White-hot home prices along Route 128 have gotten most of the attention lately, but it’s no longer the only real estate game in town.
After taking a big hit during the recession, the once-battered office market along the Interstate 95 corridor is now starting to heat up as well.
And Waltham and Burlington, which have two of the largest constellations of office buildings in Boston’s suburbs, are leading the way.
The two major hubs of the 128 office market have seen double-digit price increases over the past two years, with more on the way as the economy heats up, say local office market experts.
That said, the office market has some catching up to do, at least compared with the soaring residential market. While towns like Lexington, Newton, and Needham are setting new price records, office rents along 128 are still far below their pre-recession peaks.
“The 128 market is starting to show some good signs,” said David Begelfer, chief executive of NAIOP Massachusetts, a statewide commercial real estate industry organization.
Rents for top-shelf office space in Waltham have risen 12 percent since hitting bottom in 2010, with Class A office space now fetching more than $31 a square foot, according to the Boston office of a commercial real estate firm, Jones Lang LaSalle.
With more than 10.7 million square feet of office space, Waltham has the largest concentration of companies large and small outside Boston, Jones Lang LaSalle reports.
Given its strategic perch near the junction of 128 and the Massachusetts Turnpike, it is considered by many office brokers to have one of the best locations around.
“As one of my colleagues likes to say, they are not moving the Mass. Pike,” quipped Brendan Cohn, a broker and vice president at Jones Lang.
Yet it’s too early to break out the champagne, with Waltham rents still 20 percent below the previous peak, Cohn noted.
“Rents have been on a slow but steady incline,” he said.
Burlington’s office market, the second largest in the western suburbs, has also rebounded since the recession, according to Jones Lang.
Rents for top-tier office buildings in Burlington hit $26.31 a square foot during the first three months of the year, up 12.7 percent from its post-recession low three years ago, according to Jones Lang.
Still, rents for such Class A buildings are still nearly 19 percent below their peak in Burlington, the firm notes in its first quarter office market report.
Improvement can also be seen in the favorable trend in the amount of vacant office space along 128.
The inventory in Waltham properties has dropped from a high of 26 percent to 16 percent today, with expanding tech and biotech companies filling more than a million square feet of space, said Brendan Carroll, senior vice president of research at Richards Barry Joyce & Partners.
“Things are picking up quite a bit,” he said.
Emboldened by the strengthening market, some developers are starting to roll the dice on big new projects along the 128 corridor.
One of Burlington’s largest office parks is being redeveloped with a Wegmans supermarket and an array of new restaurants, while developer Sam Park has bulldozed the sprawling former Polaroid site alongside 128 in Waltham to make way for a major new retail and office complex.
A few miles south along the highway in Westwood, two major Newton-based companies, New England Development and National Development, are getting ready to push ahead with a mixed-used project featuring apartments, offices, retail, and a hotel.
So what do these trends — rising home prices and increases in office rents and in new development — have in common?
The booming high-tech and biotech industries along 128 are not only pushing up commercial rents again, they are also a source of strength for home sales and prices in towns along the highway.
The 128 corridor remains a beacon for top talent from across the country and the world, drawing highly paid tech workers, scientists, and executives who need a place to live when they get here.
Home prices in Lexington, Newton, and Needham are all in record territory again, with Lexington’s median price hitting $876,668 during the first three months of the year. That’s up from $713,500 back in 2006, according to the Warren Group, publisher of the real estate industry’s Banker & Tradesman.
“Those top towns will probably just continue to go up,” said Alex Coon, market manager for Redfin’s Boston-area office, who says the prices can be daunting for buyers just looking to get a foothold in the real estate market. “If you see another 20 percent increase in Lexington, we should probably all pack up and leave,” he quipped.
Communities like Dedham and Waltham that have long been relative havens for middle-income buyers also saw prices move up again during the first three months, though the prices have yet to get back to their previous peaks.
Still, Burlington is getting close, with its median price now at $395,500, nearing its 2005 peak of $405,000.
Meanwhile the new developments taking shape along 128, by bringing in new supermarkets, stores, and restaurants, will beef up the area’s retail and restaurant scene, said Begelfer, the head of at NAIOP Massachusetts.
The new amenities could help further boost the attractiveness of homes in towns along 128, he contends.
“You have the two largest developments in decades taking place in Waltham and Westwood,” Begelfer said. “You don’t have that happening unless the market is definitely moving in the right direction.”