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36 2014 Central Mass By The Numbers • Worcester Business Journal www.wbjournal.com REAL ESTATE W ith strong demand for commercial space in the eastern part of the state filling locations along Route 128, companies looking for space are pushing west, with buildings along the Interstate 495 corridor seeing a boost in occupancy in the last year. In its second-quarter 2014 report on the market, Colliers International found that the occupancy rate outside Boston surpassed 81 percent for the first time since 2008, with tenant activity "healthy in tech-heavy markets in the core Route 128" area. "With vacancies tightening quickly along Route 128, tenants (especially large users) are faced with fewer space options, which has been driving up rents and pushing demand further into the broader market," Colliers said in its report. "Rapidly declining vacancies in core Route 128 have rents surging in the Route 128, (Massachusetts Turnpike) and Northwest submarkets." In the buildings with top-of-the-line, or Class A, space along Route 128, rents increased 17 percent from the second quarter of 2013, Colliers reported, exceed- ing $32 per square foot. Meanwhile, in the third quar- ter, the vacancy rate along Route 128 edged below 17 percent, according to Colliers. That has created an opportunity for the communities along and west of I-495, according to Peter Kovago, principal of Glickman Kovago & Co. in Worcester. He pointed to large deals, such as the recent decision by GE Healthcare Life Sciences to house more than 500 employees in 160,000 square feet of space at the Marlborough Hills building at 200 Forest St. That move, announced in August, is scheduled to be com- plete next spring. "I think a number of square footage has been absorbed in the last 18 months in that space," Kovago said. With third-quarter vacancy rates around the Marlborough area at 25 percent, there is still plenty of opportunity, Kovago indicated. "I think there is a lot of decent office as well as flex space that is waiting there to be absorbed," he said of the opportunities along I-495. A benefit for communities such as Marlborough and Westborough is space. With large amounts of land at different locations, developers can take advantage of build-to-suit projects that customize locations to meet the needs of incoming tenants. "Price-sensitive firms and companies with large lease requirements will boost office demand (along I-495) going forward," according to the Colliers report. "Tenant expansions, in the form of build-to-suit con- struction, will support suburban office absorption in the coming year." As the push continues westward, space constraints will continue to be a limitation for Worcester, said Kovago, who described the city as "land poor." The only real opportunity for a build-to-suit project is in CitySquare, he said. Worcester does have a lot to offer incoming compa- nies, Kovago said, including its network of colleges and the resulting work-ready graduates, but it cannot build out in the same way as communities along I-495 can. Worcester saw its commercial vacancy rate rise in the third quarter, to 19.3 percent from 18.4 percent in the third quarter of 2013, with 16,664 square feet returning to the marketplace, according to Colliers. Despite the market saturation around Boston and a westward movement, commercial occupancy rates still have not hit a point west of I-495 that would funda- mentally change the market, according to Kovago. "It's still a favorable market for the tenant. It is still a tenant market, not a landlord market out there," he said. "You are probably not going to see that shift for a while, if at all." n By Sam Bonacci Worcester Business Journal Staff Writer Tighter supply inside Route 128 pushes firms westward Sources: Mass. Department of Revenue, U.S. Census Bureau, RealtyTrac.com Property tax rate per $1,000 assessed valuation in Bolton, the highest of any community in Central Massachusetts with one tax rate for all property. $21.20 The assessed value of all residential property in Wayland in fiscal year 2014, more than 94 percent of all property in town. $2.81B QUICK HITS Source: Colliers International office vacancy rates (3rd Quarter 2014) Source: Massachusetts Department of Revenue top commercial/industrial property tax rates in central Mass. Per $1,000 property valuation; rates are for fiscal 2014 (July 1, 2013 to June 30, 2014): Increase in building permits in West Boylston (2 to 21) from 2012 to 2013, the biggest percentage gain in Central Mass. 950% Value of new construction in Shrewsbury in 2013, highest of any community in Central Massachusetts. $21M Number of foreclosures in Athol from September 2013 to August 2014, second only to Worcester (157). 35 0 5% 10% 15% 20% 25% 16.3% 10% 22.3% 18.3% 19.3% Route 128 Inner Suburbs of Boston I-495 Suburban Boston Worcester $40.92 Framingham Hudson Maynard Worcester Milford Clinton Littleton Ayer Marlborough Fitchburg Hopedale Sudbury Berlin Auburn Sturbridge $34.45 $32.28 $30.83 $30.68 $30.19 $29.22 $28.55 $28.22 $26.32 $26.22 $24.94 $23.91 $23.38 $21.65 0 5% 10% 15% 20% 25% 16.3% 10% 22.3% 18.3% 19.3% Route 128 Inner Suburbs of Boston I-495 Suburban Boston Worcester $40.92 Framingham Hudson Maynard Worcester Milford Clinton Littleton Ayer Marlborough Fitchburg Hopedale Sudbury Berlin Auburn Sturbridge $34.45 $32.28 $30.83 $30.68 $30.19 $29.22 $28.55 $28.22 $26.32 $26.22 $24.94 $23.91 $23.38 $21.65 For a more comprehensive look at property tax rates, please turn to Page 41.