Cambridge turns in another solid quarter… for now

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Short on time? Here are the highlights of our first quarter Cambridge Office/Lab MarketView. To request the full report, fill out the form at the bottom of this post.

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OFFICE MARKET

With the question of the day being whether the market has reached its peak, many have pointed to the fact that Boston rents are still well below their 2008 peak as evidence that there is still room to run. But does Boston proper alone still present the full picture of the market, or has the epicenter of demand shifted to the other side of the Charles?

The rental spike in Boston that preceded the 2008 collapse saw growth of 89.9% from trough to peak. By comparison, East Cambridge office rents have grown 110.1% since 2011. Whether Cambridge is the new bellwether of the Boston market remains to be seen, but signs of caution have already been sighted in the city.

This is not to say the Cambridge Office market is struggling by any definition. Indeed, the first quarter statistics remained robust across the board. Asking rents—already the highest in Greater Boston— continued to see very slight upward growth, absorption was in the black and vacancy was only 3.6%.

LAB MARKET

In the last few years, finding lab space in Cambridge has been challenging even for those that could afford it. In response, developers and investors have been rapidly putting steel in the air, and more have plans underway to do the same.

At North Point, DivcoWest’s new megaproject near Lechmere, 430,000 sq. ft. of lab space is on the table, while other buildings spearheaded by MIT and Alexandria are already underway to service the pent-up lab demand.

But much like the office side, Cambridge lab demand has been waning of late, leading some to wonder whether these new projects will come online too late in the cycle and only exacerbate a softening market. 

 

Boston starts the year slowly, but has plenty in store

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Short on time? Here are the highlights of our first quarter Downtown Boston Office MarketView. To request the full report, fill out the form at the bottom of this post.

iStock-614436122.jpgIt was a relatively quiet quarter for the Downtown Boston Office market, echoing a theme seen across many of the Greater Boston submarkets—but with an unemployment rate of only 3.7% as of February, Boston’s positioning remains strong.

Vacancy was up to 8.6%, the highest it has been in three years, but asking rents continued to edge upwards.

Bifurcation of Class A and B rental growth has slowed: while in the past year Class B properties had seen much greater gains in comparison to Class A, in Q1 2017, both saw only modest gains.

Most of the activity in the quarter was seen in value low-rise Class A space in the Back Bay. This type of space can be particularly appealing to Cambridge tenants who want to remain in the urban core, but are being priced out of the options on the other side of the Charles River.

SPOTLIGHT: DATA CENTER & NETWORK SOLUTIONS

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For more information on our Data Center & Network Solutions group, please reach out to our experts Rich Modliszewski and Brad McLaughlin.

SPOTLIGHT: DEVELOPMENT & PROJECT MANAGEMENT

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By Mark Clayton, Executive Managing Director of Development & Project Management

  • This past year, a noticeable rise was seen in construction costs. For both labor and material costs, there was an increase of approximately 3.5-5% in the Boston market.
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CRA

  • The Boston market’s average construction costs are higher than the rest of the country, ranging from $110-125 per sq. ft. This compares to a national average of about $100 per sq. ft.
  • Due to the higher-than-normal volume of work in the Boston market, when choosing a consultant, it is important to evaluate their existing workload to ensure they have the capacity to meet expectations.
  • Most new space designs are moving away from traditional office concepts and in the direction of a more open and collaborative environment.
  • Furniture and AV components have become a critical part of the open environment concept, adding to overall first-time costs.
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Broadcom

  • Workplace strategy has become a buzzword in the industry. Understanding how and where people work is critical in the initial design process, and providing flexibility for employees has become a competitive differentiator.
  • Due to the volume of work in the City of Boston, the overall permitting process timeline has been extended, which should be taken into consideration when reviewing a complete construction schedule.

Interested in reading more of our spotlights? Look no further. Read more in our 2017 Market Outlook.

 

CBRE/NEW ENGLAND WINS BIG AT THE CBA ACHIEVEMENT AWARDS!

By Taidgh McClory, Managing Director/Partner, Advisory & Transaction Services

Every year, the Commercial Brokers Association (CBA) honors the best and brightest in the Greater Boston brokerage industry, highlighting all-star deals and individual achievements in several different categories. This is the equivalent of our academy awards for all our brokerage teams’ accomplishments as recognized by our industry peers.

This year CBRE/New England stood out as a dominant force at the awards, taking home five out of a potential 11 awards. Topping the list of this year’s recipients was our Rising Star of the Year, Suzie Brown. Her hard work and effort earned her the top award amongst a competitive field of 10 other finalists.

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On behalf of the entire company, congratulations to Suzie and all this year’s winners, our clients and the finalists! We continue to be proud of our employees, our collaboration and our market leadership as a
world-class company.

Below are the CBRE/NE finalists for 2016’s CBA Achievement Awards.

Rising Star of the Year
Suzie Brown
Vice President, Urban Team – Advisory & Transaction Services

Community Impact Deal of the Year 

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Mount Auburn Hospital
85,226 RSF
725 Concord Avenue, Cambridge, MA
Davis Marcus Partners
David Fitzgerald, Robert FitzgeraldTim Howe

 

Industrial Deal of the Year

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632,000 SF
Worcester, MA
GFI Partners
Bob Gibson, Steve Clancy, Rachel Marks, Doug Rodenstein

 

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Kronos at Cross Point
505,664 SF
900 Chelmsford Street, Lowell, MA
Anchor Line Partners and Farallon Capital Management
Mark Reardon, Peter Dominski, Alex Plaisted, Benjamin Roopenian, Diane Harris

Retail Deal of the YearCBA - Eataly
Eataly
53,000 SF
Prudential Center, Boston, MA
Boston Properties (also this year’s Landlord of the Year)
Jeremy Grossman

 

 

To learn more about the night, please read more here or watch a full recap here.

Where the WIRED Things Are: Exploring Your Building’s Connectivity & Infrastructure

CBRE/New England works with several clients to pursue WiredScore Certification, the international standard for cutting-edge internet connectivity in office buildings. Recently, three office buildings in our leasing portfolio within the Greater Boston area have achieved Platinum and Gold Wired Certification for having best-in-class connectivity infrastructure—One Boston Place and 33 Arch Street, both owned by TH Real Estate, and 451 D Street, owned by a joint venture between Meritage Properties and Commonwealth Ventures.

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33 Arch Street – Platinum Wired Certification

To achieve Wired Certification, properties must meet a rigorous set of standards developed in conjunction with the top minds in the telecom and commercial real estate industries. The accreditation has proven to be a popular accolade amongst Class A and Class B buildings, citing further claim to which assets are more efficiently set up for today’s demanding tenancies.

“Network connectivity has become increasingly more important to corporate occupiers as the adoption of cloud computing, office collaboration, and telecommunicating gains momentum. It is imperative for building owners to provide their tenants with best-in-class connectivity options to stay relevant and competitive in the market. WiredScore has provided a great platform for owners to showcase their technology infrastructure in a concise and standardized manner.” – CBRE/NE’s Rich Modliszewski

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451 D Street – Gold Wired Certification

By distinguishing buildings with the best tech capabilities, Wired Certification makes information about internet connectivity more transparent than ever before, enabling commercial buildings to benchmark themselves against a single standard and upgrade their offerings and allowing businesses to identify the best buildings in which to grow.

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One Boston Place – Platinum Wired Certification

For more information about the WiredScore program and CBRE/NE’s expertise in Data Centers & Telecom, please reach out to Rich Modliszewski and Brad McLaughlin.

Recap: 2017 CBRE/New England – Hartford Market Overview

Next up in our New England Market Overview recap series, we cover the Hartford market. Our Connecticut team presented on the state of the industrial, office and investment markets.

Industrial Market Overview

John Reed, Senior Vice President/Partner, led with an in-depth overview of the Greater Hartford Industrial market.

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“Last year there was 4 MSF of industrial volume and 1 MSF of net absorption. Consequently, the vacancy was down 9.2% from 2015. This led to improving values, rising lease rates, increased sales prices and higher land prices per acre, creating a premium on large industrial sites.” – JR

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“The distribution model has changed. Drivers need to get to their destination and back in one day. Being centrally located in New England has fueled this demand. With the evolution of e-commerce, next-day—if not same-day—delivery will continue.” – JR

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“UPS absorbed 230,000 SF of space at Cornerstone’s 1 Market Circle in Windsor. FedEx Ground is building a 525,000 SF distribution center at 1000 Middle Street in Middletown. You may recognize this as the former 1 MSF Aetna office campus; it is a perfect reuse of this property. This is the fourth FedEx operation established in Greater Hartford in the last four years.” – JR

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“Due to the diminished inventory of quality existing buildings, some users are having to build.” – JR

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Our industrial forecast for 2017 includes:

  • Continued demand for large existing buildings
  • Continued demand for large permitted sites
  • One million square feet of absorption in 2017
  • 2017 will be a better year than 2016

Office Market Overview

John McCormick, Executive Vice President/Partner, and Alexis Augsberger, Vice President, covered the Connecticut Office market.

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“2016 was a relatively flat year for leasing velocity, with renewals outpacing relocations. The market saw approximately 100,000 SF of net absorption and the sublease inventory was reflective of a fairly healthy economy.” – AA

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“The Greater Hartford Office market is still very much a traditional economy. By comparison, in Metro Boston approximately 40% of the tenants in the market for 2016 identified themselves as ‘tech’ companies.” – JM

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“Buildings in submarkets with walkable amenities and superior highway access led the way in 2016.” – AA

Our office market forecast for 2017 includes:

  • Increased renewal activity
  • Continued urban migration
  • State and City budget impacts on the region

Investment Market Overview

Patrick Mulready, Senior Vice President/Partner, covered the Connecticut Investment market.

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Our investment market forecast for 2017 includes:

  • Continued demand for industrial product
  • Interest rates will have minor impact on pricing
  • Liquidity not going away
  • Overall lower sale volume
  • Strong pricing for well-positioned assets with good fundamentals

Overall, market fundamentals in Greater Hartford are strong and the outlook is positive for 2017, particularly in the Industrial Sector.

Did you miss our Boston Market Overview or Rhode Island Market Overview recaps? Click on the following link to catch up.