CAMBRIDGE, MA-Another significant block of office space has been taken off the inventory here, as technology firm ChoiceStream Inc. has signed a lease for 40,000 sf at 210 Broadway. The deal comes amidst tightening vacancies and rising asking rents for the Cambridge commercial real estate market, a surge that continues despite a letup in leasing velocity during the summer months.
“The third quarter was pretty quiet,” reports Meredith & Grew EVP Joseph Flaherty, who did nonetheless negotiate the ChoiceStream transaction along with VP Tucker Hansen. John Miller of Lincoln Property Co. was broker for the landlord, MetLife, which has owned the four-story, 80,000-sf building for two years.
A veteran of the Cambridge market, Flaherty says the fourth quarter appears to have a modicum of momentum at the outset, and expresses hope that it will be sustained to end 2007 on a positive note. Among the major pending deals are Google for about 60,000 sf in Kendall Square and Juniper Networks, said to be close on a commitment for a similar amount of space in a nearby property. Technology firms have been a leading driver in Cambridge this year, even though biotech and pharmaceutical companies remain a dominant force.
Besides ChoiceStream and the blockbuster Microsoft lease at One Memorial Dr. that fetched close to $70 per sf, Flaherty says there was little in the way of major office deals signed. The core East Cambridge market did post 91,000 sf of positive net absorption in Q3, but both Alewife and the Harvard Square/Massachusetts Avenue belt were in the red for the quarter, M&G research says in its market overview. Flaherty says a lack of supply has hindered velocity, and concurs that some tenants have been blinded by “sticker shock,” with office rents now climbing into the $40s and even $50s per sf range. Jones Lang LaSalle, for example, says asking rents in Cambridge soared from an average of $39.94 per sf at mid-year to $45.24 per sf today.
The aggressive pricing has been even more numbing on the laboratory leasing side, however, according to Flaherty, who says very few biotech deals were struck in the past few months in Cambridge, partly due to hesitancy among tenants to accept the price adjustments. Instead, many life sciences firms are picking up for the suburbs, he says, both in Route 128 communities such as Waltham and Lexington, and even closer into Cambridge, with abutting Watertown drawing substantial interest.
M&G is assisting a couple of mid-sized life sciences companies explore nearby alternatives, says Flaherty, while he and Hansen also just brokered a 27,000-sf lease at 480 Arsenal St. in Watertown on behalf of WMR BioMedical Inc. The landlord there, Alexandria Real Estate Equities, was represented by Curtis Cole of CBRE/New England. Flaherty says he expects that Cambridge exodus to continue, but warns lab space is limited in many of the markets being eyed as safety valves. “The options are dwindling,” he says. As a result, future development in Cambridge will concentrate on the biotech sector, he predicts, especially in East Cambridge. The presence of such major firms as Novartis will keep lab space at a premium there, he adds. “Many companies still want to be there,” he says, despite the escalating costs.
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