Few Bright Spots For Commercial Real Estate
Availability of office and R&D space declined slightly in the third quarter for the MetroWest area while rising slightly elsewhere along the I-495 corridor, according to corporate real estate advisory analyst CresaPartners. But, according to David S. Ross, a principal at the firm, little major change in either market is likely until the companies that are potential tenants start hiring again.
The CresaPartners report for nine MetroWest communities from Northborough to Natick shows availability for class A and B office space at 28 percent and R&D space availability at 22 percent. But it says the MetroWest market is "softening," with new spec development and large blocks of space coming on the market in the near future. That means leasing activity and rental rates could decline by 5 percent in the next year or two.
"It's going to take probably 12 to 24 months, and that's all going to be based on where unemployment is," Ross said. "Commercial real estate's really tied to employment numbers."
Asking rental rates for the MetroWest area range from $20 to $28 per square foot for class A office space, $15 to $19 for class B, and $7.50 to $9.50 for R&D space.
Farther north, a cluster of seven communities between Stow and Concord that CresaPartners calls I-495 Central has seen a slight increase in the availability of both office and R&D space. Availability of class A and B office space now stands at 27 percent, with asking rents between $14 and $16 for class A space and between $11 and $13 for class B. R&D space availability is at 44 percent, with asking rates between $7 and $9.
Cross said landlords are becoming more aggressive in dropping rents and offering to make improvements for tenants, particularly those with money to spend.
"Obviously a strong credit company is going to be able to get more out of a landlord than a brand new start-up company," he said.
Meanwhile, new buildings like two in Marlborough built before the economic crash are in a rough spot. Cross said it's impossible for landlords at these properties to get the rents that they need to cover their financing agreements.
"Those buildings might stay empty for a while," he said.
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