Lawrence Yun, NAR chief economist, said fallout from the recession continues to impact commercial real estate. “Vacancy rates are beginning to level off in some sectors, but rent discounts and moderate levels of landlord concessions are widespread,” he said. “This is very much a tenant’s market, which is quite favorable for businesses that are considering expansion. It’s also encouraging that there is a modest improvement in the sentiment of commercial real estate practitioners.”

The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 600 local market experts,1 shows vacancy rates are beginning to level, but rents remain depressed, and subleasing space is high.  The SIOR index, measuring 10 variables, rose 2.8 percentage points to 41.0 in the second quarter, but remains well below a level of 100 that represents a balanced marketplace. This is the third consecutive quarterly improvement after nearly three years of decline; the last time the commercial market was in equilibrium at the 100 level was in the third quarter of 2007.  Fifty-seven percent of respondents expect improvements in the office and industrial sectors in the third quarter.

Commercial real estate development remains stagnant in all regions with low investment activity; 88 percent of respondents said it is virtually nonexistent in their markets, but development acquisitions are beginning to grow in many areas in what is described as a buyer’s market.

Looking at the overall market, vacancy rates will shift modestly in the coming year according to NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK.  The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.

 Office Markets

Vacancy rates in the office sector, with high levels of available sublease space, are expected to increase from 16.7 percent in the second quarter of this year to 17.0 percent in the second quarter of 2011, and then ease later next year.  The markets with the lowest office vacancy rates in the second quarter were New York City, Honolulu and Long Island, N.Y., with vacancies around the 9 to 11 percent range.  Annual office rent should fall 2.7 percent this year and decline another 2.1 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be a negative 13.6 million square feet this year and then a positive 22.6 million in 2011.

Industrial Markets

Industrial vacancy rates are likely to decline from 14.1 percent in the second quarter of 2010 to 13.7 percent in the second quarter of 2011, and then continue to ease modestly as the year progresses.  The areas with the lowest industrial vacancy rates in the second quarter were Los Angeles, San Francisco and Kansas City, with vacancies ranging between 8 and 11 percent.  Annual industrial rent is estimated to drop 5.4 percent this year, and to decline another 4.7 percent in 2011. Net absorption of industrial space in 58 markets tracked is seen at a negative 31.7 million square feet this year and a positive 157.2 million in 2011.

Retail Markets

Retail vacancy rates should hold steady at 13.1 percent in both the second quarter of this year and in the second quarter of 2011, with a level pattern for most of next year.  Markets with the lowest retail vacancy rates in the second quarter include San Francisco, Honolulu and Miami, with vacancies of 7 to 8 percent  Average retail rent is expected to decline 2.6 percent in 2010 and then flatten out, slipping 0.1 percent next year. Net absorption of retail space in 53 tracked markets is forecast to be a negative 2.3 million square feet this year and then a positive 6.4 million in 2011.

Multifamily Markets

The apartment rental market – multifamily housing – is benefiting from modestly higher demand. Multifamily vacancy rates are likely to decline from 6.0 percent in the second quarter of this year to 5.6 percent in the second quarter of 2011.  Areas with the lowest multifamily vacancy rates in the second quarter include San Jose, Calif.; Pittsburgh; and Philadelphia, with vacancies of less than 4 percent. With additions from new construction, average rent should slip 0.6 percent in 2010, and then hold even in 2011. Multifamily net absorption is expected to be 105,200 units in 59 tracked metro areas this year, and another 138,000 in 2011.

The COMMERCIAL REAL ESTATE OUTLOOK is published by the National Association of Realtors Research Division for the commercial community. NAR’s Commercial Division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR

Boston MA, The Stevens Group, the Boston affiliate of the International Tenant Representative Alliance (ITRA), has announced that ITRA will be hosting a Corporate Real Estate Symposium on the morning of September 24th at the Beverly Hills Wilshire Hotel, Los Angeles, CA. The Symposium will be held in conjunction with ITRA’s Global Conference being held at the same location from September 24th to the 26th.

“The ITRA 2010 Corporate Real Estate Symposium is a premier event for company executives and corporate real estate decision makers”, says Debra Stracke Anderson CCIM, SIOR, chairman of the ITRA board of directors. “Invitees to the Breakfast Symposium will include top company executives and their internal corporate real estate leaders who will join our guest panel from Corporate America and abroad to hear how they are saving millions of dollars on facility location and expansion decisions.”

The Symposium program will begin with registration and a networking breakfast at 8:00 A.M., followed by the moderated panel discussion from 9:00 A.M. – 11:00 A.M. The panelists will include:

• Dr. Ronald R. Pollina, head of ITRA’s Chicago office, discussing his firm’s annual ranking of the Top Ten Pro-Business States, based in large part on state/regional incentives, business friendly initiatives and other issues of importance when corporations are considering relocation or expansion within the United States

• Mr. Jesse G. (Gaston) Kent, Jr., Vice President of Finance for Northrop Grumman, discussing the firm’s recent decision to relocate its global headquarters from Los Angeles to Northern Virginia, related incentives and other points that entered into the decision making process

• Mr. Timothy Stevenson, President of Viacom Realty Corporation, which is responsible for the worldwide real estate requirements of Viacom, Inc. and its subsidiaries, addressing Viacom’s global portfolio and recent experiences with domestic and international real estate transactions

• Mr. Mats Johansson, President of Skanska Commercial Development USA, commenting on the firm’s expansion, areas of interest for future growth and tips for corporate clients

• Mr. Patrick Moultrup, President and CEO of ITRA affiliate AsiaPac International, sharing comments on corporate expansion to Asia, the most active markets and the “do’s and don’ts” for doing business successfully. Additional company executives have been invited to join the panel to discuss key drivers in their relocation and/or facility expansion decisions

With coverage in more than 85 global markets throughout the United States, Asia Pacific, Latin America and Europe, ITRA is the largest tenant representation organization in the world, offering a unique approach to Corporate Real Estate Services. While other real estate organizations represent both landlords and tenants, ITRA’s North American offices represent only corporate users of space, eliminating the potential conflicts that exist within traditional brokerage firms. ITRA offices are comprised of principal-level brokers and consultants offering lease and renewal negotiations, acquisitions, dispositions and consulting services. In addition, ITRA provides highly specialized advisory services in the areas of state and local incentives, lease auditing, lease management, location analysis, project management, strategic consulting, space planning and more, all with the objective of achieving for clients the best financial, business and lease terms.

For more information about ITRA and the Symposium, please call +1.706.654.3201, or visit the website, www.itraglobal.com.

July 2010

MEDFORD—TeleCom City is a fading memory, but 200 acres set aside for that ill fated business park straddling Everett, Malden and Medford will soon accommodate promising life sciences company Progenika in a 9,000-sf deal that seems to validate the tri-town revitalization campaign launched more than a decade ago in partnership with New York entity Preotle Lane.

Officials at Cambridge-based Progenika acknowledge the firm has leased 9,000 sf of laboratory and office space at Building 200 of River’s Edge, the mixed-use complex into which TeleCom City evolved after plans for a tech-centric commercial park were dashed by that industry’s thunderous collapse in 2001. Besides 400,000 sf of office space that will be constructed, River’s Edge also features modern residential options and an expansive recreational area. Progenika CFO Michael Bohan says that diversity was among the attractions luring his firm away from the life sciences epicenter in Kendall Square.

“It was a great match for us,” says Bohan, providing the firm an intermediary solution that delivers rental relief from core Cambridge pricing plus the amenities sought by a skilled employee base. Besides plentiful parking and nearby public transportation, Bohan says the on-site fitness center and cafeteria and 10 acres of landscaped fitness trails should help compete for staffers. “It’s very tranquil,” he says of the park exterior, including frontage along the Malden River. Progenika is also proud to be in an environmentally reclaimed property, adds Bohan, with the sustainability of the 200 acres further enhanced by Building 200’s designation as a LEED Gold certified structure.

Aided by broker Debra Stevens of ITRA/Stevens Group, Progenika assessed buildings from Watertown to Woburn before settling on River’s Edge. Although viable prospects such as Trade Center 128 in Woburn—another LEED Gold building— were carefully considered, he says River’s Edge ultimately fit the company’s needs best. The attentive, experienced nature of Preotle Lane in courting the firm was also comforting in striking the seven-year lease, adds Bohan, whose firm inked an agreement that contains expansion options going forward.

“It was a delight to deal with them,” concurs Stevens of the landlord. She also cites an efficient design of Building 200 and the ability to mix the laboratory and office space together, with a ratio of approximately 40 percent to 60 percent for those respective uses. The US subsidiary of a Spanish conglomerate, Progenika is involved in genetic testing and will use the property for both research and administration functions.

Landlord Matthew Preotle voices equal exuberance at the signing of Progenika from that side of the table, and agrees the tenant lives up to the vision of his father, John Preotle, whose initial commitment to redeveloping the parcel has endured multiple peaks and valleys due to the fickle economy that has dogged New England for the past 10 years.

Having endured the latest crash to somehow get the four-story, 115,000-sf Building 200 constructed, a signing of Marriott Corp. to lease the top floor last year showed River’s Edge could attract a high-end company, notes Matthew Preotle, and he says Progenika underscores that the property can also be a solution for cutting edge, new-age companies such as those in the life sciences arena. “In a lot of ways, they are the perfect tenant for us,” says Matthew Preotle. “What they are doing is very exciting, and it’s great to see that type of a company considering us . . . We hope to see many more like them coming out here.”

Matthew Preotle also credits the brokerage guidance from Stevens on the tenant side and the exclusive leasing team for River’s Edge that includes Grubb & Ellis professionals Philip Giunta, Ann Newman Foley and George Nugent. “They worked really hard to get this done,” says Matthew Preotle, voicing further encouragement by an increase of prospects touring the property in recent months, even as the summer vacation season eases the activity back to a more languid pace. There is plenty of work on the fit out of the Progenika space in the meantime, however, with that firm slated to be in by early November.

The company is expanding from about 6,000 sf, and is using Preotle Lane’s in house architect, Gensler, for the fit out assignment.

Boston, MA – Debra Stevens CCIM, principal of The Stevens Group, the Boston Affiliate of The International Tenant Representative Alliance (ITRA), has announced that Stockholm-based Newsec AB, the leading commercial real estate consultancy firm in Northern Europe, was recently selected as the Northern European affiliate for ITRA. With more than 500 professionals on staff, Newsec has 12 offices in seven countries and has recently represented clients in transactions  totaling more than € 9 billion.

“Newsec  has long been a major force in the industry and has developed a stellar international reputation”, says Debra Stracke Anderson CCIM, SIOR, chairman of ITRA. “Having Newsec on board immeasurably bolsters our capacity to serve this crucial region as we continue to focus on strategic global expansion to meet the needs of our clients.”

“We are very excited and are looking forward to becoming a member of ITRA,” says Helén Silverstolpe, a Newsec partner and Head of Corporate Real Estate. “We are convinced that the ITRA affiliation will add tremendous value to our service delivery and open new global markets to us. Newsec is the full service property house in Northern Europe and the ITRA membership will strengthen us as we continue to be the leading player in our markets.”

As head of corporate real estate for Newsec and an established figure in international real estate circles, Ms. Silverstolpe has 20 years experience as an advisor on corporate real estate issues for organizations such as Telia, EQT, IPG Group, and many other clients from the international corporate, private equity and industrial sectors. She has extensive expertise in strategic planning and negotiating leases that minimize costs and maximize value.

With coverage in more than 85 global markets throughout the United States, Asia Pacific, Latin America and Europe, ITRA is the largest tenant representation organization in the world, offering a unique approach to Corporate Real Estate Services. While other real estate organizations represent both landlords and tenants, ITRA’s North American offices represent only corporate users of space, eliminating the potential conflicts that exist within traditional brokerage firms. ITRA offices are comprised of principal-level brokers and consultants offering lease and renewal negotiations, acquisitions, dispositions and consulting services. In addition, ITRA provides highly specialized advisory services in the areas of state and local incentives, lease auditing, lease management, location analysis, project management, strategic consulting, space planning and more, all with the objective of achieving for clients the best financial, business and lease terms.

Boston MA – The Greater Boston office market ended 2009 with little to cheer about. With the economy remaining weak and unemployment stubbornly high, many companies were reluctant to make a move.The majority of leasing activity was from lease renewals, with landlords making aggressive deals to keep existing tenants in place. As a result, net absorption was negative in most submarkets as more space became available, and the supply of sublease space increased.

Vacancy rates for class A&B office space in Downtown Boston increased to 9.7%, with average asking rents dropping to $34.48 per square foot. Net absorption for the year was a negative 863,300 sq. ft.

The suburban market took the biggest hit with vacancy rates increasing to 15.4% at year end, compared to 11.2% at the end of 2008. Average asking rents decreased to $21.66 per sq. ft. In addition, the Suburban office market finished the year with a whopping 1,712,200 sq. ft. of negative net absorption.

Although this may sound like bad news, if you are a tenant with a lease expiring over the next 2 years, this is actually good news. Now is the time to take advantage of a competitive market to re-negotiate or extend your existing lease, and reduce your occupancy costs. Given the current market conditions, it appears tenants will be in a favorable position for the remainder of 2010.

The Real Reporter – By Joe Clements

WALTHAM—It might not be the most picturesque building adorning Route 128, but 219 Bear Hill Rd. is expected to provide plenty of welcomed exposure to new tenant EP Levine now that the photographic equipment supplier has signed a long-term lease for close to 20,000 sf at the single-story, 30-year-old flex/industrial property.“They are taking a big step forward in their business,” Stevens Group principal Debra L. Stevens says after helping her client in a relocation bid that comes following 20-plus years in Boston’s Marine Industrial Park. In a growth mode, EP

Levine was shooting for a new location to accommodate its loyal base of professional photographers and the region’s growing movie industry, plus consumers who might appreciate more than a half-century of expertise by the outfit now owned by Michael Bard and Jay Callum.

While not divulging specifics of the group’s business plan, Stevens says there are “exciting plans” for EP Levine’s new digs, which the firm is slated to occupy by spring following upgrades to the building. “This is a brilliant opportunity for them,” says Stevens, citing signage that can be seen from Route 128. Also, she says, “they will be close to their current customers and new people who will be able to easily find them.” A small ancillary retail component is anticipated to service the consumer trade.

EP Levine’s Waltham facility, which will include space for mini-studios that can be rented out for professional photo shoots, came about thanks to a cooperative effort, relays Stevens, praising Grubb & Ellis SVP Thomas M. Aitken for his role representing the landlord, and a commitment by the owner as well, local investor Milton Yanofsky. “Everybody worked together really hard to make it happen,” says Stevens, who declined to provide terms on length or rental rate but says there are options in place that could ultimately have EP Levine take the entire building.

Tyngsboro, MA – Barr Associates has renewed their lease at 300 Potash Hill Road, Tyngsboro, MA. The 47,780 sq. ft. lease was extended for an additional 7 year term.

Barr has occupied the single-level office/flex building since 1999. In addition to this location, Barr also owns and occupies two other buildings in Westford, MA totaling 75,000 sq. ft.

Founded in 1971, Barr Associates is the world’s largest independent manufacturer of precision thin film coatings and optical filters, and has an unmatched heritage in the optical filter and coating business providing solutions and parts for some of the most challenging requirements. Barr services the leading players and innovators in virtually every major market where optical filters or thin film coatings are enabling technologies or components.

Mark Stevens, Principal of The Stevens Group, represented Barr in the transaction, providing real estate advisory services and assisting Barr in negotiating the lease extension. The landlord, Franklin Equities LLC, represented themselves.

The Stevens Group is a commercial real estate advisory firm located in Boston, MA, that specializes in exclusively representing corporate clients in the leasing, acquisition and disposition of commercial real estate. The Stevens Group is a member/partner of the International Tenant Representative Alliance (ITRA) with offices in major cities around the world.

The Real Reporter – By Joe Clements

Boston MA -  There will be a ceremony later to fete the transaction and pending upgrades, but the $3.75 million purchase of a 60,000-sf building in the Newmarket district is already being chaulked up as a victory by deal participants such as brokers Mark Stevens and Steve Murphy.  

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Boston, MA – Trico USA has purchase a 60,000 sq. ft. industrial building located at 99 Atkinson Street in the Newmarket Square area of South Boston. The building, formerly owned by the Greater Boston Food Bank, was purchased for $3,750,000. The property is located immediately adjacent to Trico’s existing 70,000 sq. ft. building at 120 Southampton Street.

The purchase demonstrates Trico’s long term commitment and confidence in the Newmarket area as a viable business location within the city. Mark Stevens, Principal of The Stevens Group, represented Trico in the acquisition, providing real estate advisory services and assisting them in identifying options and negotiating the terms of the transaction. The Food bank was represented by Steve Murphy of CB Richard Ellis.

Trico, which has been in the Newmarket location for 10 years, will be consolidating two other locations into the Atkinson Street building. According to Trico’s President Gary Wong, Food Pak Express, a division of Trico USA, will occupy the building when renovations are complete. Food Pak Express is an importer and wholesaler of food products from around the world supplying restaurants, grocery stores, and caterers throughout the Greater Boston area. In addition, they also carry a complete line kitchen equipment and restaurant furniture and fixtures.

The Stevens Group is a commercial real estate advisory firm located in Boston, MA, that specializes in exclusively representing companies in the leasing, acquisition and disposition of commercial real estate. The Stevens Group is a member/partner of the International Tenant Representative Alliance (ITRA) with 65 offices in major cities around the world.

Boston Business Journal – by Keith Regan, Special to the Journal

In the current commercial real estate market, the ball is clearly in the court of tenants seeking new or additional space from landlords in office buildings, industrial parks, and retail malls and shopping center.Still, tenants who expect too much might find themselves in a difficult situation in the long run if they try too hard to take advantage of the current market. Keeping the scales balanced so that long-term relationships can thrive over the course of a lease and beyond while still gaining the best possible terms upfront is one reason many tenants hire their own brokers to represent them in commercial transactions.

“The transaction has to work for everyone,” said Jonathan Lapat, a vice president with Framingham-based Strategic Retail Advisors Inc., which works with local and national retail chains to help them secure space in malls and plazas across New England.

Tenant representation is especially valuable because most commercial lease-holders only renew their leases every five or 10 years, meaning working on their own would require getting up to speed on the nuances of the current market. Instead, a broker can bring instant insight into what lease terms are being struck by similar tenants in the marketplace.

“What brokers do is bring to the table experience in lots of spaces in different markets over a range of time,” said Howard Goldman, a real estate attorney with Goldman & Pease LLC in Needham. “Experienced brokers have access to a wealth of information that can help put a tenant on much stronger terms when it comes to negotiating the terms of a lease.”

Tenants are in a strong bargaining position today, and working with a broker can help identify the best ways to leverage that advantage. While some landlords may not want to give too much on the bottom line of per-square-foot rents, a host of other lease details may be open for negotiation.

For instance, a tenant may be able to get more upfront consideration for space customization and build-out, or more favorable terms for subleasing space. A tenant may even be able to negotiate a period of free rent in exchange for a long-term lease or a reduced up-front security payment.

“The troubled state of the economy definitely impacts the market negatively and that creates opportunities that a good broker can help identify,” Goldman said.

Things to look for in a representative include sound knowledge of the local market and a solid track record.

Conflicts of interest are something that a tenant should be aware of when seeking a broker, said Elliot Surkin, managing partner of the real estate group at Boston-based DLA Piper LLP.

“When you hire a consultant to work for you, they’re loyal to you and have your interests in mind,” Surkin said. “Depending upon how a broker is situated, they may have different and divided loyalties. That’s not necessarily a bad thing, but in many cases, it’s not something the client is readily aware of.”

A tenant should ask a potential broker partner about the broker’s current client list and whether they worked on behalf of landlords in the past or might again the future.

“If a tenant begins to take advice from a broker that represents someone else — that’s complicated,” Surkin added. “It might be good advice, but you always have to be wary if someone is loyal to someone else.”

Still, having a good broker, whatever his or her specific role, is all but a necessity given the complexity of today’s market.

“Most tenants do not do enough leasing to give them the knowledge they need so without a good broker team, it’s a situation where an amateur is playing against a professional,” said Surkin. “A tenant signs a lease once every five or 10 years and a landlord might do it 20 times a day. The smartest tenants figure out some way to surround themselves with advisers who make it more of an equal player.”