Officials with Cummings Properties were downright cheerful during a recent tour of TradeCenter 128, their newly finished 550,000-square-foot building in Woburn.
The place hums with activity, especially in TradeCenter Executive Suites — a 30,000-square-foot block of space that Cummings has carved out for small incubator companies. At the opposite end of the building is an entire wing of the Trade Center occupied by the Middlesex County Superior Court.
“We’re signing new leases every week,” said Dennis Clarke, president and CEO of the privately held Cummings, who claims the building is about 82 percent leased with more than 70 tenants.
Time will tell if TradeCenter’s fortunes hold out. But if real estate observers are right, the building has at least one thing in its corner: location.
Observers say the northern market should do comparatively well heading into 2010, but overall, official prognostications warn of a deteriorating suburban office market this year.
Tamie Thompson, a managing director of leasing at Jones Lang LaSalle, said that while she expects the northwest 128 submarket to see positive absorption in the first two quarters, the outlook for the rest of the market is unsure, and tenants are wary.
In its quarterly Pulse newsletter, Jones Lang LaSalle says the negative absorption was 413,244 square feet for the year, while Colliers Meredith & Grew places it at a more dire 649,470 square feet.
Thompson said there are a lot of tenants doing short-term renewals.
“Others are doing what we call ‘early blend/extends,’ ” she said. “Let’s say you have a five-year lease with two years to go. The tenant will say to the landlord, ‘I’ll give you three more years if you reduce my rent now.’ A lot of landlords are going aggressively to tenants and giving them this option.”
That’s what Cummings did last year to lure tenants to TradeCenter 128. Cummings and other landlords dropped rents and spent the extra money to customize tenant offices.
Clarke, while declining to say exactly what the rents are now, attributed the occupancy increase to a resurgence in leasing from tech and health care firms, although he did say Cummings is working with rents “that are meaningfully lower than what we originally envisioned the building having.”
Thompson believes that location is in the company’s favor – the northwest suburban submarket, where most of Cummings’ properties are located, is among the strongest in the metropolitan area.
“In the first two quarters of 2010, I believe we are going to see positive absorption in this submarket,” she said. The two largest lease signings of the fourth quarter were there — Avid Technologies agreed to move its corporate headquarters to from the I-495 corridor to Burlington, taking about 200,000 square feet in two buildings, while Acme Packet consolidated operations into 124,000 square feet at 100 Crosby Drive in Bedford.
Construction is nearing completion on another high-end suburban office project, 175 and 185 Wyman St. in Waltham, being developed on spec by Hobbs Brook Management. The company did not return calls requesting comment on the project, but a video on its Web site states that the project will be certified LEED Gold and be located in a “park-like campus atmosphere.”
“This project is priced at the height of the suburban market,” Jones Land LaSalle’s Thompson said. “They’re very well heeled, institutional owners.”
Brendan Carroll, vice president of research for Richards Barry Joyce & Partners, said that from an absorption perspective, there could be some downside heading into 2010, given the space consolidations under way and a lack of expansion activity.
“The silver lining is that construction discipline has kept vacancy at reasonable levels, with a supply-demand balance more favorable to landlords than in previous downturns,” Carroll said.
