The facility at 226 Causeway St. in Boston’s North Station office district recently was renovated by the Intercontinental Cos.
For obvious reasons, the concept of anything warming up has been difficult to grasp in the current Bay State environment, but when it comes to the office market in Boston’s North Station district, industry observers insist the hoped-for thaw is indeed becoming a reality.
“It’s like night and day between last fall and this spring,” said Michael Grill, owner of 98 North Washington St. in the heart of the North Station area. “We went from having nothing going on to where we are now seeing a lot of activity.”
Grill has retained Kevin Brown of Lincoln Property Co. to broker approximately half the space in the 83,000-square-foot office building, some of which is being opened up by the pending departure of Grant Thornton to the nearby 226 Causeway St. facility recently renovated by the Intercontinental Cos. At a competitive asking rate of $23.50 per square foot, and with space subdividable to 1,500 square feet, 98 North Washington St. is seeing some interest due to the rent rate and the building’s flexibility, said Brown. In addition, he said, tenants are becoming increasingly comfortable with North Station as an office destination, especially as the Big Dig winds down.
“Access in and out of North Station is equal to or better than any other part of the city, and it’s only going to improve,” said Brown, explaining he is giving tours to a variety of users, including attorneys and engineering firms, as well as nonprofit organizations.
Cautious Optimism
Broker Karyn McFarland, president of the Downtown North Business Association, which encompasses North Station, reported a similar trend of tenants. Lawyers, she said, are being drawn by the new state courthouse at North Station, as well as the Tip O’Neill Federal Building, while architects and engineers appreciate the variety of buildings available. Nonprofit groups favor the area due to the varied transit options, McFarland maintained, including the commuter rail and the Orange, Green, Red and Blue subway lines.
“I don’t think people see it as a perimeter market anymore,” said McFarland. “Companies are seeking out North Station as the place they want to be.”
Brown said the typical tenant seeking space in North Station is in the 5,000- to 15,000-square-foot range, although properties such as 226 Causeway St. have been able to accommodate larger requirements. McFarland, meanwhile, has a full floor available at 77 North Washington St., space left by the departure of Fast Company Magazine. The offering amounts to about 14,000 square feet, McFarland estimated.
That space and other leasing opportunities in North Station are all garnering interest, said McFarland, who agreed with Grill that the district suffered through a harsh fourth quarter of 2002 before rebounding substantially in the past few months. “It was dead, but that’s definitely not the case anymore,” McFarland said. “We’ve been constantly busy, which has been a real relief.”
First-quarter figures released by Spaulding & Slye Colliers indicate that North Station is showing signs of stability, although the vacancy rate in the area has increased during the past year from 6.9 percent to 9.8 percent, while the availability rate doubled in that time from 9.1 percent to 18.1 percent. Average asking rates in that time are down from $40.99 per square foot to $28.66 per square foot, but first-quarter 2003 net absorption was slightly positive at just under 11,000 square feet. The vacancy rate for North Station was 8 percent at the end of 2002.
Although it was not a substantial amount of leasing in the first quarter, the absorption did manage to finish on the plus side after a negative finish to 2002, and North Station rental rates were off only slightly from the year-end 2002 figure of $29.64 per square foot. McFarland said she believes several pending lease deals could make for a solid second quarter, offering a scenario that could put North Station back on track for a strong 2003.
Leasing office space is not the only source of intrigue in North Station at present, with the Downtown North Association also working closely on the completion of the Big Dig, as well as planning for the upcoming Democratic National Convention at the FleetCenter. “We are doing everything we can to put our best foot forward,” said McFarland.
In any event, it does appear North Station is recovering from the doldrums of recent months, a trend that should help prevent a repeat of the troubles that beset the district in the early 1990s. In that case, overbuilding and the dour economy sent office vacancies in North Station above 30 percent. Save for the 226 Causeway St. renovation, which added some 200,000 square feet of office space to North Station, there has been little in the way of new construction in the area during the past decade, although new projects just across the bridge in Charlestown do offer some close competition.
From Brown’s perspective, however, there is plenty of business in North Station at present, adding that he also hopes to see a deal completed in the near term. “Knock on wood, we’ve been encouraged by the activity,” he said. “Right now, I’d say I’m cautiously optimistic and I’ve been pleasantly surprised.”
Joe Clements may be reached at jclements@thewarrengroup.com.
