Leasing activity in the Interstate 495 West submarket is beginning to increase. This 3-story office building at 225 Cedar Hill St. in Marlborough, for example, is down to an 8 percent vacancy rate.

Fads and weather systems tend to migrate into New England from the west, but the opposite is true for suburban Boston’s economic fortunes, and as 2006 begins, it appears the gains seen last year in Lexington, Waltham and the Framingham/Natick markets are finally trickling outward to Interstate 495, especially in the central strip between Route 2 and the Massachusetts Turnpike.

“The news is good in the ‘boroughs,'” said Scott R. Hughes, president of New Dover Assoc. and a veteran real estate broker covering such communities as Marlborough, Northborough and Westborough, also known as the Interstate 495 West submarket. “We’re getting really strong activity right now.”

Several substantial leases have been signed in recent weeks, reinvigorating an area that initially began to stabilize in 2005 after a rough beginning to the new millennium. According to Spaulding & Slye, there was 262,000 square feet of positive net absorption in the submarket last year, despite minus-37,000 square feet of absorption in the last three months. Spaulding & Slye put the office vacancy rate at 15.5 percent, similar to Hughes’ estimates. Using a larger sampling than Spaulding & Slye, which tracks 12.1 million square feet, Meredith & Grew reported a 23.9 percent vacancy rate for the 17.8-million-square-foot submarket and also showed a fourth-quarter dip of minus-52,000 square feet in absorption. For the year, I-495 West had 467,000 square feet of positive net absorption, Meredith & Grew indicated.

By any measure, conditions have improved, Hughes relayed, citing a greater pulse from the technology sector as one reason, with more venture capital available to fuel fresh business ideas. The tighter conditions in other suburban communities are helping as well, said Hughes, noting that Framingham and Natick companies such as Bose, the TJX Cos. and Boston Scientific have spread their corporate wings out toward I-495 West of late as space options in their markets dry up.

I-495 West also has been steadied internally, as exemplified by such local players as Sepracor, National Grid and Broadbus Technologies signing new leases in early 2006 that represent expansions. In Boxboro, for example, Broadbus grew from 28,000 square feet into 49,000 square feet at 80 Central St., while National Grid Wireless is moving from Westborough into a 22,000-square-foot block in that building as well.

Broadbus mulled other options but stuck with 80 Central St. due to its “location, image, growth flexibility, amenities and existing infrastructure to support electronic labs,” said Richards Barry Joyce & Partners Vice President James Lipscomb, who worked with RBJ principals Brian McKenzie and John Wilson on that transaction, representing both the tenant and the owner. RBJ was also broker for the landlord in the National Grid negotiations, while Rob Walles of CBRE/New England was agent for the tenant.

RBJ further assisted two landlords in Marlborough as they signed Sepracor to deals totaling nearly 100,000 square feet. The life sciences company took more than 71,000 square feet at 111 Locke Drive in a renewal with Park Development Group, and leased another 25,000 square feet at nearby 33 Locke Drive, owned by Northland Investment Corp. of Newton. Sepracor was represented in both leases by Joseph Fallon and Eric Foster of Trammell Crow Co. RBJ principals Michael Frisoli and John Lashar and Vice President Paul Leone handled the assignments for both landlords.

“The I-495 West submarket continues to show signs of improvement,” Lashar said in announcing the Marlborough deals. A skilled labor force is one attraction, he said, as well as flexibility of space options and quick highway access. RBJ estimates the I-495 West office inventory at 17.8 million square feet, putting vacancy at 21.1 percent as of year-end 2005. I-495 has now registered positive absorption in seven of the past eight quarters, according to RBJ Research Director Brendan Carroll.

Willingness to Invest
Another trend helping landlords has been generated by companies acquiring real estate for their own use, often displacing tenants who then are helping to fill up other properties. Such was the case when Middlesex Savings Bank purchased an office building at 120 Flanders Road in Westborough, leading two firms out into the market, with one landing a few doors down at 134 Flanders Road and the other at 225 Cedar Hill St. in Marlborough, a new, 3-story office building purchased two years ago by Candee Investments of Lincoln.

After brokering the sale of 134 Flanders Road in early 2005 along with Carol Ann Oliver of Parsons Commercial Group, New Dover Assoc. was named exclusive leasing agent by the Baltic Group and has since brought four new tenants to the building, including InfoSpace Inc. for more than 10,000 square feet. InfoSpace had been in the Middlesex Savings Bank property, as was ArrAy Inc., which leased 7,100 square feet at 225 Cedar Hill St. Two-thirds of 134 Flanders Road was vacant when the Baltic Group acquired it for $4.32 million, but the property now has a vacancy rate of just 20 percent after another tenant signed last week for 1,500 square feet. The 225 Cedar Hill St. asset is down to an 8 percent vacancy rate.

Both 134 Flanders Road and 225 Cedar Hill St. were helped by proactive ownership, said Hughes, who negotiated the 225 Cedar Hill St. leases for Candee Investments as well. To win tenants in the current environment, landlords need to offer turnkey space and cater to the small and mid-sized companies prevalent in suburban Boston at present, according to Hughes. Featuring floor plates of 35,000 square feet, 225 Cedar Hill St. breaks up well as a multi-tenanted building, Hughes explained, and noted that Candee Investments is also adding a fitness center and cafe.

“The [willingness] to make an investment into the building has paid off,” Hughes said of Candee.

Investment sales of properties in the I-495 West submarket also have been brisk, and Hughes said he anticipates that investors are now even more enthused given the area’s improvement since last year. “There has been a tremendous amount of sales activity across the spectrum,” said Hughes, whose own firm has brokered $20.8 million of deals during the past year just in Marlborough, including three building sales and disposition of a pair of land sites. Besides the sale of an industrial building on Simarano Drive, New Dover was a broker in the disposition of 260 Cedar Hill St. last month for $6.5 million, as well as deals for 45 Bartlett St. and a 21-acre land parcel now being used for multifamily housing.