Escolar Documentos
Profissional Documentos
Cultura Documentos
Q2 2011 11
Bo st B o s t o n Of f ice Office
Research
VERV I E W OVER VI EW
2010: Net Absorption
(831,700)
Q2 2011
Greater Boston Office Market Office product within the Interstate 495 belt absorbed over 160,000 Q2 Absorption: 166,000 RSF square feet of space in the second quarter of 2011, Asking Rate: $26.05/RSF reversing a dismal trend of consistent negative net absorption over the past two and a half years. Positive absorption was once again measured in the Back Bay market, but vacancy dropped significantly in the East Cambridge market (Class A space was calculated at 6.4 percent at the end of the quarter). Limited quarter-over-quarter suburban net absorption was recorded in Q2, leaving the overall year-overyear positive net absorption total above 200,000 square feet for suburban office. Direct Vacancy: 15.0% The average asking rate for most markets besides Boston and East Cambridge continued to trend further down in the second quarter. The Q2 Greater Boston average asking rate of $26.05 per square foot fell from last quarters $26.39 per square foot rate. Interstate 495 continued to discount space available in that market and since West Cambridges high availability was a majority of space available in Cambridge, the rate in that submarket of $28.49 per square foot brought down the total Cambridge average down to $34.76 per square foot. Overall, the Greater Boston market has displayed some excellent signs of life in the first half of 2011. The investment sales market has fed off of this growth with new high-end Class A high-rise towers coming to market monthly (53 State and One Lincoln are the latest to try their luck).
Boston
(246,100)
(182,300)
Cambridge
(25,600)
Class A Class B
216,400
Route 128
(282,233)
254,600
Interstate 495
84,400
-1,200,000 -800,000 -400,000 0 400,000 800,000 1,200,000
Boston
115,800
205,900
Cambridge
45,900
Class A Class B
(314,900)
Route 128
217,900
(281,700)
Interstate 495
49,900
-1,200,000 -800,000 -400,000 0 400,000 800,000 1,200,000
Unemployment Rate
10% 9% 8% 7% 6% 5% 4%
D '07 M '08 J '08 S '08 D '08 M '09 J '09 S '09 D '09 M '10 J '10 S '10 D '10 M '11
The unemployment rate for MA has consistently dropped for five consecutive months, settling at the current rate of 7.6 percent as of May 2011. Further hiring and a continued drop in unemployment claims is forecasted for the state.
Research
VERV I E W OVER VI EW
Improvements Measured
Boston With yet another quarter of negative net absorption, the Boston office market Q2 Absorption: (83,800) RSF continued to display a sluggish recovery. Fortunately, the Asking Rate: $39.27/RSF market has been able to dodge any significant blows in 2011, and is slowly but surely absorbing the delivery of 770,000 square feet of office space at Atlantic W harf. On the other hand, the graceless ballet of tenant music chairs continued to affect one of Bostons prime office towers in the second quarter. One Financial Center, which lost Columbia Management in 2010 to 225 Franklin Street, has yet to lease the result of that move with a net loss of over 100,000 square feet in the first half of the year. 75 State Street, which lost Wellington Management to Atlantic W harf in the first quarter, has slowly chipped away at the buildings vacancy in the second quarter with the following leases: New Boston Fund, LPL Financial and LEK Consulting. The uptick in leasing for the owner Brookfield Properties resulted in over 150,000 square feet of new tenants in low to mid-rise space at 75 State Street in Q2. Direct Vacancy: 11.9% With the total vacancy rate at 4.9 percent in the Back Bay (Class A & B) the opportunity to capitalize on large requirements has dwindled, leaving sizable Class A tenants limited to options in the Financial District and Seaport. These options are by no means inferior space, however. The brand new buildings of Two Financial Center, Fan Pier and Atlantic W harf all still offer attractive options for users that exceed 70,000 square feet. Second generation space at One International Place, as well as towers along High and State Street, offer some of the best amenities for tenants in
Q2 2011
the city. Discounted options continue to fall with the sublease rate measuring a decrease to 1.6 percent (1.2 percent for Class B product) and the total availability falling by 10 basis points in Q2 to 15.2 percent. Although absorption numbers have been disappointing, average asking rates have shown some tentative signs of improvement in the first half of 2011. The Class A rate increased to $45.70 per square foot with some help from rent growth in the Financial District ($46.18 per square foot). The Class B rate calculated a limited change to $28.32 per square foot. Overall, the research group forecasts strong rent growth in the Class A market and limited growth in the Class B market by the years end. Cambridge East Cambridge office continued to impress in the second quarter of 2011. Q2 Absorption: 256,700 RSF The submarket absorbed over 210,000 square feet in Asking Rate: $34.76/RSF the second quarter with the relocation of Pegasystems from 101 Main Street to One Rogers Street. Additionally, the vacancy rate plummeted to 6.8 percent, which was assisted by the scheduled conversation of 400 Technology Square from office to lab. The space was previously occupied by Forrester Research, which left the East Cambridge submarket for a build-to-suit in West Cambridges Discovery Park. Furthermore, the average asking rate in East Cambridge climbed a few dollars to $40.76 per square foot. Overall the East Cambridge office statistics measured significant strength in the first half of 2011. Direct Vacancy: 8.9%
Heartland Robotics
Founded in 2008 in Central Square, Cambridge Moved to the Seaport District in late 2010
Brightcove
Founded in 2004 in Cambridge Signed a LOI to move to Atlantic Wharf in 2011
NaviNet
Founded in 1998 in Cambridge Moved to 179 Lincoln near South Station in 2010
Research
VERV I E W OVER VI EW
Like East Cambridge, Mid Cambridges vacancy rate has decreased to 6.7 percent in the first half of 2011. Due to some limited leasing at 19 Blackstone Street (Good Start Genetics leased 15,700 square feet), the Mid Cambridge office market absorbed almost 25,000 square feet in Q2. The overall asking rate for Mid Cambridge trails behind East Cambridge at $38.18 per square foot, but the Class B asking rate is one of the highest of all Class B submarkets in Greater Boston at $33.93 per square foot. West Cambridge office has not seen as much success in the first half of 2011 as its neighboring submarkets. With over 43,000 square feet of year-over-year negative net absorption and a Class A vacancy rate at 32.2 percent, the West Cambridge office market has seen better days. Although a majority of the vacancy was tracked to two troubled assets, 125/150 Cambridgepark Drive, the fact that East Cambridge tenants have begun to favor the Seaport District over West Cambridge does not help. Technology tenants from the Route 128 market are expected to help West Cambridge regain its footing, but that will likely take 3 to 6 quarters. Route 128 The Route 128 market gained some ground in the second Direct Vacancy: 16.3% quarter with over 67,000 square Q2 Absorption: 67,700 RSF feet of positive net absorption. Year-over-year, Route 128s Asking Rate: $21.63/RSF net absorption total exceeded 800,000 square feet, the most totaled of all the major Greater Boston markets. Route 128 South fell negative in the second quarter by 52,300 square feet mostly due to State Street vacating 93,000 square feet of back-office space at 2 Granite Avenue in Milton. The negative absorption measured
Q2 2011
in Q2 in Route 128 South erased the gains that market displayed in 2010, leaving the year-over-year net absorption figure for that submarket at 8,000 square feet. The vacancy rate for Class A (16.5 percent) product in Route 128 exceeded that measured in the Class B (15.9 percent) market due to the 19.1 percent direct vacancy rate calculated in Route 128 North. The amount of sublease space also remained higher in the Class A market (3.4 percent) than the Class B (2.0 percent) for Route 128 office. Overall, the amount of available Class A product as of Q2 2011 in Route 128 exceeds seven million square feet compared to four and a quarter million in the Class B market. These numbers are expected to gradually change as tenants look to upgrade their office requirements over the next few quarters. For asking rates in Route 128, all three markets exhibited a slight dip in the measured average rent after all gained some ground in Q1 2011. The dip in rents was entirely associated with a drop in Class A rents, which fell from an average of $24.22 per square foot in Q1 to $23.91 in Q2. The Class B average asking rate increased to $20.03 per square foot in the second quarter from the measured rate of $19.82 in Q1. The dip in Class A rents is expected to subside by the end of the year with a year-to-date growth rate of over two percent expected to improve to five percent. Interstate 495 The Interstate 495 office market fell negative in the first half of 2011 as Dassault Systemes vacated the companys Lowell and Concord campuses for the brand new buildings on Wyman Street in Watham. With significant negative net absorption recorded in the submarket Route 3 North, the overall 495 market lost over 100,000 square feet to vacancy in the second quarter, increasing the year-over-year
Research
VERV I E W OVER VI EW
negative net absorption total to 508,600 square feet. Although Direct Vacancy: 20.3% overall availability and sublease Q2 Absorption: (101,200) RSF rates remained unchanged or decreased in the second quarter, Asking Rate: $17.09/RSF the Interstate 495 market has struggled to rebound in the first half of 2011 due to a few handicaps the market has developed. First of all, the market has lost tenants to the Route 128 belt due to the cyclically lower rents and newer product that exists there. Route 3 North, which includes the CrossPoint complex in Lowell, was the most significant contributor to negative net absorption along Interstate 495 in Q2. In fact, all other submarkets were positive, but not by enough to drive overall growth for the quarter. However, tenants have naturally looked outside of the Interstate 495 markets for options in order to capitalize on the timing of the current economic cycle. The second issue remains the amount of available space (27.4 percent), the most of all the Greater Boston submarkets, that has been marketed along Interstate 495. All Interstate 495 submarkets are subject to the high availability, with all exceeding 23 percent. Additionally, the high availability has impacted values since landlords are not able to pay lenders after failing to capitalize on the limited demand that exists in the market. Therefore, increased foreclosure activity has proceeded along Interstate 495, further dragging down values. Overall, the Interstate 495 market will be the last market to fully come back from the downturn due to the underlying problems mentioned above. The second quarter has highlighted plenty of bright spots, but the incremental growth and high availability will hinder the market from any rapid absorption of vacancy in the near future.
Q2 2011
690 Canton Avenue, Westwood $34,500,000 ($209/RSF) Buyer: L&B Realty Advisors
* Yet to Close
Research
2011 R ecently Completed Leases/Sales
Esdaile, Barrett & Esdaile 7,600 RSF 75 Federal Street, Boston Tenant Rep. - Roberto Magno, CPA
Q2 2011
Lattice Engines 8,100 RSF 85 Devonshire Street, Boston Landlord Rep. - Roberto Magno, CPA & Brendan Miller
Shore Educational Collaborative 20,000 RSF 10 Forbes Road, Braintree Landlord Rep. - Ellison Patten
Taylor & Partners 2,300 RSF 77 Summer Street, Boston Tenant Rep. - Brian Smallman
Broadview Networks 10,800 RSF Presidents Place, Quincy Landlord Rep. - Ellison Patten
Peregrine Financial Corporation 2,300 RSF 84 State Street, Boston Landlord Rep. - John D. Miller & Jeffrey C. Moore & Brendan Miller
About Women by Women 7,000 RSF 30 Washington Street, Wellesley Tenant Rep. - Kevin P. Malloy & Tim Latham
LPC in MA
LPC Thank s
Cambridge
1 property: 277,800 RSF 3 properties: 287,000 RSF 5 properties: 229,800 RSF
Boston
3 properties: 270,600 RSF 5 properties: 572,600 RSF 29 properties: 4,196,600 RSF
Leasing Leasing & Management Management Route 495 Route 128 Inner Suburbs Cambridge Boston
L&B Realty for awarding Lincoln Property Companys management team with the 690 Canton Street assignment in Westwood. LPC welcomes L&B as a new client in the Boston market and congratulates them on their acquisition of a the premium Class A asset.
Research
T ER M I N O L O G Y LO
Asking Rental Rate: the dollar per square foot amount that is quoted by the entity that is representing the space being marketed. Tenant Improvements (T.I.): typically a dollar per square Deliveries: newly completed product that was recently under construction or renovation that are available for immediate occupancy. Direct: space that is marketed on behalf of the Landlord. Flex: product that is capable of hosting tenants that vary in their use of commercial real estate. Including office, lab, R&D, warehouse, manufacturing and distribution tenants. Vacant Available: all space that is currently available to lease Free Rent: the time period the tenant does not have to pay any rent, which is agreed upon by the tenant and landlord during lease negotiations. Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease. and immediately occupy; therefore, space that is not hosting a tenant. Unoccupied space with a future commitment are excluded. foot amount negotiated during the lease transaction that is paid to a tenant by the landlord, or sublandlord, for the means of improving the condition of the agreed upon space. Total Availability (A.K.A. Overall Availability): all space that is available for lease. Includes marketed occupied space, sublease, and product under construction that will be delivered within two (2) years. Sublease: space that is marketed on behalf of the current Tenant.
Lincoln Property Companys Office Preview precedes our more in depth Market Overview report, which will be published in mid-July. If you have any questions regarding our statistical data please contact our Director of Research, Scott D. Faber at sfaber@lpc.com. Thank you.
All information provided in Lincoln Property Companys Office Preview are from sources deemed reliable, but no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or other conditions.
Research
Market
Boston Total Back Bay Charlestown Financial District Midtown North Station Seaport South Station CAMBRIDGE East Cambridge Mid Cambridge West Cambridge SUBURBAN Inner Suburbs ROUTE 128 128 West 128 North 128 South INTERSTATE 495 495/Mass Pike West 495/Route 2 West 495 North East Route 3 North 495 South All Ofce
%
1.6% 2.1% 2.1% 1.5% 0.5% 0.7% 1.3% 1.9% 2.6% 4.2% 0.8% 0.8% 3.0% 0.7% 2.9% 4.2% 2.1% 2.0% 3.5% 3.6% 6.7% 0.6% 2.0% 2.6% 2.5%
%
15.2% 8.5% 8.8% 18.3% 11.2% 13.3% 18.6% 11.1% 11.0% 9.2% 8.4% 19.2% 23.1% 13.3% 20.9% 21.6% 21.2% 19.3% 27.4% 26.1% 35.9% 27.8% 23.2% 25.1% 19.4%
All information provided in Lincoln Property Companys Market Statistics are from sources deemed reliable, but no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or other conditions.
Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease Total Availability: all space that is available for lease. Includes marketed occupied space and product under construction that will be vacated within two (2) years Vacant Available: all space that is currently available to lease and occupy; therefore, space that is not hosting a tenant. Spaces with future commitments are excluded Direct: space that is marketed on behalf of the Landlord Sublease: space that is marketed on behalf of the current Tenant Average Asking Rate: the average of a compiled set of direct asking rates per market as quoted by the landlord representative. In the Suburban markets, the average asking rate is plus tenant electric.
Research
Market
BOSTON Back Bay Charlestown Financial District Midtown North Station Seaport South Station CAMBRIDGE East Cambridge Mid Cambridge West Cambridge SUBURBAN Inner Suburbs ROUTE 128 128 West 128 North 128 South INTERSTATE 495 495/Mass Pike West 495/Route 2 West 495 North East Route 3 North 495 South TOTAL CLASS A
%
1.8% 2.0% 3.1% 1.7% 0.0% 0.9% 1.4% 3.7% 3.3% 4.5% 0.7% 0.0% 3.4% 0.4% 3.4% 5.1% 2.0% 3.0% 3.7% 4.0% 6.0% 1.1% 3.0% 1.6% 2.8%
%
14.9% 7.0% 7.5% 18.7% 1.5% 1.1% 25.6% 3.7% 12.7% 9.0% 10.9% 33.8% 23.3% 15.5% 21.4% 21.0% 22.6% 19.8% 27.6% 28.7% 27.1% 21.2% 27.9% 30.0% 19.2%
11.6% 4.1% 4.4% 15.0% 1.5% 0.0% 22.7% 0.0% 10.4% 6.4% 8.8% 32.2% 16.7% 14.5% 16.5% 13.9% 19.6% 15.6% 17.4% 13.5% 13.4% 18.9% 24.2% 28.5% 14.2%
All information provided in Lincoln Property Companys Market Statistics are from sources deemed reliable, but no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or other conditions.
Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease Total Availability: all space that is available for lease. Includes marketed occupied space and product under construction that will be vacated within two (2) years Vacant Available: all space that is currently available to lease and occupy; therefore, space that is not hosting a tenant. Spaces with future commitments are excluded Direct: space that is marketed on behalf of the Landlord Sublease: space that is marketed on behalf of the current Tenant Average Asking Rate: the average of a compiled set of direct asking rates per market as quoted by the landlord representative. In the Suburban markets, the average asking rate is plus tenant electric.
Research
Market
BOSTON Back Bay Charlestown Financial District Midtown North Station Seaport South Station CAMBRIDGE East Cambridge Mid Cambridge West Cambridge SUBURBAN Inner Suburbs ROUTE 128 128 West 128 North 128 South INTERSTATE 495 495/Mass Pike West 495/Route 2 West 495 North East Route 3 North 495 South TOTAL CLASS B
%
1.2% 2.1% 1.5% 0.9% 0.9% 0.5% 1.2% 0.7% 0.7% 1.6% 0.9% 0.0% 2.5% 1.6% 2.0% 2.8% 2.2% 1.0% 3.2% 3.0% 7.5% 0.1% 0.6% 3.3% 2.0%
%
15.7% 12.2% 9.6% 17.2% 18.3% 23.5% 14.6% 15.8% 6.2% 11.2% 5.0% 4.8% 22.9% 6.9% 20.1% 22.5% 18.2% 18.9% 27.2% 22.8% 45.2% 34.3% 16.6% 22.3% 19.7%
All information provided in Lincoln Property Companys Market Statistics are from sources deemed reliable, but no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or other conditions.
Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease Total Availability: all space that is available for lease. Includes marketed occupied space and product under construction that will be vacated within two (2) years Vacant Available: all space that is currently available to lease and occupy; therefore, space that is not hosting a tenant. Spaces with future commitments are excluded Direct: space that is marketed on behalf of the Landlord Sublease: space that is marketed on behalf of the current Tenant Average Asking Rate: the average of a compiled set of direct asking rates per market as quoted by the landlord representative. In the Suburban markets, the average asking rate is plus tenant electric.