Two key tenants, Loomis Sayles and Brown Rudnick Freed & Gesmer, reportedly have decided to stay put at One Financial Center in Boston.
When it comes to trolling for office tenants, the Boston pond has thinned out dramatically during the past 12 months, but that does not mean the fish have completely disappeared.
After one of the slowest leasing periods seen locally in recent memory, Hub brokers say they are beginning to notice signs of tenants resurfacing, with several large users helping to set the pace. In addition to Bain Capital, which is seeking more than 100,000 square feet, other companies conducting six-figure space searches include Arnold Worldwide and the Goulston & Storrs law firm. Meanwhile, PricewaterhouseCoopers has hired McCall & Almy to help in its search for a large block of space said to exceed at least 150,000 square feet.
William F. McCall Jr., principal of McCall & Almy, acknowledged last Friday that his Boston-based firm has been retained to assist Jones Lang LaSalle, which has the national account for PricewaterhouseCoopers. McCall referred questions to JLL’s Virginia office, but calls were not returned by press deadline. And while the accounting giant’s future space needs have been on the industry’s radar screen for some time, brokers report that business is beginning to pick up throughout the city.
“There are definitely more tenants in the market who are considering alternatives and preparing to make commitments,” said Ted Wheatley, a principal with the Codman Co. in Boston “That has certainly been the case in the last couple of weeks.”
Indeed, sources say there have been several significant leasing actions completed in Boston recently, with Cambridge Assoc. reportedly opting to move into 90,000 square feet at 100 Summer St. and two key tenants deciding to stay put at One Financial Center. Loomis Sayles and Brown Rudnick Freed & Gesmer will remain at that downtown tower, according to sources. Both firms were estimated to have requirements in the 150,000-square-foot range.
The deals offer badly needed momentum to the local office market, with searches tending to take longer and negotiations more protracted than that common during the one-sided landlord market that existed in 1999 and much of 2000.
“The good news for landlords is there is an increase in activity, and the good news for tenants is that there are a lot of options to choose from,” Wheatley said. “So depending on your perspective, there’s good news, but it’s all relative.”
Prolonged ‘Funk’
In its just-released market report, for example, Codman estimated that rents are now averaging $55 per square foot for Class A space and $36 for Class B buildings, representing a drop-off of 25 to 30 percent from the rent levels that peaked in 2001. Given that there is more than 5.5 million square feet of available supply, Codman anticipates a further rent erosion of 10 to 15 percent before leveling off later this year.
Although it is not the direction landlords would prefer to see rents headed, Wheatley maintained it could have been much worse, with rates essentially back to where they were in 1998 or 1999. But despite being encouraged by the spate of activity, Wheatley stressed that he believes the Hub is “going to be in a funk for a while.”
Also casting a wary eye on the market is Catherine Thompson, a principal with GVA Thompson Doyle Hennessey & Everest in Boston. According to the industry veteran, there has been improvement in activity in some sectors, but it is not broad-based enough to offer encouragement that the market is completely on the rebound. Because real estate tends to be a lagging indicator, Thompson said it is expected to be a while before conditions improve.
“If a tenant is looking for space, it is because their lease is coming due,” she said. “We don’t see a lot of new or growing companies.”
Thompson’s colleague, John Hennessey, is handling the Arnold Worldwide deal. Hennessey did not return phone calls by Banker & Tradesman’s press deadline, but sources said the company is weighing whether to remain at 101 Huntington Ave. or to relocate to 131 Dartmouth St., the new 11-story office building slated to open later this year. Goulston & Storrs, currently across town at 400 Atlantic Ave. and Rowes Wharf, is also “kicking the tires” at 131 Dartmouth, one source close to the property said last week.
Were the project team to land one or both of those tenants, it would be a great leap forward in getting the 365,000-square-foot leased up, especially in the uncertain climate that has gripped the industry in the past year. Officials at Goulston & Storrs declined to return a phone call to discuss the company’s intentions, but sources acknowledge that the law firm is actively seeking space, reportedly for as much as 150,000 square feet.
Although Goulston & Storrs is apparently interested in 131 Dartmouth St., brokers said it is likely the law firm will conduct a full-fledged space search before making its decision, especially with such possibilities as 470 Atlantic Ave. still available. But some observers said they believe 131 Dartmouth St. would be a good fit for a tenant such as Arnold or Goulston & Storrs.
“It’s a better building for a large user than a small user,” said John Barry of Richards Barry Joyce & Partners. “The identity would work well for a couple of companies out there.”
