Waltham Woods. Image courtesy of Newmark
Boston Properties executives spotlighted recent leasing activity in the Route 128 office and lab market while acknowledging a current lack of interest in large downtown office expansions.
The nation’s largest office REIT completed a series of leases totaling 378,000 square feet in the Route 128 submarket with the new tenants paying from 7 to 40 percent higher rents than the previous tenants, President Doug Linde said today in a conference call to discuss Boston Properties’ fourth-quarter financials. The deals included leases by MarkForged and Wellington Management in Waltham and Needham.
CEO Owen Thomas said corporate dissatisfaction with “decaying efficiency, retention and culture related to remote work” will prompt more companies to restore traditional office-based workplace models in 2022. But during a Q-and-A session, he said the disconnect between management and labor over the future of office work lingers.
“People are comfortable doing a lot of things in person, but they’re not comfortable coming back to the office. The tight labor market is preventing business leaders from being more aggressive [about in-person work requirements],” Thomas said.
Activity has been quieter in Boston’s central business district, where a dozen smaller deals totaled 80,000 square feet, and companies have few large office requirements, Linde said.
Boston’s central business district comprises 27 percent of Boston Properties’ overall net operating income, according to its fourth-quarter earnings statement. The firm has a full or partial ownership in 11 properties within the submarket including such properties as 200 Clarendon St., 100 Federal St. and the Prudential Center. By contrast, suburban Boston properties contributed just 7 percent of NOI.
Boston Properties has been focusing on office-to-lab conversions to maximize suburban lease opportunities. The firm announced in April 2021 that it would convert 224,000 square feet of office space at its Waltham Woods complex into speculative lab space, after acquiring the 392,600-square-foot campus at 880 and 890 Winter St. in 2019 for $106 million.
On Nov. 29, TScan Therapeutics announced it will lease 113,487 square feet at 880 Winter St. for its new headquarters, replacing its 830 Winter St. location. The 10-year lease begins with base rent of $7.6 million, according to an SEC filing. Additional leases were signed by RVAC Medicines and EdiGene.
Boston Properties’ revenues grew 10 percent during the fourth quarter to $731.1 million. Funds from operations, a key measure of a REIT’s financial performance, totaled $1.55 per share, up from $1.37 per share during the same quarter in 2020.
The total of 2 million square feet leased nationwide during the fourth quarter represents a 55-percent increase over the previous quarter, and life science tenants accounted for 25 percent of the square-footage.
