Athenahealth Inc. of Waltham, a medical management firm, reportedly is deep in discussions to lease as much as 100,000 square feet at the Arsenal on the Charles office park in Watertown.
All of a sudden, Boston’s inner suburbs are in again for commercial real estate.
Having enjoyed a solid run during the late 1990s only to be battered by the regional recession that has lingered for the last three years, office, flex and industrial properties inside Route 128 appear to be staging a comeback in the second half of 2004, with several notable lease deals either just being cemented or said to be in late-stage negotiations.
Along with the blockbuster First Marblehead Corp. lease unveiled last week at One Cabot Road in Medford, a medical management firm is reportedly close to inking a major agreement at the Arsenal on the Charles office park in Watertown, while AMB Corp. recently signed a six-figure pact at an industrial building it owns in Somerville. Although leasing velocity remains a fraction of that enjoyed during the boom days, observers are expressing hope that the current surge can be sustained as the economic rebound takes hold in communities such as Allston, Brighton and Watertown to the west of Boston and Medford, Malden and Chelsea to the north.
“There does seem to be a burst of activity,” acknowledged Mark Winters, executive director at Cushman & Wakefield of Massachusetts. “The market remains pretty spotty overall, but [the inner suburbs] do seem to be getting busy again.”
Winters was at the forefront of the emerging Brighton and Watertown office submarkets, having helped secure tenants at both the Arsenal on the Charles and at Brighton Landing in Brighton, a two-building complex overlooking the Massachusetts Turnpike Extension constructed by BV Development Corp. After securing New Balance Inc. as its anchor tenant and selling one of the two buildings to WGBH-TV, Brighton Landing reached full occupancy earlier this year.
Meanwhile, the Arsenal on the Charles has had its own roller coaster ride since the one-time Army installation was sold to a Pennsylvania firm in 1997 and overhauled into more than 750,000 square feet of office and retail space. After a successful leasing campaign at the outset, the park was purchased by Harvard University for $162 million in 2001 just as the technology bubble was about to burst. Several high-tech companies in the park either went bankrupt or departed the Arsenal, but Harvard subsequently retained the Beal Cos. of Boston to fill those holes with new tenants.
‘Very Significant’
The inner suburban commercial markets initially were forged to service spillover from downtown Boston and Cambridge, but the recession not only opened up space in those core areas, rental rates were driven down to a level that has made it challenging for fringe properties to compete. The most visible example of those struggles can be found at the former Casey & Hayes warehouse in Allston where Cabot, Cabot & Forbes unsuccessfully tried to build a giant telecommunications facility just as that sector soured. The firm has since tried, with little success, to lure life sciences uses to the hulking structure.
As for the Arsenal, sources said they believe Beal Cos. is making solid progress in its leasing campaign, particularly amid rumors that Athenahealth Inc. of Waltham is deep in discussions to take upward of 100,000 square feet in the complex. Sources claim that another tenant needing about 30,000 square feet also is negotiating with the Arsenal, as is a health club operator.
At this point, none of the parties involved appear ready to acknowledge the interest, with calls to Beal Leasing Director Molly K. Walker and Athenahealth officials unreturned by Banker & Tradesman’s press deadline. Cofounded in 1997 by a first cousin of President Bush, Athenahealth is currently based at One Moody St. in Waltham.
Despite the silence, sources insisted that Athenahealth is among several live prospects targeting the Arsenal, whose vacancy rate was at about 50 percent when Beal began its leasing program. That gap has closed, although exact occupancy levels for the property were unavailable. The centerpiece of the park is 311 Arsenal St., which contains more than 350,000 square feet of high-end space.
Any deals would be welcome at this point, given a slow beginning to 2004. According to Lincoln Property Co., the inner suburbs saw negative absorption of about 6,000 square feet during the first half of 2004, while more than 25 percent of the estimated 6.7 million square feet of office space in those communities is currently available. The direct vacancy rate was 18.6 percent at the midyear mark.
The First Marblehead lease should bolster the Inner Suburbs North market tracked by Lincoln Property, according to Research Director Emily Schwartz, with that 136,000-square-foot deal expected to be included in the third-quarter figures. Totaling less than 3.5 million square feet, Lincoln estimates that the Inner Suburbs North had just over 1,200 square feet of positive absorption in the first half of 2004.
On the industrial end, Austin Smith of Lincoln represented AMB in its 115,000-square-foot lease to Royal Institutional Services at 30 Innerbelt Road in Somerville. “That deal is very significant,” said Schwartz, citing the thin amount of industrial product available in the Inner Suburbs. David Corkery of CB Richard Ellis/Whittier Partners was broker for the tenant in the lease.
In the First Marblehead lease, David W. Campbell of the Codman Co. represented the tenant, while GVA Thompson Doyle Hennessey & Stevens acted on behalf of the landlord, Berkeley Investments of Boston. In a release announcing the deal, Berkeley Senior Asset Manager Steve Brooks said the First Marblehead pact and a smaller one brokered earlier this year by GVA/Thompson Doyle “has really brought the building back to life.” Totaling 330,000 square feet, One Cabot Road is now 95 percent occupied.
