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Greater Boston

Q1 2011 Warehouse
Flex

Highlights

• Slight Growth for Warehouse

• Sublease Rate Hits 1.3%

• Flex Vacancy Increases

• Average Rent of $6.60/RSF NNN

• Manufacturing Employment Flat


Research Q1 2011

Warehouse: Route 128


Sublease Falls to 1.5% Submarket Thermometer
Six Month Change in Asking Rate & Vacancy

Landlord Market
The first quarter concluded with Route 128’s warehouse vacancy rate increasing
slightly to 21.4 percent after a quarter of 42,800 square feet of negative net Hot
Rents Climbing/Vacancy Falling
absorption. Route 128 North exhibited the largest increase in its vacancy rate
with over 53,800 square feet of negative net absorption in Q1 2011 alone. The
negative growth total was due in no part to one particular tenant, but a collection
of tenants moving out of the market. Route 128 South’s direct vacancy rate fell
slightly in the first quarter with net absorption totaling only 11,100 square feet. Warm
QC Electronic contributed tot he submarket’s growth with the purchase of 1551 Rents Holding/Vacancy Decreases
Central Street in Stoughton, removing 53,000 square feet of vacancy from the Inner Suburbs
submarket. Year-over-year, Route 128’s total vacancy rate grew to 21.4 percent, Equilibrium
measuring 496,600 square feet of negative net absorption.

After increasing in the fourth quarter, the overall availability rate decreased
slightly to 22.7 percent in the first quarter of 2011. Route 128 West measured the
Cold
Rents Decline/Vacancy Inches Up

Te n a n t M a r k e t
highest availability rate at 35 percent, which was also the direct vacancy rate for
128 West
the market. Fortunately for Route 128 West, sublease space was nonexistent, but 128 North
Route 128 North calculated 438,300 square feet, for a rate of 2.5 percent of that 128 South
market. Moving inward, Suffolk County calculated over 86,000 square feet of Suffolk County
negative net absorption in the first quarter with the submarket’s total availability Frozen
rate increasing to 29.2 percent. Slumping Rents/Vacancy Increases

Data Points
Net Absorption ( YOY ) Direct Vacancy Sublease Availability Total Availability Asking Rate
(496,600) SF 21.4% 1.5% 22.7% $6.20/SF NNN

Recent Significant Transactions


Net Absorption and Direct Vacancy
TriCo USA
99 Atkinson Street, Boston - 58,600 SF
800,000 SF Net Absorption - Projection 25.0% Suffolk County - Purchased Building
Net Absorption
600,000 SF Direct Vacancy 22.5%
QC Electronics
400,000 SF 20.0% 1551 Central Street, Stoughton - 53,000 SF
128 South - Purchased Building
200,000 SF 17.5%

0 SF 15.0% Fenway Bark


2007 2008 2009 2010 2011 2012
88 Black Falcon, Boston - 19,800 SF
-200,000 SF 12.5%
Suffolk County - Relocation
-400,000 SF 10.0%
Eliot Community Human Services
-600,000 SF 7.5% 730 Eastern Ave, Malden - 19,000 SF
-800,000 SF 5.0% Inner Suburbs - Relocation

2
Research Q1 2011

Warehouse: Interstate 495


Slight Decline in Overall Availability Submarket Thermometer
Six Month Change in Asking Rate & Vacancy
First quarter positive absorption in the Interstate 495 market was led by the 495 South
and 495 Route 2 submarkets, which collectively calculated over 400,000 square feet of

Landlord Market
net growth. Within Interstate 495 Route 2, Horn Packaging purchased the vacant 580 Hot
Fort Pond Road in Lancaster. The packaging company will consolidate operations at Rents Climbing/Vacancy Falling
the building, which removed 275,300 square feet from the market. In Interstate 495
South, Stergis Windows’ purchased the 114,300 square foot building 79 Walton Street
in Attleboro and will occupy the asset. In the red was Interstate 495 Mass Pike with
a few prime tenants terminating leases. Breyers Ice Cream shuttered its doors at their
Framingham building in the first quarter, adding approximately 130,000 square feet to Warm
the market. Verizon continued the negative news for that submarket with 325 Turnpike Rents Holding/Vacancy Decreases
Street in Southborough losing them as a tenant. Over 375,000 square feet was placed on 495 Mass Pike
the leasing market at that building in the first quarter of 2011. 495 South Equilibrium

The space available for sublease fell below one million square feet in the first quarter
Cold
of 2011, which totaled only 1.0 percent of the entire supply within the Interstate 495 Rents Decline/Vacancy Inches Up
market. Interstate 495 Route 2 West continued to hold the highest sublease rate at 3.7
Route 3 North

Te n a n t M a r k e t
percent (down from 5.5 percent last quarter). Quarter-over-quarter, the average asking 495 Northeast
rate fell slightly in 2011 to $4.79 per square foot. However, Interstate 495 Mass Pike, 495 Route 2 West
Interstate 495 Northeast and Route 3 North all maintained an average asking rate above
$5.00 per square foot. Interstate 495 South fell to $4.50 per square foot in the first Frozen
quarter, but Route 2 West measured the lowest average asking rate of $4.46 per square Slumping Rents/Vacancy Increases
foot.

Data Points
Net Absorption ( YOY ) Direct Vacancy Sublease Availability Total Availability Asking Rate
846,900 SF 21.4% 1.0% 23.0% $4.79/SF NNN

Recent Significant Transactions


Net Absorption and Direct Vacancy
Horn Packaging
580 Fort Pond, Lancaster - 275,300 SF
25.0% 495 Route 2 West - Purchased Building
1,400,000 SF Net Absorption - Projection
Net Absorption
1,050,000 SF Direct Vacancy 22.5% Stergis Windows
79 Walton Street, Attleboro - 114,300 SF
700,000 SF 20.0%
495 South - Purchased Building
350,000 SF 17.5%
Honeywell International
0 SF 15.0%
2007 2008 2009 2010 2011 2012 100 Discovery Way, Acton - 40,000 SF
-350,000 SF 12.5% 495 Route 2 West - Renewal

-700,000 SF 10.0%
AVED Electronics
-1,050,000 SF 7.5% 95 Billerica Avenue, Billerica - 36,000 SF
Route 3 North - Relocation
-1,400,000 SF 5.0%

3
Research Q1 2011

Flex: Route 128


Limited Exposure Submarket Thermometer
Six Month Change in Asking Rate & Vacancy
After significant leasing in the fourth quarter, the Route 128 North submarket’s

Landlord Market
vacancy rate increased slightly. In addition, the negative absorption measured in
Route 128 South totaled 172,800 square feet due in most part to State Street’s vacancy Hot
Rents Climbing/Vacancy Falling
at 105 Rosemont Road in Westwood. Overall, the entire Route 128 market’s negative
absorption totaled 191,800 square feet in the first quarter. Year-over-year, the total
positive absorption figure was more rosy with over 369,100 square feet calculated.
Transactions measured in the fourth quarter for the Route 128 flex submarket
included Engineered Materials Corp.’ 62,000 square feet at 17-57 Jonspin Road in
Warm
North Wilmington. Overall, for the flex market in Route 128 all submarkets measured Rents Holding/Vacancy Decreases
a quarter-over-quarter increase in vacancy of over a 100 basis points to 17.3 percent. 128 West
128 North Equilibrium
The total availability rate declined from 21.9 percent at the end of 2009 to 19.6 percent
in the first quarter of 2011. But that percentage is an increase from the 19 percent
recorded in the fourth quarter of 2010. The recent increase in the first quarter of 2011 Cold
was not due in part to sublease, since that rate declined from 2 percent to 1.8 percent, Rents Decline/Vacancy Inches Up
but to the negative absorption recorded in the first quarter. Additionally, the average Inner Suburbs

Te n a n t M a r k e t
asking rate for Route 128 flex product fell to $10.34 per square foot NNN by the 128 South
conclusion of the first quarter. A slight decrease was measured in Route 128 South,
which fell from $8.27 per square foot NNN to $8.23 per square foot NNN. Route 128
Frozen
West’s average asking rate remained at $12.81 per square foot NNN, whereas Route Slumping Rents/Vacancy Increases
128 North measured $11.19 per square foot NNN after a few cents increase.

Data Points
Net Absorption ( YOY ) Direct Vacancy Sublease Availability Total Availability Asking Rate
369,200 SF 17.3% 1.8% 19.6% $10.34/SF NNN

Recent Significant Leases


Net Absorption and Direct Vacancy Engineered Materials Corp.
17-57 Jonspin Road, N. Wilmington
62,000 SF
800,000 SF Net Absorption - Projection 25.0%
Net Absorption
128 North - Relocation
600,000 SF Direct Vacancy 22.5%
Accellent, Inc.
400,000 SF 20.0% 100-110 Fordham Road, Wilmington
200,000 SF 17.5% 44,700 SF
128 North - Renewal
0 SF 15.0%
2007 2008 2009 2010 2011 2012

-200,000 SF 12.5%
OnCore Manufacturing
400 Research Drive, Wilmington - 35,000 SF
-400,000 SF 10.0% 128 North - Relocation
-600,000 SF 7.5%
Atlantic Semiconductor
-800,000 SF 5.0% 9 Centennial Drive, Peabody - 21,400 SF
128 North - Relocation
4
Research Q1 2011

Flex: Interstate 495


Overall Availability Over 10M RSF Submarket Thermometer
Six Month Change in Asking Rate & Vacancy
The Interstate 495 flex market, after displaying negative net absorption in the second
half of 2010, held a positive year-to-date net absorption total of 112,400 square feet.

Landlord Market
The direct vacancy rate for flex product within Interstate 495 was 26.3 percent at the Hot
end of the first quarter, down from the conclusion of 2010, when it stood at 27.5 Rents Climbing/Vacancy Falling
percent. The submarket Route 3 North was the sole submarket to fall negative in
the first quarter, finishing the quarter with over 100,800 square feet of negative net
absorption. Sonexis Technology, Inc.’s vacancy of 400 Business Center in Tewksbury
was one contributor with approximately 97,000 square feet of new vacancy added to
the market at that building. Interstate 495 South measured the most significant loss to
Warm
Rents Holding/Vacancy Decreases
vacancy year-to-date at the conclusion of the first quarter with 64,500 square feet of
positive net absorption.
Equilibrium

By the end of the first quarter, the total amount of sublease space available for lease
remained under 500,000 square feet. The absorption of sublease space has been slow Cold
due to the limited leasing velocity of flex space along Interstate 495. The sublease rate Rents Decline/Vacancy Inches Up
remained the highest in Route 3 North, which was home to over half of the supply of 495 Mass Pike West

Te n a n t M a r k e t
sublease space along Interstate 495 (over 235,000 square feet). Although the entire 495 Route 2
availability rate fell from 29.2 to 27.9 in the first quarter, the elevated amount of space 495 Northeast
495 South
on the market has continued to discount flex space along Interstate 495. The average
Route 3 North
asking rate for flex space in the first quarter totaled $8.30 per square foot NNN, a drop
of $0.06 cents from a quarter ago. Fortunately, due to the recent drop in availability Frozen
Slumping Rents/Vacancy Increases
and limited future vacancies, absorption in the Interstate 495 market is forecasted to
remain positive in 2011.

Data Points
Net Absorption ( YOY ) Direct Vacancy Sublease Availability Total Availability Asking Rate
(271,300) SF 26.3% 1.3% 27.9% $8.30/SF NNN

Recent Significant Leases


Net Absorption and Direct Vacancy
Atronix Incorporated
780 Boston Road, Billerica - 30,700 SF
800,000 SF 30.0% Route 3 North - Renewal
Net Absorption - Projection
Net Absorption 27.5%
600,000 SF
Direct Vacancy OMNI Life Sciences, Inc.
400,000 SF 25.0%
50 O’Connell Way, Taunton - 15,000 SF
200,000 SF 22.5% 495 South - Relocation

0 SF 20.0%
2007 2008 2009 2010 2011 2012 Ultra Services, Inc.
-200,000 SF 17.5% 780 Boston Road, Billerica - 10,200 SF
Route 3 North - Renewal
-400,000 SF 15.0%

-600,000 SF 12.5% Thyssen Krupp


-800,000 SF 50 O’Connell Way, Taunton - 7,000 SF
10.0%
495 South - Relocation
5
Research Q1 2011

Warehouse
Route 128 Interstate 495
Average Asking Rate (NNN) Sublease Availability (RSF) Average Asking Rate (NNN) Sublease Availability (RSF)
1,000,000 RSF $6.00 NNN 2,000,000 RSF
$10.00 NNN

$8.00 NNN 800,000 RSF $5.20 NNN 1,600,000 RSF

$6.00 NNN 600,000 RSF $4.40 NNN 1,200,000 RSF

$4.00 NNN 400,000 RSF $3.60 NNN 800,000 RSF

$2.00 NNN 200,000 RSF $2.80 NNN 400,000 RSF

$0.00 NNN Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 0 RSF $2.00 NNN Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 0 RSF

Flex
Route 128 Interstate 495
Average Asking Rate (NNN) Sublease Availability (RSF)
Average Asking Rate (NNN) Sublease Availability (RSF)
$12.00 NNN 1,000,000 RSF $10.00 NNN 1,000,000 RSF

$9.60 NNN $9.00 NNN 800,000 RSF


800,000 RSF

$7.20 NNN 600,000 RSF $8.00 NNN 600,000 RSF

$4.80 NNN 400,000 RSF


$7.00 NNN 400,000 RSF

$2.40 NNN $6.00 NNN 200,000 RSF


200,000 RSF

$0.00 NNN $5.00 NNN Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 0 RSF
Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 0 RSF

Availabilities
Contiguous Blocks by # Contiguous Blocks by #
of Options: Warehouse of Options: Flex
3 43
15 Independence Drive, Ayer 24 22
The largest sublease availability in the Boston market at 52 20
370,500 square feet. 140
45
48 173

89 94 105

500K+ 500K+

50K - 74K 250K - 499K 50K - 74K 250K - 499K

25K - 49K 100K - 249K 25K - 49K 100K - 249K

10K - 24K 75K - 100K 10K - 24K 75K - 100K

(617) 951-4100 • www.lpcboston.com 6


Research Q1 2011

30 Perwal Street, Westwood


Warehouse & Flex
Investment Sales

The industrial investment sales market maintained momentum in the first quarter of
2011. For instance, tenants continued to pursue ownership options with Stergis Windows
purchasing the 128,332 square foot 79 Walton Street in Attleboro for under $600,000
($4.51 per square foot). At the very end of 2010, IPC Global purchased 605 Myles
Standish Boulevard in Taunton for $28.57 per square foot and will occupy the asset. In 79 Walton Street, Attleboro
addition to tenants taking interest in ownership, banks and special servicers are acting
on a number of distressed assets in the Greater Boston industrial market including the
62,400 square foot warehouse building, 4 Commercial Street, in Sharon.

As the investment sale market has picked-up, core opportunities are also testing the
market. Currently on the market is Invesco’s Westborough portfolio that includes
warehouse buildings along Otis Street for a total of 451,900 square feet. The portfolio
is well leased and is expected to draw significant attention from the market that has yet
to offer quality warehouse product since the most recent recession. 30 Perwal Street in
Westwood is a flex asset that traded in late 2010 to Campanelli Companies and TriGate
Capital. The joint-venture partnership has since fully leased the property and is looking 4 Commercial Street, Sharon
to flip the building by mid-2011.

Development

There are many proposed projects that are currently in the pipeline for warehouse and
flex, but no new buildings will be built without a commitment from a tenant. Therefore,
with no speculative construction underway, the warehouse and flex markets will have an
easier time recovering than past cycles. Invesco Westborough Portfolio

(617) 951-4100 • www.lpcboston.com 7


Research Q1 2011

I N C O LN U P
L INC PDD AT
A TE
ESS
2011 R ecently Completed Leases
STAG Capital Partners VCE Acadia Inc.
11,400 RSF 38,600 RSF
99 High Street, Boston The Campus @ Marlborough, Marlborough
Tenant Rep. - Kevin P. Malloy & Brendan Miller Landlord Rep. - Kevin P. Malloy & Tim Latham

Lynch Brewer Hoffman & Fink LLP J.A. Miara Transportation


7,900 RSF 13,500 RSF
75/101 Federal Street, Boston 844 Woburn Street, Wilmington
Tenant Rep. - Roberto Magno, CPA Landlord Rep. - Rob Cronin

Synapse Energy IHS Dialysis, Inc.


7,000 RSF 11,500 RSF
485 Massachusetts Avenue, Cambridge Presidents Place, Quincy
Sublandlord Rep. - Tim Latham & Jesse Flynn Landlord Rep. - Ellison Patten

Greene, LLP About Women by Women


3,600 RSF 7,000 RSF
33 Broad Street, Boston 30 Washington Street, Wellesley
Tenant Rep. - John D. Miller & Jeffrey C. Moore Landlord Rep. - Kevin P. Malloy & Tim Latham

LPC in MA

LPC Thank s
Cambridge
1 property: 277,800 RSF
3 properties: 287,000 RSF
5 properties: 229,800 RSF

Boston
3 properties: 270,600 RSF
5 properties: 572,600 RSF
29 properties: 4,196,600 RSF

For awarding Lincoln Property Company’s suburban


team with the 80 Hayden Avenue in Lexington leasing
Leasing assignment.
Leasing & Management

Management

Route 495
Route 128
Inner Suburbs
Cambridge
Boston 8
Research Q1 2011

T EER
RMINOL
LOOGY
Asking Rental Rate: the dollar per square foot amount that Tenant Improvements (T.I.): typically a dollar per square
is quoted by the entity that is representing the space being foot amount negotiated during the lease transaction that is paid
marketed. to a tenant by the landlord, or sublandlord, for the means of
improving the condition of the agreed upon space.
Deliveries: newly completed product that was recently under
construction or renovation that are available for immediate Total Availability (A.K.A. Overall Availability): all space
occupancy. that is available for lease. Includes marketed occupied space,
sublease, and product under construction that will be delivered
Direct: space that is marketed on behalf of the Landlord. within two (2) years.

Flex: product that is capable of hosting tenants that vary in Vacant Available: all space that is currently available to lease
their use of commercial real estate. Including office, lab, R&D, and immediately occupy; therefore, space that is not hosting
warehouse, manufacturing and distribution tenants. a tenant. Unoccupied space with a future commitment are
excluded.
Free Rent: the time period the tenant does not have to pay any
rent, which is agreed upon by the tenant and landlord during
lease negotiations.

Net Absorption: the change in direct vacancy over a measured


time frame. Includes newly delivered product ready for
occupancy, but does not include sublease.

Sublease: space that is marketed on behalf of the current


Tenant.

Lincoln Property Company’s Industrial Overview is produced by the Boston Office’s research team in collaboration
with our Downtown and Suburban Brokerage Group. If you have any questions regarding market conditions and the
information found in this report, please contact Scott Faber, Director of Research at sfaber@lpc.com.

All information provided in Lincoln Property Company’s Industrial Overview are from sources deemed reliable, but
no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or
other conditions.
(617) 951-4100 • www.lpcboston.com

9
Research Q1 2011 - Industrial
Rentable Direct Total Sublease Total Q1 2011 YOY Net Average
Market % % %
Square Feet (RSF) Vacancy (sf) Available (sf) Availability (sf) Absorption (sf) Absorption (sf) Asking Rate NNN
WAREHOUSE 130,533,791 27,899,696 21.4% 1,623,252 1.2% 29,803,763 22.8% 91,154 1,384,320 $5.43
METRO 10,815,153 2,305,281 21.3% 248,056 2.3% 2,366,519 21.9% (63,528) 382,262 $8.29
Suffolk County 6,683,413 1,889,675 28.3% 248,056 3.7% 1,950,913 29.2% (86,427) 133,361 $8.38
Inner Suburbs 4,131,740 415,606 10.1% - 0.0% 415,606 10.1% 22,899 248,901 $7.90
ROUTE 128 35,651,619 7,639,306 21.4% 528,295 1.5% 8,076,704 22.7% (42,796) (496,617) $6.20
128 West 1,471,123 515,585 35.0% - 0.0% 515,585 35.0% - (128,400) $7.88
128 North 17,579,541 2,618,114 14.9% 438,295 2.5% 2,917,512 16.6% (53,898) (519,756) $6.48
128 South 16,600,955 4,505,607 27.1% 90,000 0.5% 4,643,607 28.0% 11,102 151,539 $5.85
INTERSTATE 495 84,067,019 17,955,109 21.4% 846,901 1.0% 19,360,540 23.0% 197,478 1,498,675 $4.79
495/Mass Pike West 10,950,695 2,079,795 19.0% 120,165 1.1% 2,272,411 20.8% (396,792) 404,723 $5.71
495/Route 2 West 10,034,813 3,733,585 37.2% 370,545 3.7% 4,104,130 40.9% 203,045 (247,273) $4.46
495 North East 13,229,064 1,473,729 11.1% 63,075 0.5% 1,790,059 13.5% 129,123 216,013 $5.48
Route 3 North 6,598,033 926,289 14.0% 30,350 0.5% 1,049,483 15.9% (14,634) 244,371 $5.64
495 South 43,254,414 9,741,711 22.5% 262,766 0.6% 10,144,457 23.5% 276,736 880,841 $4.50

FLEX 57,074,638 13,017,680 22.8% 855,554 1.5% 14,066,372 24.6% (85,386) 74,705 $9.03
Inner Suburbs 1,203,952 292,262 24.3% 7,000 0.6% 299,262 24.9% (6,000) (23,143) $14.37
ROUTE 128 21,831,280 3,770,041 17.3% 397,811 1.8% 4,276,277 19.6% (191,829) 369,163 $10.34
128 West 3,406,258 360,319 10.6% - 0.0% 362,258 10.6% 3,898 52,504 $12.81
128 North 11,905,859 2,176,853 18.3% 133,035 1.1% 2,339,769 19.7% (22,965) 320,338 $11.19
128 South 6,519,163 1,232,869 18.9% 264,776 4.1% 1,574,250 24.1% (172,762) (3,679) $8.23
INTERSTATE 495 34,039,406 8,955,377 26.3% 450,743 1.3% 9,490,833 27.9% 112,443 (271,315) $8.30
495/Mass Pike West 4,040,702 1,123,633 27.8% 115,743 2.9% 1,276,576 31.6% 59,567 35,339 $8.46
495/Route 2 West 5,792,366 1,560,500 26.9% - 0.0% 1,606,500 27.7% 26,852 73,721 $8.37
495 North East 7,944,344 2,405,820 30.3% 23,302 0.3% 2,441,422 30.7% 62,319 (231,819) $8.67
Route 3 North 8,498,045 3,048,322 35.9% 235,001 2.8% 3,220,516 37.9% (100,821) (158,984) $8.37
495 South 7,763,949 817,102 10.5% 76,697 1.0% 945,819 12.2% 64,526 10,428 $6.70
INDUSTRIAL TOTAL 187,608,429 40,917,376 21.8% 2,478,806 1.3% 43,870,135 23.4% 5,768 1,459,025 $6.60

All information provided in Lincoln Property Company’s Market Statistics are from sources deemed reliable, but no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or other conditions.

Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease
Total Availability: all space that is available for lease. Includes marketed occupied space and product under construction that will be vacated within two (2) years
Vacant Available: all space that is currently available to lease and occupy; therefore, space that is not hosting a tenant. Spaces with future commitments are excluded
Direct: space that is marketed on behalf of the Landlord
Sublease: space that is marketed on behalf of the current Tenant
Average Asking Rate: the average of a compiled set of direct asking rates per market as quoted by the landlord representative. In the Suburban markets, the average asking rate is plus tenant electric.