Rental rates hit a high note in 495/MetroWest
Region is still a bargain compared to Boston
Driven largely by soaring rent prices in the Boston market and the continuously rising price of commercial real estate in the area, the average class A asking rent in the 495/MetroWest region topped $20 per square foot in the first quarter of 2007.
It marks the first time since 2003 that rents in the area have exceeded the $20 mark, according to a study conducted by Boston-based real estate firm Grubb & Ellis. Average asking rents rose 40 cents in the first quarter of 2007 to top out at $20.19.
Upward trend
"There's not necessarily a whole lot of shift with respect to vacancy in the area, so the market isn't being driven by supply and demand just yet," said Ryan McCullough, research manager for Grubb & Ellis. "It's more the fact that the greater Boston market has seen an astronomical jump in terms of asking rent, and that's trickled down to the 495 area. The rental rate increases have been much more pronounced around Route 128. Out west has been kind of insulated from that. It's turning upwards, but not leaping like it is closer to Boston."
The quarter's largest deal in Metro West was Cytyc Corp.'s occupation of 145,000 square feet at 445 Simarano Dr. in Marlborough, according to Grubb & Ellis research.
New building owners often raise rents to give investors a higher rate of return, McCullough said.
"Buildings are flipping a lot faster than in the past," said McCullough. "This wouldn't happen unless investors were making more profit. That means higher rents for tenants downstream. When different owners come in, there's a correlating shift in asking rents almost immediately."
Shopping around
McCullough said the presence of large, national real estate companies with bigger portfolios, companies like the Blackstone Group and Broadway Partners, has changed the dynamics in the market.
"Vacancy is still pretty high, so it's probably a whole musical chairs kind of thing," Coakley said. "Tenants are just moving around in the market, and there's not a ton of organic growth."
Coakley pointed to the town of Marlborough as one place that's doing well in the office market. He mentioned several buildings on Nickerson Road and Boston Post Road that have seen their occupancy and asking rents rise, including a 200,000-square-foot building at 293 Boston Post Road that is 90 percent leased today after a 50 percent occupancy rate as recently as last year.
Despite the rising rents in the area, Coakley said it is still a tenant's market.
"The market is improving, but if you're a tenant and you're out touring properties and looking for space, you're still gonna get a pretty competitive deal," said Coakley. "As opposed to Route 128, where rents are continually rising, it's kind of a good opportunity. With housing costs the way they are and more and more people moving out west anyways, it's not as much of a disadvantage as it used to be out there."
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