Despite Changes, Office Properties Remain A Business Cornerstone
Courtesy
Jim Gordon is president of Gordon Real Estate (www.gordonre.com of Framingham), which owns and manages five commercial properties in the area of routes 9 and 30 and has been active in the leasing and sale of commercial property in the area for more than 30 years. Contact him at 508-370-3333 or jimgordon@gordonre.com.
Much has changed in recent years for MetroWest landlords and tenants.
The economy has affected rental rates for many properties and pushed up vacancy rates, resulting in a “tenant's market” — a trend that's gradually shifting. An increasing number of companies no longer need office space for all their employees because technological advances have created a whole new set of workplace dynamics, resulting in more people working from home or other less-structured environments. And better technology has also meant that companies need less space for physical storage files due to digitized data storage and cloud computing.
In fact, our experience has shown that companies often need 20 to 35 percent fewer square feet per person than they did 25 years ago.
Yet despite the shifting dynamics, the office remains the cornerstone of American business. And what held true from the beginning remains today: A lease only gets executed when both parties agree on the terms. From the landlord's point of view on leasing a building, the goal is to find a financially strong tenant who will pay the desired amount of rent and take the space as soon as possible with minimal build-out work. The longer the lease, the more accommodating a landlord will be to doing substantial property improvements.
When tenants search for office space to lease today, they have new questions that go beyond the ever important topics of location, access for clients and employees, parking ratio and building services. Prospective tenants want to know which Internet providers service the building and whether a particular office space is wired for other technological capabilities, such as intelligent building control systems. The more reliant a tenant's business on technology, the more demands are placed on a prospective landlord to meet them.
From the tenant's point of view, the optimum situation is to find an appealing building in an advantageous location, find the right amount of office space available at an attractive rent for the date the tenant wants, obtain the desired length of the lease, and have a floor plan that's primarily built out to meet its needs.
State Of The Market
The office leasing market in MetroWest, with Framingham and Natick at the core, is as diverse as the region itself. Class A space in MetroWest consists of higher-end office buildings in prime locations on or near the Massachusetts Turnpike exits or parts of routes 9 and 128 and I-495, with rents ranging from $22 to $29 per square foot per year and usually including initial-year real estate taxes and operating costs, plus a limited build-out cost allowance.
The Class B space, which describes attractive but not luxurious buildings, goes from $14 to $19 per square foot, including real estate taxes and operating costs and sometimes even some of the utility costs. Class C space — generally older, “no frills” buildings or houses converted to office space and located in older commercial or neighborhood settings — go for approximately $8 to $13 per square foot, which generally includes real estate taxes, utility costs, maintenance and upkeep.
What's next for the commercial real estate market in MetroWest? Jobs will tell a big part of the story. As the labor market improves and companies accelerate hiring, more vacancies will be filled, rents will rise gradually and new buildings will be constructed.
But the market has a ways to go before landlords hold most of the leverage.
WBJ Web Partners
Most Recent
Most Recent
0 Comments