As a group of trophy office buildings in Boston gained new owners this year, industry observers predicted they’ll look to recoup their investments by hiking rents as leases turn over.
But there’s no guarantee that existing tenants won’t have unpleasant surprises in store as well.
Office tenants chip in a percentage of their building’s operating expenses as part of their lease payments. As properties change hands, new landlords may "remeasure the building," or recalculate operating expenses more aggressively and pass them on to tenants.
"You’ll always see that new wave come in with new ownership," said Joseph Sciolla, managing principal at Cresa in Boston. "This is a hot topic among tenants."
The issue has the potential to come into play at several high-profile office towers after a busy year of office investment sales.
Blackstone’s Equity Office sold five trophy properties in Boston and Cambridge in September to new owners including Toronto-based Oxford Properties Group and CBRE Global Investors in a series of transactions topping $2 billion. Norges Bank Investment Management bought a 45 percent stake in Atlantic Wharf and 100 Federal St., in a $1.5-billion deal that also included a Manhattan skyscraper.
As landlords renovate downtown properties to compete with the Seaport for amenities, the cost of new lobbies and common areas also will mean higher rents, Sciolla predicted.
The sales activity comes in a period of rising rents in many office submarkets in Greater Boston. Demand is so high that tenants should begin looking for new space at least a year in advance with the aim of making landlords compete for their tenancy, according to a Cresa’ research report.
Rents in Boston’s Downtown Crossing have risen from $25 to $35 per square foot in the last two years, with growing demand from tech tenants such as audio company Sonos, which is relocating from Cambridge to Lafayette City Center.
For tenants looking for pockets of value, good deals remain in the low-rise floors of Financial District buildings, where vacancies remain in the mid-teens and rents average in the low $40 range, Sciolla said.
"There’s a lot of opportunities there, and it’s going to work for some tenants, not all," he said. "The reason rents are that low is because you have very limited viewscapes."
