BILLERICA, MA-A six-figure leasing requirement seems to have shifted focus here, but the change could have a zero sum impact on both the landlord and the Interstate 495 North office market. Whereas biotech services firm Parexel had been targeting 2 Executive Dr. in Chelmsford, sources say the company is now eyeing a deal at 2 Federal St., a 100,000-sf building located in the Fields office complex in Billerica, also part of I-495 North.
Parexel had supposedly been close to striking a lease at 2 Executive Dr. before targeting Billerica, but owner RREEF Funds would still benefit given that the firm also owns 2 Federal St. The situation exemplifies RREEF's ubiquity in the I-495 office market, with the real estate investment arm of Deutsche Bank owning properties in several communities, including the Crosby Corporate Center in Bedford. The Fields complex was acquired in 2005 as part of a large portfolio purchased from Boston Capital Institutional Advisors, with 2 Federal St.'s price valued at $9.3 million.
Calls to 2 Federal St.'s brokers at Cushman & Wakefield were not returned, while Parexel agent Brian McKenzie of Richards Barry Joyce & Partners also did not respond to inquiries. Industry sources, however, insist that a deal could be inked at the Billerica property over the near term. “Their focus is clearly now on 2 Federal St.,” one source familiar with the negotiations tells GlobeSt.com, although that industry professional and others could not explain why Parexel has turned in that direction. A better rental rate might be one reason, several speculated, with some also noting that 2 Federal St. offers quick access to other Parexel offices in Waltham and Lowell.
Whatever the reason, or the ultimate selection, observers say the requirement is especially valuable to the I-495 North region given that it apparently represents an expansion by the company rather than the normal practice of replacing one office or multiple locations with another. I-495 North and the Route 3 corridor enjoyed one of the strongest summers of any suburban office market in Greater Boston, and the Parexel signing would only enhance that progress. Meredith & Grew puts net absorption in the third quarter at more than 640,000 sf, dropping the I-495 North vacancy rate to 23%. Year-to-date net absorption is approaching one million sf.
Although substantial inventory does remain, I-495 North is seeing an erosion of large blocks of contiguous space, while those that remain are receiving plenty of activity, according to brokers active in the area. Sources, for example, say Tyco International has begun a search for nearly 100,000 sf, an effort that reportedly led to the retention of CB Richard Ellis broker Kerry Olson. Calls to Olson to discuss that assignment were not returned, but I-495 and Route 3 are said to be the likely landing spots. Also, a state educational agency is seeking 120,000 sf, and sources report representatives have been spotted touring prospective sites in the submarket.
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