Metcalf & Eddy, an engineering firm, has reportedly agreed to lease as much as 80,000 square feet of space at 701 Edgewater Drive, a speculative office building under construction in Wakefield.
After one of the slowest third quarters in memory, the suburban Boston commercial real estate market appears to be picking up just as 2002 winds down, with industry sources reporting a pair of significant leases in the works. In one instance, engineering firm Metcalf & Eddy has supposedly committed to 701 Edgewater Drive in Wakefield’s Edgewater Office Park, while biotech company Antigenics is said to be taking more than 100,000 square feet at 3 Forbes Road in Lexington.
“That’s real fresh,” one broker said of the Antigenics deal, with the New York-based company having scoured the market extensively before homing in on the Lexington property. The 160,000-square-foot facility is owned by the Bulfinch Cos. of Needham.
Sources estimate the Metcalf & Eddy lease to be in the 80,000-square-foot range, although the company leases substantially more than that at its current home at the Harvard Mills in Wakefield. If that deal is completed, it would represent another coup for Hobbs Brook Management, which began construction of 701 Edgewater Drive this summer without a tenant in tow. The developer had similar success with 701 Edgewater’s twin property, 601 Edgewater Drive, landing Epsilon Assoc. as anchor tenant this summer after developing that as a speculative property as well.
Calls to Bulfinch and Antigenics’ leasing agent, Insignia/ESG, were not returned by Banker & Tradesman’s press deadline. Similarly, Metcalf & Eddy broker Greg Klemmer and Hobbs Brooks officials were unavailable for comment on that lease. Nonetheless, sources insisted the tenants have committed in both cases.
‘A Lot of Space’
As for the market overall, Spaulding & Slye Colliers principal Tamie R. Thompson said last week that any activity is welcome news, but she also stressed she believes the last-minute surge will do little to save the suburban market from a brutal 2002. “There do seem to be a few [big] deals out there, but there is not enough substance to them to change things very much,” said Thompson, who specializes in the Route 128 North area. “There’s no big momentum shift [toward a market] recovery.”
Whereas Route 128 was littered with six-figure commitments in 1999 and 2000, the technology bust and the recession have pared down the number of companies looking for space, and the amount of occupancy required. According to Spaulding & Slye, for example, the median deal size in suburban Boston has shrunk from a high of 38,000 square feet at the peak of the market to about 12,000 square feet at present. The bulk of activity is even less than that, said Thompson, with numerous tenant requirements hovering at under 10,000 square feet.
“Everybody is shrinking,” said Thompson, adding that the ongoing trend of mergers and acquisitions could dampen demand even more in the coming months. One major concern north of Boston is the impact Level 3’s takeover of Genuity will have, with the latter firm leasing an entire building at the Metro North Corporate Center in Woburn. Meanwhile, IBM’s reported takeover of Rational Software could have implications for properties from Lowell to Waltham.
In any event, the recent spate of deals is offering a bit of optimism towards 2003, albeit quite limited from the market’s boom days. Other six-figure deals of note recently include MRO’s renewal at 100 Crosby Drive in Bedford, a deal brokered by Spaulding & Slye, as well as KeySpan Energy Delivery’s 113,000-square-foot lease at 52 Second Ave. in Waltham. KeySpan is taking space formerly occupied by Renaissance Worldwide. In that deal, which building owner Beal Cos. is proclaiming to be the largest aggregate office lease in the suburbs this year, Michael Ripp and Trey Agnew of Insignia/ESG negotiated a 20-year pact on behalf of KeySpan.
According to sources, Ripp is also representing Antigenics along with colleague Andrew Majewski. Ripp did not return a phone call by press deadline.
The Metcalf & Eddy lease bears the markings of a traditional flight-to-quality decision, with the firm departing its longtime mill home in favor of brand new construction. While the Harvard Mills complex is considered a solid asset, the lure of an aggressive rental rate for a state-of-the-art building apparently was too much for the firm to resist. While Thompson said there has yet to be a full-fledged surge of companies departing older properties for new space, she acknowledged that the Metcalf & Eddy lease could be an inkling that such a migration may soon begin, similar to what occurred in the early 1990s recession.
“The cream [of the office facility crop] will start to lease at some point,” said Thompson, with pricing of Class A space having fallen enough to substantiate a move up in space for many companies. Higher build-out allowances and concessions such free rent are also likely to return, Thompson said, as landlords become increasingly competitive. While acknowledging that free rent options are not a particular favorite among building owners, Thompson said she is seeing new instances where that is occurring. “They are doing it a lot more now because they don’t have a choice,” she said. “There’s just a lot of space out there right now.”
As with other suburban brokers, Thompson said she anticipates a rough ride for commercial real estate in 2003. Potential roadblocks towards a recovery would be the lack of job growth and the increasing X factor of so-called “shadow space,” square footage leased by companies but not being used. Thompson estimates there could be an additional 10 percent of supply above the current suburban vacancy rate unaccounted for, although she added that Spaulding & Slye is working that factor into its recovery projections.
As far as other major tenants circulating for space, the lead suburban target at present would likely be Zoll Medical. Currently located at Northwest Park in Burlington, Zoll is in need of up to 150,000 square feet, although sources said the firm may be targeting Chelmsford at present. Meanwhile, in a mixed-use requirement that includes office, research and manufacturing space, Ge Panametrics is reportedly seeking as much as 200,000 square feet in the suburbs.
