Despite a change in climate, the Hobbs Brook Management team remains optimistic that quality tenants will be found for its speculative office development at 601 Edgewater Drive in Wakefield.

The bright skies and spring temperatures gracing Wakefield last Wednesday were a welcome backdrop at the topping-off ceremony for 601 Edgewater Drive, the latest addition to Edgewater Office Park. Equally sunny was the disposition of the building’s development team, with their celebratory mood offering little hint of the economic storm clouds gathering almost since Hobbs Brook Management broke ground on the 160,000-square-foot structure last autumn.

While acknowledging that the market has changed considerably since the high-tech industry began its precipitous slide six months ago, HBM Vice President Donald G. Oldmixon insisted that the future is not as bleak as some are anticipating.

“The market has plateaued, but it hasn’t really slowed down,” Oldmixon said, reporting a flurry of interest for the building in recent weeks. “I’m confident we are going to be successful with the leasing.”

Designed by Tsoi Kobus Architects of Cambridge, with A.J. Martini serving as general contractor, the building has the flexibility to accommodate either a single user or multiple tenants. R.M. Bradley Senior Vice President Charles Batchelder said the strategy is to land an anchor tenant requiring at least 50,000 square feet, and then entertain smaller deals. Rents are being quoted in the low $30 per-square-foot range, said Batchelder, who is handling the leasing assignment with R.M. Bradley Director of Marketing Tyson Dion and Vice President Robert Borgman Jr.

“We’ll get it done,” predicted Batchelder, who said he believes the completion of the steel frame will spur increased activity among tenants. Besides close proximity to Route 128 and the quality of the materials being used, the building’s 32,000-square-foot floorplates are another drawing card, Batchelder said. The floors, he said, are designed so they could be efficiently split in half, while architect Judith D. Mitchell said there is also an option to conjoin 601 Edgewater with a second building planned by HBM, a similarly sized property bearing the moniker 701 Edgewater Drive. That union would likely only happen if a major tenant became involved in the first building, however.

Another bonus for 601 Edgewater Drive is the reduced amount of competition available in the suburbs. Although there is considerable sublease space available, with Batchelder estimating a 12 percent vacancy rate now in the area, the economic difficulties of late also make it less likely that additional speculative construction will be added to the pipeline.

“Anyone who’s not in the ground now, I don’t see getting in the ground,” said Spaulding & Slye principal Tamie R. Thompson. “It just wouldn’t be prudent, as well as, I think, it would be very difficult to finance.”

Because of that, Thompson said she doubts there will be very many deliveries of new suburban office buildings through 2002, which could lead to a tightening of space over the near term. Even with tenants taking longer to make decisions, reversing a panic atmosphere seen last summer, Thompson said the limited supply will keep the market’s fundamentals healthy unless a severe correction occurs.

‘Low Activity’
One encouraging sign for the suburban office sector is the lease-up of 4 Van de Graaf Drive in Burlington. Developed as a speculative building by the Gutierrez Cos., the four-story, 100,000-square-foot building will become the regional headquarters for BEA Systems. The California-based high-tech company will consolidate its Maynard and Cambridge operations into the new building upon its completion later this year.

One added twist to that deal is that Spaulding & Slye had planned to take upwards of 65,000 square feet in the building. Thompson, who represented the landlord in the BEA lease along with colleague Matt Daniels, said it is unclear what Spaulding & Slye will do now in that regard. The firm has suburban facilities in Lexington and Burlington, and is currently based in Boston.

The BEA lease should offer a boost for the suburban market, both in terms of the size of the deal, as well as a solid rental rate that projects to the high $40 per-square-foot range over 10 years. While rents peaked in the low $50 range in Burlington last year, the BEA rate is well above historical rents for that market.

“We’re pleased with having them in the building,” said Thompson. “I think it was a good deal for everybody.”

Securing a tenant commitment has been the big challenge of 2001. Several companies are touring the market, Thompson said, but most are typically are basking in the glow of multiple opportunities. The big issue at present, said Cushman & Wakefield broker Mark Roth, is whether the market has hit bottom yet.

“Tenants are holding off as long as they can,” said Roth. “It isn’t really dead. There’s just very low activity.”

For the most part, only well-heeled developers are willing to push ahead in the current climate. Boston Properties is among those with office projects in the works as it moves full-speed ahead with the 303,000-square-foot Waltham-Weston Corporate Center. According to sources, Boston Properties has signed Microsoft to a deal in the 50,000-square-foot range, with Trammell Crow Co. retained to lease the speculative complex.

Beyond that, however, developers also appear to be treading cautiously, with the 77 Fourth Ave. office project in Waltham apparently on the back burner. Boston Properties acquired the rights to the 200,000-square-foot building earlier this year from the Nelson Cos. for $13 million, but sources said the real estate investment trust is presently focused on stabilizing the corporate center project.

Also up in the air is the Inwood Office Park slated to be built along Interstate 93 on the Woburn/Reading border. Developer Edward Callen had attempted to sell the parcel last summer, but has subsequently been pursuing several leasing deals, none of which have borne fruit thus far. Efforts to contact Callen were unsuccessful by Banker & Tradesman’s press deadline, but most industry sources said they believe it will be hard to jump-start the project in the current environment.

As for 601 Edgewater Drive, Oldmixon said that “getting the steel up is very important.” He also maintained that the temperament of the market is actually healthier than a year ago, with the dot-com craze making it hard last year for old-economy companies to recruit employees for expansion. Adding to the concern was the out-of-control rent spikes, which had some companies questioning the long-range competitiveness of Greater Boston.

“We’re back to a much more normal market,” Oldmixon said.

HBM President Thomas M. Dusel concurred with that outlook, adding that he believes the property’s fundamentals will help secure a good-credit tenant to help kick-start the leasing. Dusel said HBM views the building as a long-term hold, reflecting the company’s real estate strategy. The key, he said, is not to take the first deal that comes along, but rather a company that lends credibility and stability to the structure. HBM is best known for the Hobbs Brook Office Park in Waltham, a 1.3 million-square-foot complex that is fully leased.