Does Your Broker Really Represent Your Best Interests?
May 4th, 2012
Joe Sciolla
This is a time when corporate America is still in a cost-cutting mode, even as the economy slowly recovers. It’s also a time when commercial real estate continues to be a company’s second-biggest expense, after labor costs, with millions of dollars at stake. In this environment, most companies are looking for creative solutions and aren’t satisfied with business as usual. They’re looking to save money, reduce risk, and add value. And they recognize they need to do this in a post-Sarbanes-Oxley world, where even the appearance of conflicts is not acceptable.
Which leads us to the million-dollar question: Does your real estate service provider really represent your best interests? Does your firm ensure objectivity and accountability as your trusted advocate? Well, if you have a dual agency arrangement, where your broker represents both you and your landlord, the answer to these questions is likely no.
The fact is, a landlord’s agent has a contractual obligation (and a financial incentive) to bring tenants to the landlord’s buildings. But if the broker’s incentives and the tenant’s interests are not compatible, conflicts of interest are inevitable.
The client-broker relationship is all about trust, which is based on transparency and full disclosure.
How can you protect yourself? Here is a checklist:
- Ask for an account of all the brokerage firm’s relationships, listings, and asset/property management work with landlords, from the get-go, starting with the RFP (Request for Proposal).
- Make sure you check for overt conflicts of interest (e.g., the broker has listings in other competitive buildings) or hidden conflicts (e.g., a firm is affiliated with a REIT that is looking to invest in income-producing properties that are also potential buildings for tenants).
- Ask for full disclosure about compensation and commissions and expect to be informed if the broker is offered bonuses or discounts.
- Be sure that your interests are protected in your lease in such matters as expansion, contraction, and termination rights as well as non-disturbance clauses in the event of new ownership.
- Overall, insist on complete transparency…and ensure that your broker puts your interests first.
So, why are dual agency relationships still prevalent in commercial real estate, even when conflicts are prohibited by law in other professions? That’s a good question. Certainly, there are ethical firms that claim to be fair when working both sides of the fence. We at Cresa respect our competitors, some of whom are employed at dual agency firms. But we know that at the end of the day, you can’t adequately serve two masters.
Tags: tenant guide
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Metrowest Office Market Update: Q3 2011
December 27th, 2011
Dave Ross
The Metrowest office market—including Northborough, Westborough,Marlborough, Southborough,Hudson, Hopkington,Framingham, Wayland, andNatick—is faring better than Route 495 Central. However, the entire area is lagging behind most otherBostonsubmarkets, as high availability and slow job growth continue to hinder any significant rent recovery.
Despite strong activity among small companies (10-30 employees) and tenants with space requirements of less than 8,000 SF in towns such as Southborough, Natick, and Framingham, office absorption remained negative, averaging 421,040 SF year-to-date. In addition, 75%-85% of transactions were lease renewals, which implies the area’s main hurdle is not recruiting talent but recruiting companies to move here.
Companies with space requirements of 15,000 SF- 25,000 SF are being considered large users and aggressively targeted. Landlords with large portfolios, previously marketing space for tenants in the 50,000 SF range, are now breaking up these blocks of space to attract smaller and mid-sized companies and offering more generous tenant improvement packages.
Despite favorable rental rates and landlord concessions, a full market recovery will likely not occur until 2014 or later. Much of the existing “flex”/industrial space in the Metrowest market that has been sitting empty for more than three years has not been improved since the 1970s and will probably never be leased.
Other Highlights:
The 5 million SF market ofFraminghamandNatickwill continue to outpace the outer-boroughs in terms of greater rent appreciation ($3-$4 differential) and lower availability rates (10%) due to limited blocks of larger space, restricted market development, and the desire of small and medium companies to be situated near abundant amenities.
Total available (versus vacant) space increased to 36%, from 30% in Q2.
Average rental rates for Class B office and Flex/R&D space remained flat at $14.50 and $7.50, respectively, while rents for Class A office space increased slightly from $21.50 to $22.00/SF. While average rents have remained flat for the last three quarters, they may decline by up to 5% in the next 12-24 months.
In Marlborough, where vacancy is almost 40% , tied to Fidelity and Hewlett Packard, there is an opportunity to construct up to 3 million SF along I-495.
Recent Transactions:
| Tenant | Address | SF |
| ECC | 33 Boston Post Road,Marlborough | 18,231 SF |
| Vasco Data | 293 Boston Post Road,Marlborough | 11,804 SF |
| Mitsubishi Electric | 150 Cordaville Road, Southborough | 15,867 SF |
| Vivox | 2-4 Mercer Road,Natick | 7,300 SF |
Largest Tenants in the Market:
| Tenant | Requirement |
| TJX | 800,000 SF |
| Arbor Health | 150,000 SF |
| American Bio Analytical | 40,000 SF |
| Big Band Networks – Flex | 40,000 SF |
| Motion Technology– Flex | 20,000 SF |
Largest Contiguous Availabilities:
| Building Address | Available SF |
| 400 & 300Puritan Way,Marlborough | 716,000 SF |
| 4400 Computer Drive, Westborough | 382,000 SF |
| 2 Results Way, Marlborough | 160,464 SF |
| 35 Parkwood, Hopkington | 159,796 SF |
| 2 Cabot Road, Hudson | 110,000 SF |
| 450 Whitney Street, Northborough | 109,384 SF |
Takeaway for Tenants:
- Overall, the Metrowest market will continue to see higher availability rates and lower rental rates in the outer boroughs, providing favorable market conditions and lease terms for tenants. Landlords will aggressively respond, offering greater tenant improvement packages and free rent.
- Tenants that have strong, long-term business plans or leases that are expiring are advised to renew early and lock into long-term deals. Because the market is generally still soft and multiple opportunities are available, tenants should explore the market and exercise their leverage in negotiations with landlords.
For more information, contact Metrowest market specialist:
Dave Ross: 617-758-6088, dross@cresapartners.com.
Tags: commercial real estate, CresaPartners, Metrowest Market Report, office market, Q3
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“Are We There Yet?” Not Really. Meanwhile, Tenants Should Use Their Clout.
December 6th, 2011
Joe Sciolla
Many Boston-area corporate real estate executives are wondering if “we’re there yet” in terms of an office market recovery, as many landlords and their brokers are trying to create the perception that the pendulum is shifting in their favor. The truth is that space has tightened significantly in Class A high-rise buildings in the Financial District, Back Bay, and East Cambridge In fact, there are signs that the overall market is recovering, albeit very slowly.
But are we home yet? Not by a long shot. In fact, the latest economic study, released by Northeastern University economist Alan Clayton-Matthews, reveals that Massachusetts won’t return to pre-recession employment levels until the second quarter of 2015. In the meantime, availability levels in most markets are still 20% or more, with huge amounts of inventory waiting to be filled.
Mastering the Art of Advocacy
With the stakes so high and some landlords pushing the envelope, tenants are advised to partner with advisors who can objectively represent their best interests and provide integrated corporate services like Strategic Planning and Project Management. They should leverage every opportunity to advocate for themselves and exercise their negotiating clout.
For example, we encourage clients to:
- Investigate your landlord and the market. Don’t make assumptions about the landlord’s financial stability. Many buildings are still under debt and at risk for delinquency. You can also strengthen your position by reviewing other options in the market and researching the occupancy situation in your building.
- Stress credit-worthiness. At the same time, credit-worthy tenants should stress their own stability, knowing that landlords would prefer to work with companies that have strong long-term plans. In this light, early lease renewals present a win-win situation for tenants as well as landlords who want to keep good tenants in place.
- Maximize favorable lease terms. Read the fine print in your lease—you’ll find numerous clauses that can support your negotiations. Flexibility is key, so make sure there are favorable terms for expansion and contraction. Also, ensure the building delivery date is acceptable. And naturally, push for generous concessions such as tenant improvement allowances and free rent.
- Plan today for the office of the future. Consider how your workforce is changing and plan ahead for an infrastructure that will accommodate wireless environments, office sharing, smaller workstations, and sustainable features. Determine plans to optimize your space by working with a Project Manager and request support from the landlord.
It will still be a long and bumpy ride before a full commercial real estate recovery arrives in Greater Boston. Meanwhile, be prepared to act before rents across the board really do rise…and remember who’s in the driver’s seat!
With the stakes so high and some landlords pushing the envelope, tenants are advised to partner with advisors who can objectively represent their best interests.
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128 North Office Market Update: Q3 2011
November 30th, 2011
Matt Harvey
Despite slow job growth, the 128 North commercial real estate market continued to show signs of recovery in Q3. Office absorption remained positive for the seventh straight quarter, averaging 289,439 year-to-date, and both the office and flex/R&D markets posted their lowest
availability rates (22%) in 18 months.
While average asking rental rates for Class B ($20/SF) and Flex/R&D ($10.50/SF) space have remained flat, asking rates for Class A space increased by .50/SF and are now tracking at $25/SF. Despite a few instances where landlords of Class A buildings will try to test the market’s appetite for higher rents, rents will remain flat for the remainder of the year and Class A leasing activity will drive the area’s recovery.
However, as both the office and flex markets continue to tighten, “flight to quality” is a trend that bears watching. With no new construction being added to the market inventory, tenants opting for better buildings closer to Boston are relocating to other submarkets.
Other Highlights:
Select landlords, including Boston properties, Hobbs Brook Management, and National Development have gained leverage in the 128 North market, by acquiring “micro markets” in select areas (Edgewater Drive inWakefield and Presidential Way/Unicorn Park inWoburn).
By strategically expanding their presence in area business parks, these monopolies have reduced competition among landlords and enhanced their ability to hike rents above market value.
Recent Transactions:
| Tenant | Address | SF |
| National Development (Sale) | UnicornPark, Woburn | 675,000 SF |
| Hobbs Brook (Sale) | 100, 201, 500 Edgewater Drive,Wakefield | 313,300 SF |
| Keurig | 100 Quannapowit Parkway,Wakefield | 55,000 SF |
| Carl Zeiss | 1 CorporationWay,Peabody | 43,496 SF |
| Eliza | 75 Sylvan Street,Danvers | 38,000 SF |
Largest Tenants in the Market:
| Tenant | Requirement |
| Keurig | 250,000 SF |
| GSI Group | 100,000 SF |
| Welch’s | 75,000 SF |
| Logmein | 75,000 SF |
| Excel Orthopedic | 40,000 SF |
Largest Contiguous Availabilities:
| Building Address | Available SF |
| 300 Trade Center, Woburn | 206,739 SF |
| 28 Crosby Drive, Bedford | 121,063 SF |
| 15 Wayside Drive, Burlington | 109,283 SF |
| 10 Corporate Drive, Burlington | 107,000 SF |
| 50 Dunham Road, Beverly | 103,000 SF |
| 2 Corporation Way, Peabody | 100,000 SF |
Takeaway for Tenants:
In this transitional market, tenants are advised to work with an advisor that represents their best interests.
Despite the emergence of select “micro markets,” tenants with strong advisory representation will find that cost-effective solutions are still available and in turn be able to maximize their leverage in negotiations.
For more information, contact 128 North market specialist:
Matt Harvey: 617-758-6003, mharvey@cresapartners.com
Tags: 128 North Office Report, Boston Q3 Market Report, commercial real estate, CresaPartners, office market, Q3
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128 West Office Market Update: Q3 2011
November 4th, 2011
Shawn McDonough
While Waltham has become one of the hottest office submarkets in Greater Boston, overall, the Route 128 West office market remains flat. After strong activity last quarter, absorption was down in Q3, and a full recovery is years away due to slow job growth and significant vacancy.
Throughout the first half of the year, 128 West experienced some tightening of Class A space, as tenants looking to take advantage of low rates traded up in Waltham and surrounding towns. While it appeared the market was shifting in favor of landlords, Route 128 West remains a “tenant friendly” market, with availability in the Class A and B office sectors still above 21%. Large tenants face fewer options, but tenants seeking 10,000-20,000 SF have over 60 available options to choose from.
Despite some cases of landlords testing the market’s appetite for higher rents, there is too much inventory to fundamentally change rental rates. In order to establish an equilibrium between landlords and tenants and create a vibrant real estate market, thousands of jobs must be generated to fill the empty space, and it’s
unclear if enough jobs will be created in the next three to five years to make any real difference.
Other Highlights:
- While the market will remain flat for the next 12 months, Marcus Partners could add over 800,000 SF of Class A office space when the market rebounds. In addition, Boston Properties recently announced plans to invest $30 million into its purchased Bay Colony.
- Total available (versus vacant) space is 21.4% in, while availability in some other submarkets (Metrowest, 495 Central, 495 North) average 10-15% points higher.
- Asking rents for Class A space increased slightly to $34/SF, while Class B remained flat at $25.50/SF. Rents for both Class A and B will likely remain flat for the rest of the year.
Recent Transactions:
| Tenant | Address | SF |
| Hitachi | 610 Lincoln Street,Waltham | 50,000 SF |
| PyxisMobile | 1000 Winter Street,Waltham | 40,000 SF |
| Schwartz Communications | 300 Fifth Avenue,Waltham | 29,550 SF |
| Verisk Analytics | 201 Jones Road,Waltham | 25,000 SF |
Largest Tenants in the Market:
| Tenant | Requirement |
| VistaPrint | 150,000 SF |
| Iron Mountain | 100,000 SF |
| Sybase | 85,000 SF |
| Welch’s | 75,000 SF |
Largest Contiguous Availabilities:
| Building Address | Available SF |
| 133 Boston Post Road, Weston | 356,992 SF |
| 55 Chapel Street, Newton | 201,317 SF |
| 1100 Winter Street, Waltham | 154,813 SF |
| 20 Maguire Road, Lexington | 101,868 SF |
| 333 Wyman Street, Waltham | 83,000 SF |
| 1050 Winter Street, Waltham | 56,000 SF |
Takeaway for Tenants:
Thanks to advanced technology and current economic conditions, more and more tenants are seeking ways to do more with less. Creative workplace solutions such as telecommuting and a predilection among tenants to renew existing leases and not expand will keep demand from rebounding quickly.
Tenants with strong business plans and good credit should consider locking into leases for the long term in order to take advantage of current market conditions.
For more information, contact Route 128 West market specialist:
Shawn McDonough: 617-758-6092, smcdonough@cresapartners.com.
Tags: 128 West Office Report, CresaPartners, Q3
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Boston Office Market Update: Q3 2011
October 19th, 2011
Brandon Leitner
Rick Lowe
While there have been signs of improvement, it remains a tenant’s market in Boston mainly due to sluggish job growth and a general mood of uncertainty.
The office market in Boston, which consists of 60 million SF, now has an availability rate of 16%. After a slight uptick in the last two quarters of 2010, availability this year has been relatively flat, and we expect it to remain as such for the rest of the year. Meanwhile, year-to-date net absorption (now 350,000 SF) has been rising slowly and is expected to continue in this positive trajectory.
Average asking rental rates in the Class A market (now at $48/SF) have averaged an increase of $1.00 per quarter since Q1 2011 and will likely increase slightly more in the next couple of quarters. Class B space, now tracking at $33/SF, is showing similar signs of incremental rate spikes. Class C space, however, may experience declining rates looking ahead.
Trends and Highlights
Overall, our market forecast includes the following:
The downtown Boston marketplace will continue to see a high volume of activity throughout the next quarter as tenants seek favorable rental rates and concessions well ahead of their lease expiration dates.
The recent trend of traditional office tenants from Cambridge migrating to Boston’s Seaport District will continue in the next quarter and beyond.
Larger tenants with lease expiration dates three-plus years out will continue to tour the market, hoping to achieve long-term leases at today’s market values.
Landlords will “reach” to keep existing tenants, rather than having them move out of buildings, by continuing to offer strong tenant improvement allowances and free rent packages.
Absorption will continue to be tepid over the next several years, thus acting as a restraint on any rent growth.
Recent transactions include:
Boston Herald 451 D Street, Boston 50,724 SF
CBIZ Tofias 500 Boylston Street, Boston 40,000 SF
Allen & Gerristen 155 Seaport Lane, Boston 33,000 SF
EC Language Center One Faneuil Hall ,Boston 21,700 SF
Largest tenants in the market include:
State Street 500,000 SF
Blue Cross/Blue Shield 420,000 SF
Brown Brothers 300,000 SF
Mintz Levin 220,000 SF
Cambridge Associates 175,000 SF
Lexington/AIG Insurance 150,000 SF
Largest contiguous space availabilities include:
50 Post Office Square 411,000 SF
One Federal Street 280,000 SF
75 State Street 230,000 SF
One Congress Street 185,000 SF
One International Place 180,000 SF
One Financial Center 170,000 SF
Lafayette Corporate Center 135,000 SF
Takeaway for Tenants
It is critical for tenants to review market conditions and their business plans in considering real estate solutions that best protect their interests. A few things to keep in mind:
Downtown Boston remains a tenant’s market.
No new buildings are expected to come online prior to Liberty Mutual’s headquarters in 2013.
While the Class A vacancy in the Back Bay is approximately 3%, the Financial District vacancy is approximately 15%, creating value for tenants seeking to lower their overall occupancy costs.
Financial services tenants represent the largest demand group in the market, with law firms next in line.
The average-size active tenant requirements continue to be 15,000 square feet and under.
For more information, contact Boston market specialists Rick Lowe 617-758-6030 email: mailto: rlowe@cresapartners.com or Brandon Leitner 617-758-6040 bleitner@cresapartners.com.
Tags: Boston, Boston Q3 Market Report, office market
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Perception vs. Reality:It’s Still a Tenants’ Market After Another Dip in Jobs
September 23rd, 2011
- Joe Sciolla
Earlier this summer, it seemed like the economy was improving, and there were signs that commercial real estate in Greater Boston was heating up. After all, job growth was reported in three consecutive months, and the unemployment rate was falling. After a long period of pent-up frustration, many building owners and their brokers started to become more bullish, trying to create the perception that rising rents were on the way.
Then a wave of reality swept over the region, leaving us where we are today: back to a big chill. Tied to a recent warning from the IMF, there is renewed talk about world-wide, double-dip recession. Today, the corporate mindset is generally marked by uncertainty and anxiety. Still, some landlords are trying to push the envelope, which means that tenants should be wary about over-inflated prices.
Ironically, Boston was the top major US job market in Q2, with the state unemployment rate down to 7.4%, the lowest since February 2009. Yet, some statistics can be misleading, and it’s important to drill deeper and focus on facts vs. hype.
Macro and Micro Realities
The last couple of months have witnessed disturbing developments on the world stage that have ripple effects on the local level.
These include the debt crisis in Europe, gyrating stock markets, and gridlock in Washington.
Locally, consider the following:
- Vacancy.
While it’s considered a balanced market when vacancy is a 10%, Boston
vacancy today is 15% in the CBD for Class A office space, 20% for Class B
space, and the stats are even higher when viewed in terms of total availability.
- Employment.
In August, Massachusetts companies cut nearly 9,000 employees after
gains in June and July. The following sectors lost jobs:
Information (6,000), Leisure & Hospitality (2,100), Arts,
Entertainment, Recreation (1,600), Education and Health Services ((1,100),
Manufacturing (800), Professional, Scientific, Business Services, Government
(700), Financial (400).
- Rents and Demand. Rental rents have generally remained flat, with the exception of premium, high-rise view space. More tenants are considering a flight to quality Class A space, causing the Class B market to suffer.
Where Is the Market Headed?
Are these recent setbacks a blip along the road to recovery, or is this slowdown going to continue? The answer may lie in reports about the plans of the following companies for layoffs (with others likely to follow):
- Bank of America: plans to cut nearly 40,000 jobs company-wide, according to the Wall Street Journal, with Boston hard hit.
- State Street Corp.: 558 expected layoffs.
- BayState Health: 354 expected state layoffs.
- Flextronics Americas: 250 layoff in Boston, Framingham, Springfield.
- Hasbro: moving 70 employees to RI and laying off 75 Mass.-based staff.
So, what is the takeaway for tenant?
Looking ahead, we all need to monitor the ever-changing commercial landscape, and
tenants need to perform due diligence to make sure they are minimizing their risks. Most of all, they should repeat over and over again: “It’s still a tenants’ market, and I need to negotiate from a position of strength.”
Tags: commercial real estate, tenant guide
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