Vacancy rates up_ rents down Tenants in control

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					Inside Real Estate

Vacancy rates up, rents down: Tenants in control
By Jill Gambon, Special to Mass High Tech
With office vacancy rates up, it’s a renter’s market for technology companies looking to lease space. Depending on the location, some landlords are offering free rent, throwing in furniture or picking up the tab for renovations. “Right now, it’s a great time to be a tenant looking for office space,” said Joe Doyle, vice president at Cresa-Partners LLC, a corporate real estate advisory firm headquartered in Boston that represents tenants. “There’s an oversupply of inventory. You are seeing overall tenant improvement packages increasing and free rent increasing.” With more space on the market and prices coming down, some locations have become more affordable for prospective tenants, said Michael Taylor, vice president at T3 Advisors LLC in Waltham, a tenants’ real estate brokerage and consulting firm. For example, Taylor estimated rents in office buildings along Route 128 have fallen 25 percent to 30 percent over the past 18 months. With landlords competing aggressively for business, many deals include not only low prices but extras that make the lease more attractive. At the Hudson Mill Business Center, a 210,000-square-foot complex in downtown Hudson, Calare Properties is offering office space for $8 to $10 per square foot, plus electricity. Included in the lease are such amenities as an on-site fitness center and customized space for each tenant, including painting and carpeting and in some cases, kitchens. Tenants at the converted textile mill are typically small, privately held companies that are owned by an individual or a small group of investors. “Every dollar they save in rent is a dollar in their pocket,” said Bill Manley, president of Calare. While the Hudson Mill doesn’t have “skyscraper appeal,” it does offer flexible leases, where growing companies can negotiate short-term deals that allow them to move or add space as their business evolves, Manley said. SDL Enterprise Technology, the U.S. arm of U.K.-based SDL, completed a move in April to 69 Hickory Drive at Bear Hill Business Park in Waltham, an office building up the street from SDL’s previous location. The move allowed the company to occupy an entire floor, which made it easier to configure space to match employees’ needs, said Betsy Fallon, vice president of client services for SDL. The company had options when it started looking for office space and considered searching in Boston or Wellesley, Fallon said. But after polling employees about which locations they

preferred, the company decided to stay in Waltham. “We looked at 10 to 15 spaces. There was quite a bit on the market,” said Fallon. The new lease included some furniture, which made the deal more “cost effective,” she said. Free is good With so many businesses downsizing or closing, emerging technology companies may be able to take advantage of the sublease market. Often, with a sublease, surplus furniture, phones, wiring and other amenities may be thrown in to sweeten the deal, Taylor said. With a sublease, the length of the agreement may range from a few months to a few years. For some emerging companies, the flexibility of a short-term deal may be exactly what they are looking for, said Taylor. Last year, SiGe Semiconductor Inc. subleased 12,150 square feet of office space at 200 Brickstone Square in Andover. As an incentive, SiGe received six months of free rent and more than $500,000 of existing furniture and equipment, said Doyle, who represented the semiconductor company. With the free rent factored in, the effective rental rate over the 38month lease was in the “low teens,” Doyle said. Companies trying to snag bargains, as with Calare for less than $10 per square foot, can find deals outside the prime markets of Boston and Cambridge and the Route 128 corridor. Businesses willing to consider locations along Route 3 and Route 495 can get sub-$10 per square foot space in several converted mill buildings. For example, at Chelmsford Mills, a renovated wool mill in North Chelmsford, businesses can rent space ranging from about $6 to $12 per square foot, depending on the terms of the lease. Tenants, who include several technology companies, are attracted to the price as well as the services included with their rent, such as on-site maintenance and parking, says Naraj Tuli, property manager with Chelmsford Holdings Inc., which owns the buildings. The complex -- three buildings with some 216,000 square feet of rentable space -- has a vacancy rate between 10 percent and 15 percent, lower than the average in the area. Eye on startups At Bell Tower Square in Lawrence, where space can be had for between $8.50 and $12 per square foot, plus electricity, tenants want state-of-the-art voice and data infrastructure and custom-designed offices, said Gary Sidell, principal of Bell Tower Management LLC, which runs the converted mill. The development offers broadband access, VoIP and wireless connectivity and there is an in-house design and construction team to remodel offices for tenants, Sidell said. The leases at Bell Tower Square tend to run for two or three years for young companies. “We try to be flexible. It’s hard to think five to 10 years out when you’re a startup,” Sidell said. To accommodate tech startups, Chelmsford Holdings is considering creating an “incubator” where companies could initially lease a few hundred feet of space and share common areas such as kitchens with other small businesses to help keep overhead low. “We are trying to figure out the economics of the model,” Tuli says. In addition to providing office space and related services, Tuli envisions offering marketing services to the startups.

Companies at a glance CresaPartners Business: Corporate real estate advisors Revenue: $150 million Locations: About 50 locations in the U.S. and Canada Headquarters: Boston Telephone: 617-758-6000 Web: www.cresapartners.com/boston/ T3 Advisors Business: Corporate real estate advisors Locations: Boston and Waltham Telephone: 617-227-1390 Web: www.t3advisors.com Hudson Mill Business Center Location: Hudson Description: 250,000 sq. ft. mill complex Manager: Calare Properties Inc. of Newton Telephone: 781-535-6900 Web: www.calare.com/hudsonmill/index.html Bear Hill Business Park Location: Waltham Description: Eight building 225,000 sq. ft. park Manager: King Street Properties LLC of Boston Telephone: 617-521-0400 Web: www.kingstreetproperties.com/index.html Brickstone Square Location: Andover Description: Three first-class office and R&D buildings Owner: Transwestern Investment Co. Contact: Colliers Meredith & Grew in Boston Web: www.brickstonesquare.com Bell Tower Square Location: Lawrence Description: Converted mill along the Merrimack River Manager: Bell Tower Management LLC Telephone: 978-683-5999 Web: www.belltowerdevelopment.com Chelmsford Mills Location: Chelmsford Description: Former mill complex housing 50 companies Manager: Chelmsford Holdings Inc. Telephone: 978-251-3500 Web: www.chelmshold.com/


				
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