Converted mill buildings like RMR Group’s 9 Galen St. in Watertown are attracting commitments from companies looking for distinctive workspaces and suburban rents.
Migration to inner-ring suburbs – from Boston, Cambridge and Route 128 office parks alike – is generating steady leasing activity and pushing rents to record highs.
Landlords are positioning former streetcar suburbs like Watertown as a destination for small and midsized companies seeking lower rents than Boston and Cambridge, and more dynamic atmospheres than suburban office parks. The “urban edge” stretching from Watertown to Medford has tallied more than 300,000 square feet of absorption in 2017, the most of any Greater Boston submarket, according to Newmark Grubb Knight research.
“It’s an urban-suburban blend where you get the best of both worlds,” said Dan Krysiak, a Newmark senior managing director. “We’re getting good traction from tenants along Route 128 that are getting pushed by the younger population of workers to consider spaces closer to the city.”
The availability of open floor plan new construction and brick-and-beam buildings has widespread appeal to tech and creative companies, said Jason Rexinis, assistant vice president at Colliers International Boston.
“You don’t have to sit in hours of traffic, and the early stage companies can have a brand and an identity there rather than being the smallest tenant in a big building on Route 128,” he said. Rexinis recently represented RMR Group’s 9 Galen St. in Watertown in leases with two relocating Cambridge firms, Core States Group and Socomec Inc.
Office rents are hitting historic highs in Watertown where an expanding class A inventory is directly challenging Route 128 office parks as a landing spot for creative and tech companies on the move.
“It’s a district that has convenient drive times to a lot of different labor pools,” said Brendan Carroll, director of intelligence for Perry Brokerage Assoc. “It’s becoming a much more contiguous semi-urban experience from Boston all the way out to Waltham.”
Asking rents in Watertown averaged $40 per square foot, according to Perry Brokerage Assoc. research, which remains a bargain compared to the $46 per square foot rate in Cambridge’s Alewife submarket.
According to Avison Young research, average asking rents in the “ring” submarket hit a historical high of $33.94 per square foot in the second quarter. The brokerage defines the submarket as including outlying Boston neighborhoods, such as Brighton and Charlestown, along with the immediate northern suburbs.
Flexible lease terms and distinctive workspace designs factored heavily into Boston-based InCrowd’s decision to relocate late this year from South End to the Riverworks mill complex in Watertown. The 6-year-old company provides real-time market research to clients in the life science industry.
“Initially we tried very hard to stay in Boston and Cambridge, but the rents were just really out of our reach for the amount of space we wanted,” said InCrowd Co-founder and CEO Janet Kosloff. The firm is expanding from 3,500 square feet in the South End to 10,500 square feet at Riverworks in a three-year sublease from cloud email specialists Mimecast.
“The direction to our broker was we really needed to have a modern vibe,” Kosloff said. “Culture is important to us for recruiting purposes and to feel cutting edge.”
The major drawback to the move, Kosloff said, is the lack of public transit in Watertown beyond MBTA bus service. The company offers flexible work schedules and work-from-home options, which it may expand on a case-by-case basis after the move, she said.
Development pressures in East Watertown prompted Massachusetts Department of Transportation to study upgrades for the Arsenal Street corridor.
A draft plan released Tuesday rejected plans for separated bike lanes and bus rapid transit service, but kept open for further study the potential to add express bus service along North Beacon Street to supplement the existing Route 70/70A buses.
East Watertown boasts an expanding range of after-work attractions including redevelopment of the former Arsenal Mall into a mixed-use complex including a hotel, multifamily housing, a cinema and new retail and restaurant tenants.
Amid the rapid change, two developers’ strategies of building speculative office and lab space are starting to pay off.
Boston-based Boylston Properties recently leased 45,000 square feet to Dana Farber Cancer Institute spinout C4 Therapeutics. The cancer researchers are the first tenant committing to Linx, Boylston’s speculative 185,000-square-foot warehouse-to-office conversion and expansion project at 490 Arsenal St.
Linx faces competition from 65 Grove, a 120,000-square-foot former GE Ionics office and manufacturing building being redeveloped on spec by Cresset Group of Boston. That property landed its first two tenants in Lyndra Inc., a venture-backed oral drug delivery company relocating from within Watertown, and Bosch Thermotechnology.
Brokers are marketing remaining spaces at 65 Grove ranging from 5,000 to 87,000 square feet, with five to six property tours a week and interest split equally between office and lab tenants, Krysiak said.
“We seem to be on a run of groups that need 30,000 to 50,000 square feet,” he said. “We had three showings (Tuesday), so for mid-August, it’s been pretty brisk.”
