Corporate Suburban Flight Gets Resistance

BOSTON-The battle has been going on for decades, and often with disappointing results, but the city and neighboring Cambridge won a few major rounds, recently, to stop tenants from fleeing to suburban office alternatives. Not only did MetLife just prevent engineering giant Camp Dresser & McKee (CDM) from vacating all 180,000 sf at One Cambridge Place in Cambridge, Mayor Thomas Menino is diligently seeking to keep JP Morgan from moving its custodial funds group out of Boston, even pledging a hefty tax break to accomplish the feat.

A spokesperson confirms to GlobeSt.com that Menino personally contacted JP Morgan officials upon learning that a pending lease expiration at 73 Tremont St. was leading the firm to pursue a possible move to the South Shore. One source says that effort was “way down the road” and the departure seemed inevitable to many industry observers, but Menino’s intervention apparently shifted JP Morgan’s attention to an option in Boston’s Seaport District. GlobeSt.com first reported last month that the firm was negotiating to lease nearly 130,000 sf at the largely empty 451 D St. owned by the Beal Cos. and Rockpoint Group, a rumor that was finally acknowledged this week when Menino’s stimulus package was announced, as reported by GlobeSt.com.

In a widely circulated press release announcing the use of tax increment financing and property tax relief to offset higher rental costs in Boston, the mayor’s office stated that JP Morgan initiated the conversation, but the spokesperson now confirms Menino was the catalyst. “The mayor wanted to get out ahead of it,” explains the spokesperson, but she could not say exactly who was contacted at JP Morgan. Some sources claim the matter extended up to chairman Jamie Dimon, but JP Morgan officials declined comment.

CDM, meanwhile, was supposedly enticed to stay put in Cambridge when landlord MetLife made a counter-offer after the firm was on the verge of signing leases in Woburn and on the South Shore in a plan to split its operations. The concept ostensibly was to help curb pollution from commuting employees, but financial considerations apparently won out. Lincoln Property Co. principal John Miller helped negotiate the lease, and told GlobeSt.com that he believes CDM was attracted by a competitive offer, plus being able to avoid the costs and headaches required of a move.

Other Cambridge firms such as Akamai Technologies and the Monitor Group have opted to stay in the city during the past year, but there have certainly been plenty of departures, including several life sciences companies, such as Shire Pharmaceuticals to Lexington. According to the Office Market Viewpoint by Colliers Meredith & Grew, life sciences companies in Boston and Cambridge make up 12% of the demand currently circulating in the suburbs. The total demand is 13.4 million sf from about 250 tenants, says CMG, which puts the suburban inventory at 134 million sf. Two other Boston financial services companies have already committed to the suburbs this year, with MFS Investment Management leasing 40,000 sf at HarborSouth in Quincy and the Telephone Workers Credit Union taking 25,000 sf at Granite Woods Corporate Center in Braintree, as previously reported by GlobeSt.com.

Seldom has there been such drama involving local corporate defections, as played out in recent weeks, but market watchers note that the debate has been raging on for some time. “It’s nothing new at all,” says one South Shore broker, although the source does agree that the so-called “Blackstone effect” that has led to sharply higher asking rents in Boston could be enough to ramp up suburban tours. Presently, however, that broker and other real estate professionals say leasing activity from all quarters eased up in April after a brisk Q1 “It’s not a dynamic market right now,” says one Quincy landlord. “Nobody wants to make any decisions.”