Watertown’s Arsenal on the Charles mixed-use complex has been one of the biggest success stories of Boston’s fringe office markets.
Life on the edge can be challenging, and Boston’s fringe office markets have certainly had their struggles of late, but as the second half of 2005 begins, a prolonged trend of rising vacancies and plummeting rents could finally be reversing course.
“We’re busy,” North Station-based broker Karyn McFarland said last week, estimating having negotiated more than 150,000 square feet of leases there since late 2004, including the just-completed pact by Baseline Publications for a full floor at 77 North Washington St. Another 10 deals are pending, said McFarland, who declined to identify those prospects.
Baseline, which was represented by broker Todd Saber, is relocating from the Back Bay, and reflects a growing migration of “creative” tenants flocking to North Station, McFarland reported. “They love the brick-and-beam,” she explained, as well as access to public transit for employees and an array of restaurant and entertainment options. “It doesn’t shut down at 6 p.m.”
The recent surge witnessed in North Station is welcome news for a market that has among the city’s highest vacancy rates, with Meredith & Grew placing it at 19.6 percent after negative net absorption of 37,000 square feet for the quarter and more than 54,000 square feet since the start of the year. Only a 23.5 percent vacancy in abutting Charlestown exceeded North Station’s rate in the seven submarkets tracked by Meredith & Grew, which has the lowest rate at 5.2 percent in the Fenway/Kenmore district.
Among other submarkets, South Station is in the red for absorption by 70,000 square feet, said Meredith & Grew, and Crosstown has a deficit of 60,000 square feet. The 11.4 million-square-foot Back Bay led all city submarkets for the first half of the year after enjoying 333,000 square feet of positive absorption and dropping its vacancy rate to 13.5 percent, nearly 2 percent lower than the city’s average. The Seaport District also turned the corner on an up note, with Meredith & Grew indicating 146,000 square feet of positive absorption to drop its vacancy rate to 14.7 percent.
The Seaport District and core Fort Point Channel had an intriguing six months, welcoming the arrival of such new tenants as Elkus Manfredi Architects and Shepley Bulfinch Richardson & Abbott and the departure of Boston Wharf Co. as a landlord in the district after more than a century of involvement in the area. One of Boston’s most venerable architectural concerns, SBR&A’s 65,000-square-foot lease at the World Trade Center ended a lengthy stay in the city’s Financial District, which suffered several defections outward in recent months.
In its midyear report, Spaulding & Slye Colliers estimated that North Station had negative absorption of 65,000 square feet in 2005, the most of any fringe market. That firm had both the Seaport and South Station districts negative for the year, even after more than 100,000 square feet of positive absorption for the Seaport submarket in the second quarter. Charlestown registered 10,000 square feet of positive absorption in the opening six months, but a glut of sublease space, including a major block at the Schrafft’s Center being shopped by ManuLife Financial, has given it the highest availability rate in the Hub at an alarming 28.4 percent.
The inner suburbs recorded more than 90,000 square feet of positive absorption in the first half of 2005, said Meredith & Grew, providing the 5.3 million-square-foot submarket with a vacancy rate of an even 15 percent, compared to the suburban average of 21.6 percent. That momentum slowed a bit in the second quarter, however, with only Worcester posting a lower net absorption rate of 25,000 square feet than the 41,000 square feet of positive net absorption estimated by Meredith & Grew in the inner suburbs.
Besides the Somerville-Malden loop to the north, the Boston neighborhoods of Allston-Brighton and abutting Watertown have forged a significant fringe submarket in the new millennium, with Cushman & Wakefield estimating 3.4 million square feet of space in those communities in 44 properties. Along with the gleaming Brighton Landing just to the East, Watertown’s Arsenal on the Charles mixed-use complex, forged from a surplus Army facility, has been the driving force, according to Codman Co. principal Darryl C. Morse.
“It really put Watertown on the map,” Morse said of the 37-acre complex, now owned by Harvard University. Guided by the Beal Cos., exclusive agents for the park, the Arsenal on the Charles has recently welcomed such new tenants as Boston Sports Clubs, Bard, Rao, & Athanas Consulting and athenahealth. The arrivals offer additional optimism for nearby properties, said Morse, who has teamed up with Codman principal Peter W. Evans as agents for 125 Walnut St. The 130,000-square-foot building, owned by Everest Partners, has about 30,000 square feet available, said Morse.
Rental-wise, the submarket has performed well, with Cushman & Wakefield estimating asking rates there at $27.40 per square foot, compared to the overall market average of $23.35 per square foot. Among Boston’s office submarkets, the overall average of $30.28 per square foot was far above the $18.93 per square foot average in Charlestown and the $21.58 per-square-foot mark in the Midtown district. The Back Bay had the highest average at $37.07 per square foot.
Joe Clements may be reached at jclements@thewarrengroup.com.
