Experts Optimistic About Commercial Real Estate
The commercial real estate market is improving in Massachusetts, according to those who track the market closely.
And even if those improvements aren't quite being felt across the entire MetroWest and Interstate 495 region, experts say the dark clouds are starting to part.
Market indicators for the Boston and suburban markets continue to improve slowly but surely, especially for high-growth industries such as pharmaceuticals, biotechnology and technology.
The slight improvements in the Boston market haven't quite reached the outer suburbs in MetroWest and along Interstates 128 and 495 yet, but experts predict that if momentum continues in Boston, a wave could eventually work its way westward.
"There is reason for optimism," said Brendan Carroll, a senior vice president at Boston-based commercial real estate firm Richards Barry Joyce & Partners. "To the extent that we're in an economically challenging period ... the downturn has been far gentler in the Boston area, and in many ways we have an expanding economy."
Number Crunch
For example, while the national unemployment rate is above 9 percent, in Massachusetts, the rate is around 7 percent. In the eastern half of the state, Carroll pointed out that the rate is even lower.
"It's a totally different picture," he said.
Lower unemployment and job creation leads to demand by businesses for real estate space, which helps the commercial real estate market reduce vacancies and increase rents.
There are some positive signs in the MetroWest market specifically as well. For one, high-quality office space is being gobbled up.
Vacancies for Class A office space - the best available - is shrinking.
There are comparatively affordable and high-quality lease spaces in MetroWest where a business can get a lot of space for a more attractive price than what is paid in the Boston market.
Class A office space is being leased 50 percent faster than Class B space, according to Richards Barry Joyce & Partners' (RBJ) summer market report.
The MetroWest market is also being fueled by the strength of the the boroughs.
According to RBJ, the 495 West market, which includes Framingham, Natick, Westborough and other communities in the heart of MetroWest, has a 17.2 percent vacancy rate, with asking rents above $20 per square foot.
That compares to a 20.5 percent vacancy rate in the 495 North sector and a 24.7 percent vacancy rate in the 495 South region, with asking rents in both areas below $20 per square foot.
Carroll also noted that the statistics for MetroWest could be skewed by a handful of large vacant properties.
If seven vacant properties that have been empty for an average of six years or more are excluded, the 495 West are has a 12.3 percent vacancy rate.
Overall, Carroll is bullish on MetroWest.
"There is almost no other place where businesses are able to tap into the strong labor market and have occupancy costs below $20 per square foot for Class A space," he said. "These are absolutely compelling drivers."
Some recent transactions may back that up.
Goodrich Corp. cut the ribbon on a new 130,000-square-foot facility in Chelmsford this week. National Development purchased the former National Grid building in Westborough for $20.1 million and Egenera leased 25,000 square feet of space in Boxborough.
But commercial real estate is an ebb and flow.
Some companies also left the region, including 38 Studios, the video game design company started by former Red Sox hurler Curt Schilling, which vacated 50,000 square feet of space in Maynard.
Fidelity Investments' closure of its Marlborough campus, which is not expected to be complete for another two years, will eventually leave an 800,000-square-foot hole in the MetroWest commercial real estate market.
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