As Greater Boston has become a more desirable place for post-recession investments, transaction volume has increased and many buildings have changed hands in the past few years. This increase in volume has in turn driven up rents across the city and suburban markets because owners who take on new properties are under pressure almost immediately to drive rent growth for their stakeholders and lenders.
Meanwhile, tenants are looking for value everywhere, and will always consider things such as price, access to transportation and amenities when making a decision on where to grow their business. These fundamentals are constant, but as we all know, the commercial real estate market is always changing.
So the question now becomes, how do tenants find value properties for lease?
1. Don’t ignore a hot location out of hand. Sometimes there are landlords who have owned properties for a long time and seek stable tenants over high rents.
Waltham is arguably the hottest suburb in Greater Boston right now. With the lowest average direct vacancy rate of 9.6% out of all Boston suburbs, and rents among the highest in the area (per NAI Hunneman’s 2013 Q4 Report), it seems as though the search for value in office space would exclude Waltham. However, if tenants know what to look for, especially in terms of ownership, value deals are sure to be found.
One example of this trend is Waverley Oaks Park. The owner, Duffy Properties, was the original developer of the park and prioritizes low vacancy over record-setting rents, which is why it is the best deal in Waltham right now. The park offers ample amenities, including a full service health club, restaurants, and service retail. Waverley Oaks Park’s location on the Watertown line provides easy access from Boston and Cambridge via the Mass Pike, and features lots of nearby retail (grocery stores, restaurants, hotels) as well as residential real estate. It proves that even in a heated market there are still deals to be found if you look hard enough.
2. Look for a secondary market in close proximity to an established market. In other words, what’s the next town over from the place you may really want to be?
For years, Burlington has been a destination for tenants seeking value. However, rents in the $20s per square foot are disappearing fast thanks to the herd mentality and low vacancy rates.
So tenants who missed out on the opportunity to move to Burlington or who cannot find space to expand there need look no further than the surrounding towns of Billerica and Bedford, where rents for class A space are 23 and 25 respectively. With competitive pricing and similar access to transportation and amenities as Burlington (which has a mall and many other restaurants), companies are seeing the value in moving to these under-the-radar markets. For example, Aspen Technology moved to Bedford earlier this year after previously occupying Class A space in Burlington.
Billerica is also emerging as the market that offers more opportunity than Bedford. A good example of this is Insulet Corporation moving its headquarters from Bedford to a larger space in Billerica earlier this year.
What it all means
Tenants seeking value when looking for office space in the suburbs all want affordable pricing at a desirable location. In order to have both, they have a couple of options: they can take the more patient approach and search within established markets for a deal, or they can look in surrounding towns that emulate the look and feel of these hotter markets, but without the name recognition. Either way, a tenant that is determined enough to find value in the suburbs will always have options.