TripAdvisor’s new Needham headquarters.
Hello custom-built corporate campus, goodbye spec development.
The spec suburban office building or tower increasingly seems to be a thing of the past as companies turn to build-to-suits to create exactly the kind of environment to attract the best and brightest.
More than a few years into what is proving to be an historic building boom, the Boston area is seeing a growing number of new flagship buildings and campuses built for various tech, life science and other fast-growing companies.
But what we are not seeing is a bevy of proposals for new speculative office towers in Boston or new, from the ground up, spec suburban buildings by developers.
For a growing number of hot-shot companies, the control that a build-to-suit gives over everything from work environment to future expansion is trumping cost.
“They get a chance to control their own culture and control the environment for their employees who are so highly sought after today,” said Matt Daniels, managing director and suburban team leader at JLL.
The trend can be most clearly seen at work in the suburbs, especially along the red-hot 128 corridor, where rents are rising, vacant space is dwindling and build-to-suit projects are starting to multiply.
The rise in build-to-suit activity comes after a lull of a couple years as the real estate market on 128 and across Greater Boston caught its breath in the aftermath of the Great Recession.
High Profile HQs
Launched in the waning days of the last boom, a spate of new flagship buildings and campuses came online between 2008 and 2010, after which activity dropped off, according to JLL. But that quiet period is long gone now.
TripAdvisor is settling into its new 282,000-square-foot headquarters along Route 128 in Needham, complete with a salt water fish tank, a lounge with craft beer and a hip fitness center.
Not alone, Clark’s Shoes, Wolverine, Vistaprint and Thermo Fisher Scientific have all recently moved into new, specially built quarters along 128, or are in the process of doing so. They join Green Mountain Coffee, which had a new research and development center built for its Keurig Division in Burlington, and life science giant Shire, which is expanding its 128 campus in Lexington, first rolled out in the years before the Great Recession.
And more are on the way. The owners of Northwest Park and the District in Burlington are pitching two build-to suit development sites large enough for 270,000 and 180,000 square feet respectively, while the giant NorthPoint project in Cambridge is hawking sites as well to headquarters hungry companies.
Nor is it just a 128 trend – Martignetti Cos. is building a 650,000-square-foot headquarters and state-of-the-art distribution center in Taunton, while Crown Uniform & Linen Service is building a new headquarters and laundry Brockton. MathWorks is in the middle of a major expansion of its campus on Route 9 in Natick, having acquired Boston Scientific’s old campus.
And let’s not forget about Boston. GE may very well end up having its own high-rise tailor-made for it; if so, it would join Liberty Mutual, State Street and Reebok among companies with their own, high-profile headquarters in the Hub.
A New Status Symbol
By contrast, when it comes to ground-up construction of new office buildings, new projects are few and far between. Instead, developers are largely renovating existing buildings, with Hobbs Brook Management and the Davis Cos. among those spiffing up and reposition aging office buildings in Waltham.
It’s a marked contrast from decades past, with the Boston skyline having more than a few towers either built on spec or for multiple tenants back in the 1980s and ’90s.
The same was once true for the suburbs, where in the past, build-to-suits typically gave way to spec construction as the market heated up.
Yet so far, that doesn’t seem to be the pattern this time around.
From a purely cost standpoint, this corporate driven building boom doesn’t necessarily make sense – it costs far more to build in the Boston area than to lease space in an existing building. But companies increasingly want control over their work environment as they fight it out for talent in a tight labor market.
They want their offices to reflect their corporate ethos and culture, with a general preference now for generous window space with lots of natural light, open offices and large meetings spaces. Other must-haves include the ubiquitous fitness center, walk-to restaurants and shopping, JLL’s Daniels notes.
For that matter, having your own building or campus is the ultimate statement of corporate success, not to mention some great advertising. Frankly, it makes leasing space in office building with several other companies look lame by comparison.
“The number one challenge we hear from our tenants is attracting, recruiting and retaining top talent,” noted Joe Zink of Atlantic Management, in a video on new projects put out by Colliers. “The top tier people, everyone wants to recruit these people, so you have to provide that environment,” which includes building a 200,000-square-foot lab and testing complex in Marlborough for Quest Diagnostics.
Still, if there is any cautionary note, this surge in new corporate campuses and headquarters projects could just turn out to be the canary in the coal mine, warning of the next big bust.
As noted above, the last time we saw so many cranes at work building new corporate Taj Mahals was back during the final year or two leading up to epic 2008 bust. The late 1990s saw its own frenzy of corporate campus building, as Oracle and Cisco snapped up development sites along 128 and 495 and the now defunct Sun Microsystems went bananas building in Burlington.
While it would be silly to make too much of this, neither does it make sense to shrug it all off as a coincidence. More likely, it just represents the often tortuously slow process under which various suburbs vet new development – by the time big new developments finally move into construction, the business cycle is in its last stages.
Here’s hoping the current corporate building boom still has some legs.
