More than two years after the Boston Regional Medical Center in Stoneham succumbed under a sea of red ink, the Gutierrez Co. has finally unveiled its plans to breathe new life into the 41-acre property. If all goes as hoped, the project could prove a cure for the imbalanced office market as well.
In a proposal filed with state environmental officials, Burlington-based Gutierrez calls for a $50 million renovation and expansion of the complex, which is located just off Interstate 93 and Route 28. Along with restoration of 300,000 square feet of existing space, the developer is also seeking to construct three new office buildings totaling 540,000 square feet. Gutierrez is renaming the facility the Stoneham Executive Center, with a completion date anticipated by August 2002. The Lahey Clinic, which has cancelled plans to open a medical facility at the park, is an equity partner in the property.
Broker David Wright of CB Richard Ellis/Whittier Partners reports that the park “has seen a ton of interest” since his company’s marketing effort began in earnest less than two months ago. More than 3 million square feet of requirements are currently considering the property, he said, most of whom are looking for 500,000 square feet and above.
“It’s really exciting,” Wright said of the leasing campaign, which he describes as “elephant hunting” given the size of the candidates circling the park. Industry sources maintain that Rational Software is among the firms seriously eyeing Stoneham Executive Center. The company is seeking more than 400,000 square feet, sources said.
Although he declined to identify any prospects, Wright did say the campus-like quality is attracting leading companies, especially since the park is barely a mile away from the Orange Line’s Oak Grove subway stop, which leads directly to downtown Boston. The landlord will run a continous shuttle to the station to enhance that connection. The former hospital also has solid highway access to I-93, and is nestled amongst hundreds of acres of parkland controlled by the Metropolitan District Commission.
Companies “are crawling out of the woodwork,” Wright said, including Cambridge firms and other players who believe the campus setting will help attract and retain employees. Along with jogging paths and mountain biking trails, the pond which fronts the property is usable for canoeing and windsurfing, Wright said. Views of the new buildings on a hillside behind the old hospital stretch to the Atlantic Ocean and downtown Boston, he added.
The Stoneham project is just the latest example of so-called infill developments occurring in Greater Boston, with a dwindling number of virgin land sites and strong demand for office space prompting a fresh look at underperforming or underutilized properties that could be successfully adapted for commercial uses. In Watertown, for example, O’Neill Property Group is putting the finishing touches on the buildout of a longtime army installation into a 770,000-square-foot office/retail complex. Just a few miles down from the Gutierrez project, meanwhile, National Development is leading the charge to build more than 1 million square feet of office, retail and hotel space in Woburn. That venture is located at the former Superfund parcel that inspired the movie “A Civil Action.”
Calls to the Gutierrez Co. to discuss the Stoneham plan were not returned by Banker & Tradesman’s press deadline. The company first announced its purchase of the failed medical center earlier this spring, paying $20 million for the acquisition to a creditor’s group formed to dispose of the hospital’s assets. While it was a price that seemed low to some, industry observers said the firm’s willingness to buy the development with no strings attached helped Gutierrez secure the deal at that rate.
The Stoneham initiative is just one of several sizeable projects Gutierrez is involved in at present. Another notable purchase occurred last month when the company shelled out $14 million for 560 acres of land in Northborough and Marlborough, a parcel previously owned by MetLife that is considered a likely candidate for office space development. Gutierrez is also proceeding with a new office building in Burlington, a 135,000-square-foot structure being built on behalf of Nokia Communications, while the firm has also finalized a deal with RSA Data for 350,000 square feet of office space off the Middlesex Turnpike in Bedford.
Tenant ‘Receptivity’
As for the Stoneham property, it might appear that Gutierrez is beginning the redevelopment at the wrong time, with a year of record rental rate growth suddenly tempered by upheaval in the high-tech sector. A number of companies have recently announced layoffs and plans to return office space to the market, both in Boston and at suburban locales. Tens of thousands of square feet is being offered for sublease by such struggling companies as Allaire, CMGI, Nextera and iCast.
Despite those difficulties, suburban brokers such as Tamie Thompson of Spaulding & Slye Colliers insist that the region can withstand additional supply. In fact, Thompson said the tight market had made life difficult for tenants, with the lack of options often forcing companies into bidding wars to secure space.
“A little vacancy will be good,” said Thompson, noting that rental rates in the North market have ballooned from the mid- to high $20s per square foot a year ago to achieved rents of $50 per square foot in such central locations as Burlington and Woburn. In one example, Thompson brokered a lease at New England Executive Park in Burlington at the start of the year at $32.50 per square foot. Recently, that development realized a deal at the $50 per-square-foot level.
According to Spaulding & Slye Colliers research analyst Ben Breslau, the vacancy rate is now at 4.7 percent for the 7.8 million-square-foot North market. That is the same as the overall suburban average, while rental rates are averaging $26.45 per square foot, compared to an overall average of $27.76 per square foot.
Wright noted that the bulk of the sublease space is not only being priced at near market rate, most of it is in chunks of 20,000 to 40,000 square feet, whereas those looking at Stoneham Executive Center require a much larger option. Depending on the credit of the tenant and lease terms, the park should achieve rents in the mid- to high $30 per-square-foot range, said Wright. The recent high-tech shakeup has had no impact on activity at the park, he said, with interest actually picking up in the past month.
Along with the proximity to Boston and Cambridge, Thompson also cited the property’s rural setting as a plus. The lack of large, contiguous blocks of space will make the property attractive, she said, as well as the developer’s track record of being able to complete such an ambitous effort.
“It’s really beautiful,” Thompson said of the complex. “I think that project is going to have a lot of receptivity.”
Stoneham Executive Center should also benefit by a trend of new construction along I-93, according to Thompson. Besides the National Development project in Woburn, Unicorn Office Park recently completed a 190,000-square-foot office building almost across the street, while developer Edward Callan continues to push his proposed office park on the Woburn/Reading line. Thompson said the rise of I-93 construction is a product of both the lack of sites on Route 128 and I-495, as well as a recognition of I-93’s centralized location.
Wright said the decision on whether to renovate the existing hospital building or launch a new office building as the initial construction will be “tenant driven.” If all goes as well as hoped, he said a major commitment could be cemented within the next two months.
