With rents down and open space up, lawyers on the move have many choices
Rent for office space has not been immune to the recent economic climate, as evident with lower rates and high supply.
|Photo by David Spink
|Attorney Neil Osborne has been trying to rent additional space in his office located at the corner of Tremont and Boylston streets. An increase in the availability of office space at lower rents has made it more difficult for Osborne to rent the space.
According to real estate brokers throughout the state, office space now ranges from $18 to $45 per square foot in urban locales, a major decrease from even two years ago.
And as decreasing rents typify the change in economic climate, so too do the vacancy signs that can be seen hanging in office buildings - or even with attorneys themselves.
Take, for instance, Neil Osborne, one attorney who wants to remain in downtown Boston. But his struggle to rent available space in his office may force him to consider other options.
Since last August, Osborne has been trying to rent additional space in his office, located at the corner of Tremont and Boylston streets. He moved there from his former office, on lower Tremont Street, because he shared the space with five attorneys.
"That space was not conducive after a while," he said.
Although his new location is convenient for his clients, finding another attorney to share the space has been difficult. Osborne, who mostly practices discrimination law but also handles some real estate, trust and estate work, said he will move if he can't find a tenant who can afford the rent. He's even had to reduce his asking price - from $1,300 per month to $900 per month for a smaller office and similarly from $2,000 per month to $1,300 per month for the larger office.
"The (downturn) in the economy has made more office space available at a cheaper price, which made my space harder to rent out," Osborne said.
Osborne is going to continue to advertise the space in hopes of finding a tenant.
"I'll try another year," Osborne said. "Most people who need offices are just starting out. It's hard for them to find enough money to put aside for rent."
According to a variety of commercial real estate brokers, rates have decreased throughout the Boston metropolitan area.
Brian McGlame, president of Auburn Commercial Real Estate in Waltham, said rates that are now $28-$30 per square foot were $45 per square foot 18 months ago.
Eliot Ravech, a commercial real estate broker in Newton, said rates are 10-20 percent less than they were a year ago. Rents in Newton now range from the high teens to the low thirties per square foot.
Brian Ernst of Access Commercial Real Estate in Lincoln said rates there were $50 per square foot in 2000 and are down to $15 per square foot in Burlington.
Unlike Boston, dividing large office space is more difficult in Worcester, said Tom Kelleher, vice president of Kelleher & Sadowsky, a commercial real estate firm. And East Worcester lost leases after the fall of the high-tech industry.
"We're working with environmental companies, energy businesses, legal firms. Major buildings are nearly full but at one-half to one-third the rate of Boston," he said.
Blazing a trail in the Seaport District
One of the latest burgeoning areas for real estate is the South Boston Waterfront, often called the Seaport District.
Among the firms to blaze a trail and move to the developing area is Nutter McClennen & Fish LLP.
Attracted to additional space, accessibility and a brand new building featuring the latest in technology, Nutter McClennen & Fish moved from its offices at 1 International Place to World Trade Center West on Seaport Boulevard in July 2002, according to Michael E. Mooney, the firm's managing partner.
"We're very high on it - for several reasons," Mooney said. "I truly believe we are building a city down here and this is the new financial district."
Other law firms that have moved to the area include Cetrulo & Capone LLP, Donovan Hatem LLP, Foley Hoag LLP and Seyfarth Shaw.
Mooney cites the area's adjacency to the existing financial district and easy access to the Seaport District as prime reasons for the move.
"As far as the Back Bay versus here, we felt much closer (to the financial district) and access to the Seaport is phenomenal," Mooney said. "Clients like the accessibility. There's tremendous parking down here as well."
Mooney said rents are "very reasonable," though he wouldn't disclose how much the firm is paying for rent.
The Seaport area is becoming the newest frontier in Boston, as evidenced by the changes Mooney sees daily in the area - from new sidewalks being installed to the construction of new buildings.
"Literally every day there's a change," Mooney said.
Another perk is the view - even being a half of a block closer to the waterfront creates a more nautical feel, Mooney said.
New front opens in Back Bay
Another trend being seen in the commercial real estate market is a draw to the Back Bay.
Attorneys are not only still interested in city office space but have discovered the Back Bay, says Ted Wheatley, senior vice president of The Staubach Company, a commercial real estate company that covers Cambridge and downtown Boston.
Both Palmer & Dodge and Epstein Becker & Grain moved their offices from downtown to the Back Bay in the last two years, Wheatley said.
"The Back Bay has emerged as a solid, viable location for insurance companies, advertising firms and all types of office users due to an increase in the number of office buildings and the high-end residential supply," Wheatley said.
The development of 111 Huntington Avenue at the Prudential Center as well as restaurants and shops along Boylston Street has made the Back Bay a "destination center," Wheatley said.
Likewise, as the type of building can fluctuate, so can its rental price tag. For instance, a so-called Class A space - which typically is located in an upscale building that features restaurants, a health spa, stores or other amenities - runs from $30-$45 a square foot. But rents in the so-called Class B space - which resemble a traditional type of office building - may cost between $20-$35 a square foot.
"Attorneys want to work where everything is at their fingertips," Wheatley said, adding that many lawyers live in the Back Bay. "They can go out dinner and go back to work. Ten years ago there were no major law firms in the Back Bay."
According to Wheatley, many firms are trying to sublease their space, but vacancy is dwindling in the Back Bay. In late May, the vacancy rate was 10 percent, down from 11.5 percent since the beginning of 2003, he said.
"There is a fight for quality as with any real estate slump. Tenants are taking the opportunity to move into higher-quality buildings," Wheatley said.
In the suburbs, attorneys also are choosing Class A building space over the marketability of an on-street site.
Ravech said Newton landlords have been more cooperative since rates have become so competitive.
"They are willing to fix up space for tenant's needs. It's about securing the lease, especially since demand is slow," he said. "Newton doesn't have the supply other communities have."
|Finding space for your practice
Patrick Francomano, chair of the MBA's Law Practice Management Section, said solo practice has become more popular due to downsizing in large law firms. He counted 150 attorneys at a recent MBA seminar, which discussed how to start a private practice.
"Many [attorneys] are tremendously interested in learning how to set themselves up," he said. "It's difficult to find work, so they [are doing] it on their own."
Francomano advises new solo practitioners to keep overhead low by sharing receptionists and conference rooms with other attorneys.
"An office-sharing situation keeps the costs to something manageable," he said, adding attorneys choose to rent office space in major buildings for prestige and convenience, and not necessarily visibility purposes.
"Having a corner office with an awning facing two main streets in town is rare and is not happening in Boston. The nature of the space is not designed for that," said Francomano.
In Waltham, office space is also available, especially along Route 128, according to McGlame. "This is a good time to be renting space, because prices are down," he said, adding that the dotcom boom affected the suburban area he covers. "The phones are starting to ring and things are stabilizing."
Ernst, president of Access Commercial Real Estate in Lincoln, is not as optimistic. He equates vacancy with unemployment and doesn't think the space will be absorbed until 2008-2009.
"Burlington is 50 percent empty, which equals 2 million vacant square feet," he said.
Further out, in the western part of the state, office rates are comparable, due to "retractions in the market," said William Fitzgerald, principal at Fitzgerald & Co., Inc. in Springfield.
Unicare Life and Health Insurance Company's announcement to leave the area by December will open 120,000 square feet, which will be sublet for the remainder of the firm's five-year lease.
Such arrangements have raised indirect vacancy, or renting space from a prior tenant rather than the owner of the property, to 16 percent in the area, said Fitzgerald.
Bill Low, partner at Samuel D. Plotkin and Associates in Springfield, agreed that major tenants are moving out of downtown. Those remaining are more interested in buying buildings rather than renting.
In addition, communities such as Longmeadow, Agawam and Holyoke, are appealing because of the available, free parking that is often included in the rent.
"Attorneys work [in] downtown [Springfield] if they need to be near the courts for trial work, but the trend is out of the central business district to the suburbs," he said.