"It seems like the center of excitement has shifted northwest," says RBJ director of research Brendan Carroll, indicating that the region and the core NW community of Burlington will grade "wildly positive" when his team's numbers are finalized early next week. "There's a real enthusiasm there right now," says Carroll, among many observers indicating mid-$30-per-sf rents are being achieved for top quality product in the best locations. "That's where Burlington is at right now," accedes RBJ VP Ron Friedman.
"Companies are expanding and we're getting good activity," concurs Meredith & Grew SVP Matt Daniels, exclusive leasing agent for the New England Executive Park in Burlington, owned by the Blackstone Group. While anticipating a "flat" start for the suburbs as a whole, G&E research manager Ryan McCullough provided GlobeSt.com with advance results showing net positive absorption of 254,000 sf in the second quarter and plus-356,000 sf for the year in the Route 128 NW submarket. Both were best in the suburbs, and far better than the negative 48,000 sf posted in the Central Route 128 region during the second quarter. That outcome whittled the year-to-date absorption to positive 118,000 sf in 128 Central, tepid for a submarket that has led the regional recovery.
The G&E results showed similar trends to a JLL survey reported last week by GlobeSt.com that put YTD net absorption in the red by 172,000-sf sf for the central district and estimated 108,000 sf of net positive absorption in the NW. The vagaries are a result of different samplings and how vacancies and other data are treated. JLL surveys 19 million sf in 128 Central and 13.4 million sf in the NW, for example, compared to 14.7 million sf tracked by G&E in the latter market.
At least from an asking-rent perspective, the upward trend appears unmistakable for 128 NW, albeit on a lower plane than 128 Central, now commanding deals exceeding $40 per sf. According to McCullough, the overall asking rent for 128 NW rose by 6.7% between the first and second quarters, from $22.80 per-sf to $24.47, whereas the class A sector fared even better, ascending 7.7% from the first quarter to $26.56 per-sf at mid-year. "I think we are seeing it pick up even more," says McCullough, with the 128 NW class A inventory of 10.9 million sf quoting asking rates 13.8% higher than in the third quarter of 2006.
Although 128 NW has been the recipient of tenants migrating from outside, such as Color Kinetics moving from Boston to Burlington Woods Office Park, McCullough says it is too early to say whether the area will be cast as a consistent alternative for tenants in sticker shock from top markets including Boston, Cambridge and 128 Central. Noting one Cambridge life sciences company preparing to move to Lexington and Polaroid Corp.'s announced relocation to 300 Baker Ave. in Concord, brokers maintain that the movement is already underway and say they think it will continue.
"We've been busy, and if anything, there seems to be more demand going into the summer than what we've already seen," says Cushman & Wakefield broker David Pergola. "That's atypical." Several major leases were cemented in the 128 NW strip in the first half of the year, among them a 60,000-sf deal by Aspen Technology at 200 Wheeler Rd. in Burlington; the Color Kinetics pact for 51,000 sf; and Zoran Corp. taking 55,000 sf at One Wall St., also in Burlington.
With minus 39,000-sf of absorption in Route 128 South, 128 NW and North were the only two submarkets on the highway to record positive absorption during the second quarter, but 128 North at 18.3% and 128 NW at 15.2% still have the highest vacancy rates in the G&E survey. Despite the sluggish second quarter, 128 Central remains tightest at 10.7% versus 14.9% in 128 South for an average vacancy rate of 13.6%.
Daniels agrees there are opportunities available in the northern flank, but he and others maintain the number of requirements could soon overwhelm supply, especially for class A space. Given the Department of Homeland Security's lease of one 40,000-sf building at 10 New England Executive Park, there is just one contiguous block of 40,000-sf available at NEEP, says Daniels. "That's a rarity along Route 128 today," says Daniels, estimating that Blackstone has about 100,000 sf total available in the 10 buildings it owns at NEEP, allowing for the landlord to accommodate a range of needs. The asset at 10 NEEP is owned by another firm, local developer Murray Hills Inc.
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