Acton’s Nagog Woods has enjoyed a number of recent sales and lease deals, including Tatara Systems’ leasing of nearly 12,000 square feet on the third floor of 35 Nagog Park.
Recovery could be near for suburban Boston’s Interstate 495 office market, but the region’s lingering economic woes have claimed another landlord casualty in the interim, with two Acton buildings being quietly taken back by their lender, Lehman Bros. Also known as Nagog Woods, 50 and 100 Nagog Park Drive had been owned by Tishman-Heskin Partners of New York since 1997.
Efforts to contact Lehman and Tishman-Heskin Partners officials were unsuccessful by Banker & Tradesman’s press deadline, but sources said Lehman assumed control of the $23 million loan on the buildings from Principal Financial Group last year before buying the note at auction earlier this month for a figure said to be between $15 million and $17 million. The properties represented Tishman-Heskin’s final foothold in the Massachusetts real estate market after selling other assets in Hudson and Stoughton as part of a national liquidation strategy of its portfolio.
The transfer of Nagog Woods comes at a time of upheaval for the I-495 North office market. Saddled with one of the highest vacancy rates in the region, the corridor is nonetheless showing signs of life, as witnessed by a slew of leasing activity at Nagog Park in Acton, where deals totaling nearly 50,000 square feet have been inked by the lead landlord, KBS Realty Advisors. “It does seem like we are seeing an upswing after a rough 2004,” Richards Barry Joyce & Partners associate Jamey Lipscomb acknowledged last week. “You can really feel the energy.”
I-495 North’s pace began to quicken last November and has remained encouraging since, said Lipscomb, citing multiple showings being conducted last week at Nagog Park. RBJ&P is exclusive agent for approximately 350,000 square feet owned at Nagog by KBS, which controls eight of the 11 buildings in the complex. Nagog Woods is considered part of Nagog Park despite the different ownership.
In the spate of leasing victories for KBS, Azimuth Systems and sentitO Networks each took 13,000 square feet at 31 and 43 Nagog Park, respectively, while Tatara Systems secured nearly 12,000 square feet on the third floor of 35 Nagog Park. In addition, Virtual Iron Software has committed to 10,000 square at 43 Nagog Park as part of a lease extension and expansion. RBJ&P’s team of Lipscomb and Troy Coady and principals John C. Wilson and Brian M. McKenzie negotiated all four deals for KBS. T3 Realty Advisors represented the tenant in three of the transactions, while the Staubach Co. acted on behalf of Virtual Iron Software.
Turning the Corner
Most of I-495 has had a difficult stretch in the new millennium, and the northern tier has yet to overcome the technology crash that began nearly four years ago, said RBJ&P Director of Research Brendan Carroll. Although the suburban Massachusetts office market enjoyed a robust 2004, I-495 North experienced 417,000 square feet of negative absorption to start 2005 saddled with a vacancy rate of 31.5 percent, said Carroll, who counts 15.1 million square feet of office inventory in that area.
One hopeful trend, according to Carroll, is that venture capital funding appears to be on the increase for emerging technology companies, providing optimism that such resources will lead to more demand for space throughout I-495 North, especially for core communities such as Acton, Boxboro and Littleton. Wireless communication is luring new funding, said Carroll, representing a promising development for a region reliant on technological innovation.
Given a labor force teeming with techno talent harkening back to the days of Digital Equipment Corp. and Wang Computers, I-495 North is poised to benefit from a high-tech revival, said Lipscomb, who credits local know-how for spawning many of the upstart startups driving the area’s office market at present. Large requirements are few and far between, but Lipscomb said he is impressed by a surge of smaller companies seeking office/flex space. Nagog Park is doing its best to lure such companies, Lipscomb said, with KBS Realty willing to subdivide to as little as 1,000 square feet and amenable to flexible lease terms to accommodate the unique needs of fledgling companies.
KBS “understands the mindset” of young firms, Lipscomb said, while listing other Nagog Park benefits that could attract promising tenants, including five restaurants and substantial parking, plus a mix of product type, from inexpensive, efficient offerings to 50,000 square feet and above available at 50 and 100 Nagog Park.
With Cushman & Wakefield of Massachusetts handling leasing duties at 50 and 100 Nagog Park for the vanquished owners, Lipscomb could not speculate on what the future holds for the two properties, but he opined that they could prove a solid option should a firm in the KBS buildings need a larger footprint, perhaps following a successful product launch or as a result of a merger or acquisition. Nagog Park’s largest tenant, he noted, is Ciena Corp., which landed at the campus after buying a firm in the property. RBJ&P subsequently represented KBS last year when Ciena committed to 42,000 square feet in the property
Totaling just over 310,000 square feet, 50 and 100 Nagog Park Drive are nearly empty after enjoying considerable success in the boom times of the late 1990s. “We filled those buildings up in six months the first time we had them,” recalled Cushman & Wakefield of Massachusetts broker James B. Thomson, who provided leasing and sales consulting services for Tishman-Heskins in the Bay State, including oversight of 50 and 100 Nagog Park Drive for the past eight years.
Thomson said both buildings were well received until the technology crash, but the failure of some tenants and a depletion of the leasing roster through attrition resulted in the space being emptied out over time. After achieving rents approaching $30 per square foot, I-495 North has seen rates plunge significantly, said Thomson, estimating that plenty of space is now being marketed for $13 to $14 per square foot on a gross basis. “The market has just never come back,” said Thomson, adding “there isn’t much room” for upside.
According to Thomson, no decision has been made on who will be selected as agent for 50 and 100 Nagog Park Drive, but sources said several firms are vying to take over the assignment. And while it might seem like a daunting task to handle, Lipscomb insisted that the improving climate should make the process easier going forward. “It has finally turned the corner,” he said of I-495 North.
