is optimistic that I-495 will recover, adding there has recently been a flurry of tenants needing 10,000 square feet of space or less in the area. The month of December has been active, he said.

Hughes also said he believes that landlords are pricing their space to move, and are also willing to offer additional concessions, including free rent and generous tenant improvement clauses. He cautioned, however, that such allowances would wane once the sublease inventory begins to wear down.

If you are a tenant, the best opportunities will be in the first half of 2002, he said. The best deals will be gone by June.

High-tech companies had been among the most prolific space consumers in MetroWest, with some opting to develop massive corporate campuses in recent years. Sun Microsystems has an extensive campus in Burlington, while Cisco Systems began developing a Boxboro complex aimed at housing more than 3,000 employees.

Now, almost as quickly as the trend took hold, companies are abandoning centralized facilities or greatly reducing the scope of their once-ambitious plans. Cisco announced this summer it was mothballing 400,000 square feet of space that was already underway when the financial turmoil hit earlier this year. Meanwhile, Cushman & Wakefield has also been retained to sell the 3Com campus in Marlborough. The multibuilding hilltop property features 500,000 square feet of space and development rights for another 6 million square feet. It is unclear what the status of those discussions is at present.

Calls to Cushman & Wakefield to discuss the status of the Lucent and 3Com sales were not returned by press deadline.

Lucent Site Under Agreement, But Tenant’s Future Uncertain

by Banker & Tradesman time to read: 4 min