Friday, February 20, 2009

Inside Real Estate

Cummings: Niche focus helps high vacancy rate

By James M. Connolly

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So what are you doing to repair the economy? That was the question posed by a recent Mass High Tech editorial. One real estate company, Cummings Properties LLC of Woburn, responded with a fairly detailed outline of what it considers to be positive steps to contribute to economic growth in New England and to prepare itself for an eventual upturn in the general economy.

Cummings design manager Jim Trudeau listed a dozen initiatives, ranging from internal cost efficiencies to new construction “on spec” — without tenants lined up — as areas where Cummings is positioning itself and regional growth in general. Trudeau, Cummings CEO and president Dennis Clarke and vice president for operations John Wiseman followed up with more details in a phone interview.

At a time when some property owners are desperate for new tenants, struggling to pay the tab on finances, and dealing with overcapacity, Clarke cites a 94 percent to 95 percent occupancy for its Massachusetts properties, aside from its two newest buildings — one in Sudbury and the 400,000-square-foot TradeCenter 128 in Woburn. Clark called the low vacancy rate a “healthy situation,” and attributed it to the firm’s focus on its niche, small, entrepreneurial companies.

Trudeau noted that Cummings has two projects in the works on spec. One is a 52,000-square-foot new lab and office building in Woburn, now in the permitting stage and targeted for a late 2009 opening. The second is an upgrade on a 40-year-old, 35,000-square-foot tech property that was vacant when work began six weeks ago but now has commitments for half of its space.

Wiseman observed that building on speculation isn’t as risky as it might sound. “Think of a building as having a useful life of 50 years. If, over that 50-year period it’s not leased for a couple of months, that represents a relatively small period of time,” he said. He noted that even if space remains open for a while, it gives a property owner the flexibility to support tenants’ expansion plans.

TradeCenter 128, one of Cummings most visible new properties, remains only 44 percent occupied, with the largest tenant, the Middlesex County Superior Court, taking up 138,000 square feet. Clarke is pushing to bring that occupancy rate up to 55 percent to provide more activity on the property, increasing the chances of additional rentals while providing more opportunities for central services such as a bank and two restaurants.

TradeCenter 128 also provides a centerpiece in Cummings’ efforts to expand the use of solar power, energy efficient lighting and other “green” options. The company is preparing to switch on a 100 kilowatt solar-generating system housed on the roof of the TradeCenter parking garage, providing up to 20 percent of the building’s common-area electrical needs. The $1 million investment should be recovered in two-and-a-half years, the company said.

Noting that many of Cummings’ 1,800 client firms are entrepreneurial tech firms, Clark said the company is continuing its lease credit program for entrepreneurs and business plan competition winners, in which the company not only helps to sponsor business plan competitions but provides $300,000 a year in lease credits.

“Cummings Properties is effectively a large-scale incubator for entrepreneurs of all types. We were founded by an entrepreneur, and there is so much we can do for entrepreneurs,” said Clark.