Bullish on the prospect of finding office tenants, National Development is continuing to expand its 61-acre Lake Williams Corporate Center in Marlborough.

Like any good roller coaster, the wild ride that the office market has embarked upon in the past 12 months has its minions holding on for dear life, nervously contemplating what lies ahead at the next sharp turn. But while many are suddenly clamoring to get off, convinced the industry is headed for a brick wall, there are a few pockets of momentum that offer some hope to the deal-starved sector.

Along Interstate 495, for example, an element of demand still exists for office space, as witnessed by a pair of hefty leases just completed in Marlborough. At 300 Nickerson Drive, Aether Systems has leased 40,000 square feet, while Axiowave has signed on for the entire 80,000 square feet at 200 Nickerson Drive. Both buildings are owned by Glenborough Realty Trust.

“Those were two sizeable leases,” said CB Richard Ellis/Whittier Partners broker Robert McGuire, who represented Glenborough along with colleagues Chris Tosti and Rob Walles. As for the overall market pulse, McGuire added, “We may not be at the volume we were last fall, but there are still deals out there.”

Among those with an optimistic outlook is John J. O’Neil III of National Development, whose firm is pursuing tenants for its Lake Williams Corporate Center in Marlborough. In partnership with Taurus Investments of New England, National is offering 26,000 square feet in one building nearing completion, and is also marketing a four-story, 120,000-square-foot structure that would complete build-out of the 61-acre complex.

While acknowledging that the market has softened significantly in recent months, O’Neil said the park is garnering solid interest from potential tenants. A lease is out for signature for half the space in the property under construction, he said, and the landlord is closing in on two tenants who could kick off the final project as well.

“We’re seeing a lot of activity right now,” said O’Neil. “It’s encouraging.”

National is so bullish about the prospects that it recently retooled the park’s layout, axing a proposed 120-room hotel in favor of adding 30,000 square feet of office space to the final building. With an estimated 1,300 hotel rooms already in Marlborough, coupled with a subpar location for an inn, National and Taurus concluded that the revised plan made more sense, O’Neil explained. Although office rents have clearly fallen after the record-setting pace of 2000, and vacancies are up substantially, O’Neil said the developers are confident of finding someone to take the added inventory.

“If feels terrible, but things really aren’t that bad,” he said. “In my mind, this is just a healthy correction that is bringing some normalcy” back to the market. The 8 percent to 10 percent vacancy rate in the suburban office market stands in stark contrast to the 2 percent and 3 percent levels of 2000, but O’Neil said the current climate is actually more in line with a balanced supply/demand equation.

Joining O’Neil in that opinion is Scott R. Hughes, president of Hughes Properties Corp. The past six months have certainly cooled the impressive boom market seen previously, Hughes agreed, but he also concurred with O’Neil that there are tenants still shopping for space.

“We are doing deals,” Hughes said last week. “You’ve got to work harder, and the landlord has to be flexible, but there are [firms with space] requirements out there right now.”

The key to wooing such prospects, Hughes said, is to be creative and accommodating. In the case of one office building he is marketing, Cedar Hill Place in Marlborough, the developer has agreed to subdivide the space as small as 2,500 square feet.

No Worries
The formula by the Maggiore Cos. of Woburn appears to be working, with Hughes noting that four tenants have already committed to the 107,000-square-foot building, including one taking 26,000 square feet. The latest, CTC Communications, is leasing 5,100 square feet. Two more firms are about to ink letters of intent, Hughes said, and will bring the property to nearly 60 percent leased if they do sign.

Given that Maggiore broke ground on the building on a speculative basis when conditions were markedly stronger, the recent activity is no doubt encouraging. Hughes said the decision to cut the space up was based on reading the market realistically, with six-figure requirements all but vanishing in the current environment. The Aether and the Axiowave leases were unusually large for 2001. Cushman & Wakefield brokers John Lashar and Mark Reardon represented the tenants in the Nickerson Road transactions.

“Most of the requirements we are seeing are in the 2,500- to 12,000-square-foot range, so that’s what you have to work with,” Hughes said. “You need to understand the market, and you have to move quickly to get it done.”

Interestingly, the Marlborough area is attracting firms from outside the region. In one instance, Internet Photonics of New Jersey relocated to 100 Locke Drive in Marlborough, while a New York firm is moving into a 5,400-square-foot space in Southborough. Hughes said he believes the area’s wealth of skilled employees is luring companies to Marlborough and surrounding communities.

That trend should offer comfort to developers who have buildings under construction, many of whom might have held off had they known the market would slide so quickly in the first half of 2001. Among the office projects in the pipeline is a 45,000-square-foot building on Solomon Pond Road in Northborough and a 120,000-square-foot structure on Donald J. Lynch Blvd. in Marlborough. McGuire is representing Capital Group Properties and Secured Realty Inc. in an 80,000-square-foot building under construction along Route 9 in Southborough.

After hitting the Route 128 market for the past several months, subleasing opportunities are beginning to crop up along I-495. Despite that trend, and a November completion date that has some prospective tenants waiting on the sidelines before committing to the Capital/Secured property, McGuire said he is nonetheless encouraged by the initial interest in that project, which is known as Southborough Place.

“We’re doing just fine with activity right now,” he said. “The landlords aren’t
worried.”