CAMBRIDGE, MA-A well-located commercial building is no longer an option for tenants in this city’s white hot office market, as Senior Whole Health is committing to nearly 50,000 sf at 58 Charles St. The 10-year agreement will allow SWH to expand its occupancy by more than double what it has heretofore leased at the property in East Cambridge.

“It’s a good building that works well for them,” Richards Barry Joyce & Partners principal Steven Purpura tells in assessing SWH’s decision to remain. Not only is it situated in the heart of the city’s most prominent office submarket, 58 Charles St. offers such attractive features as brick-and-beam space, a flexible layout and a private parking lot, says Purpura. The two-story building is owned by BioMed Realty Trust, which acquired the asset in early 2006 for $13.1 million.

Gian Starita of Lincoln Property Co. represented the tenant in the lease, while Purpura and RBJ assistant VP Eric Smith negotiated for BioMed Realty. Starita says SWH wanted to remain in the city where it was founded and was able to convince BioMed that a full-building deal versus converting the space to laboratory use made economic sense over the long run. “It was a neat deal that met everyone’s needs,” says Starita, who earlier this year joined Lincoln colleague Kevin Brown in finding 6,000 sf for SWH in Raynham for a suburban office.

The 58 Charles St. transaction carries the momentum of a strong third quarter into the final frame of 2007, although Purpura says the pace appears to have eased recently from the frenetic summer stretch that dropped the East Cambridge office vacancy rate to 8.6% by the end of Q3. That is the lowest vacancy rate since Q2 2000 when the mark was a miniscule 0.2%, notes RBJ director of research Brendan Carroll. Interestingly, Carroll reports that the amount of occupied office space in East Cambridge is actually greater now than it was in 2000, reaching a rate of 7.3 million sf presently versus 7.1 million sf in the previous boom.

The SWH transaction will allow the tenant to remain in a submarket that is becoming increasingly bereft of substantial alternatives, especially if pricing is a concern—and even if it is not. There are just three options in East Cambridge for more than 50,000 sf of class A space, says Carroll, those being 3 Cambridge Center, 25 First St. and One Rogers St. Perhaps more alarmingly, RBJ research shows that East Cambridge is the only submarket in Greater Boston whose vacancy rate is under 10% that has no new office space either under construction or even proposed. Starita concurs that SWH had few alternatives to stay in Cambridge beyond 58 Charles St. even though he characterizes that property as class B, albeit on the high end of that scale.

At current levels, class A office space in Cambridge will be fully depleted by Q3 2009, RBJ estimates. A big reason has been the higher rewards for laboratory space, leading new development in that direction during the past few years. “Class A is extremely tight,” says Purpura, with the second and third quarters of 2007 marked by a series of high-profile leases that took major blocks of office product off the market. RBJ is broker for Cambridge Center, whose recent transactions include Google taking down 60,000 sf; Biogen renewing for nearly 100,000 sf; and Akamai Technologies securing 260,000 sf, the largest lease to date in Cambridge this year. Owned by Boston Properties, Cambridge Center appears to have fully recovered from the area’s difficulties from 2001 through 2005, with occupancy at the multi-building park now at 99% after falling into the 70% range.

RBJ puts the current average rental rate for class A at $51.52 per sf in East Cambridge, representing a stratospheric increase of 57% from Q3 2006. Landlords are requesting upwards of $57.50 per sf, Carroll reports.

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