Author Archives: Wil Catlin

0 There’s More Driving The Boston Suburban Renaissance Then COVID Panic

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By Dees Stribling | Bisnow | August 24, 2020

During the 2010s, suburban office space lost its luster to the activity of the city and the charms of walkable neighborhoods. Downtown Boston and its tall towers all seemed shiny and new.

A few months of pandemic has suddenly refocused companies and their workers back to the suburbs, but that was beginning to happen anyway, according to the speakers at Bisnow’s Boston Neighborhoods and Beyond webinar last week.

“We’ve always thought the suburbs are resilient, and we’ve viewed them as a very important part of our portfolio,” Boston Properties Senior Vice President of Leasing Patrick Mulvihill said. “Most of our development pipeline is suburban, with about 3M SF out of 4M SF total in the Waltham-Central 128 market. It’s where we plan to be very active moving forward.”

Jumbo Capital Management Managing Partner and founder Jay Hirsh said that he believes demographics are more important in the revival of Boston’s suburbs than the impact of the coronavirus pandemic, which is bound to be temporary.

Most of the commonwealth resides in the suburbs, and most of its major employers are there, Hirsh said. So there has been a yield premium in the suburbs, without as much risk as commonly perceived, though the city isn’t dead by any means, he added.

“I lived in Boston for 10 years and had my second kid, so I knew we had to move to the burbs,” he said. ‘That’s just a trend that’s consistently happening to everyone in my age cohort. COVID is just going to accelerate the trend.”

“Boston will always be an amazing place to live and work, but the burbs have a lot going for them,” Campanelli partner and Principal of Acquisitions Stephen Murphy said.

Campanelli has continued to focus on the suburbs, he said, because until recently there has been less competition for what the company does.

“Suburban developments stand on their own, and were improving before the pandemic,” Murphy said. “Downtown isn’t the right place for everyone.”

None of that is to say that suburban office space is going to be the same as it was before the pandemic, however popular it becomes. It too will change as expectations for space change among companies and their workers, the speakers said.

As one of the country’s largest office REIT, Boston Properties is leasing productivity to companies, not just empty space, Mulvihill said. As part of that thinking, companies are looking at the hub-and-spoke model.

“We’ve developed a product we call FLEX by BXP, which is primarily urban office space leased on a short-term basis,” he said. “It’s as simple as that. We’re considering deploying that in the suburbs for those folks who want to downsize their urban presence and add satellite space.”

Companies now understand that their office portfolio needs to be a mix — a headquarters, maybe downtown or maybe not, but also satellite offices and flexible office space, UpFlex co-founder and Chief Product Officer Ginger Dhaliwal said.

“We’re all working from home, and we know the challenges, and sometimes you need to escape to flexible space for a few hours during the day,” she said. “Those are new considerations that our corporate clients are looking at — giving employees choices based on how they want to work. I think that’s a trend that’s going to live past COVID.

“We also hear that employees are scared to go back to high-density office spaces,” Dhaliwal said. “Having flexible options is what they’re looking for now. Suburbs are the perfect place for that because they’re close to where people live already. People can work from home, or headquarters, or satellite flex space.”

For the first month or so of the pandemic, there was no demand for any kind of space, but now tenants are re-emerging, resuming their deliberations about what kind of space they need and where, Murphy said.

“We signed four leases in the last 120 days,” he said. “None of them started during COVID. All of them were in some process before, but they went forward without renegotiation.

“Suburban tenants seem to be back,” Murphy said. “Our view is that demand is only going to go up in the suburbs over the coming months. In almost every conversation with tenants, they all believe they’re more productive under the same roof.”

0 CRES Stats Report | Week Ending August 17

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A Summer WAVE (tsunami?) of space has hit Boston: An unprecedented 51 spaces hit the market as available in the last 7 days as a whopping 553,000 SF, easily eclipsing the past few months’ weekly totals.

11 spaces (over 1,000 SF) came off the market (170,000 SF), but this was mostly a block at 10 St. James on the 3rd and 7th– 10th floors coming off.

31 properties in the subject area can provide blocks – and sometimes multiple blocks – of contiguous +50,000 SF suites.

There is 14,000,000 SF available now – a new high – equating to a 11.4% availability rate.  You probably have to go back to 1999-2001 and the dot-com bust to find a similar number.

0 Boston Neighborhoods and Beyond

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As markets across the U.S. adjust to the new normal, developers and investors are looking for development opportunities outside of major cities, and Boston is no exception. Neighborhoods like Newton or Waltham are seeing a surge of investment during the pandemic. Why now?

Join Bisnow, Patrick Mulvhill, SVP of Leasing at Boston Properties, Ginger Dhaliwal, co-founder & chief product officer at UpFlex, Jay Hirsh, CEO of Jumbo Capital Management and Stephen Murphy, partner and principal of acquisitions at Campanelli highlight development and investment in Boston’s suburban markets and whether or not this migration will last.

Questions to be discussed:

  1. What are the reasons to look to the suburbs right now for development and investment opportunities?
  2. How does transit support demand for potential developments currently underway?
  3. Where can investors receive the largest returns and which asset class?
  4. What are tenants looking for in these emerging areas?

How are suburban schemes funded and scaled?

Watch webinar HERE.

0 CRES Stats Report | Week Ending August 14

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The onslaught of space coming on market INCREASES: 33 spaces (over 1,000 SF) hit the market as available, easily one of highest amounts in recent memory, equaling 335,000 SF.  That equates to FOUR vacant 545 Boylston Street’s hitting the market – in 7 days!;

Only 8 spaces (over 1,000 SF) came off the market (63,000 SF);

The vacancy rate in MIDTOWN (24 mostly class B buildings of 1.5mmSF) is 11.0% and the availability rate is slightly higher at 12.3%);

The rotation from sublet to direct space has continued.  Either companies are walking on leases, paying to get out of them or giving up on trying to sublease it (“shadow space”);

There is 13,800,000 SF available (that’s thirteen vacant Hancock Towers) of which 3.3mm SF is sublease.

0 Coronavirus Pauses Luxe Condo Sales In Boston, But Developers Anticipate Post-Pandemic Surge

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By Dees Stribling | Bisnow | August 12, 2020

Like a lot of other real estate activity, the coronavirus pandemic has represented a pause for the luxury condo market in greater Boston. But there are signs that the pause won’t be a long one.

After a period of adjustment to the new realities of the pandemic, buyers who put off buying upper-end properties will soon be back in the market, developers said on Bisnow’s Boston Luxury Condo Update webinar. Demand will rise, but supply won’t rise as far, because it never has in Boston, whose entitlement and zoning process is protracted.

“There are not a lot of silver linings in this pandemic, but it has created a surge in the Massachusetts residential market, both in the traditional single-family bedroom communities in Boston, but also in the Cape and islands,” Boston Realty Advisors Senior Partner Jason Weissman said.

For the moment, that might mean people are looking to live outside the city, but in terms of the ecosystem of Boston residential properties, activity near Boston will ultimately be good for the city market, he said.

“I don’t look at it as losing people from Boston, but as more liquidity in the market post-pandemic,” Weissman said, adding that in many Massachusetts communities, there is less than one month inventory of single-family homes.

There are also hints that, however much cachet upmarket single-family suburban houses might have for the moment (because it is easier to distance oneself in them), buyers are still interested in luxe urban properties.

In June, just one Boston residence listed for over $5M took an offer, while in July, five properties at that price range found buyers, according to a report by David Bates, a Boston Realtor and specialist in the luxury market.

Of the six accepted offers for those months, four were in Beacon Hill, one was in Back Bay and one was in the South End, and they were all new construction or recent rehabs, Bates noted.

When the luxury market does make its comeback, its fundamentals will be strong, because there is a lack of inventory. The amount of condo inventory varies significantly between city neighborhoods, according to Boston Realty Advisors data. In places like East Boston, the South End and Allston/Brighton, there is less than three months’ supply. Beacon Hill has about five-and-a-half months’ supply, and Back Bay has more than six months.

“What that means is, demand will quickly catch up to the supply, once people begin to come back,” Weissman said.

“We see that people are still interested in buying and leasing,” HYM Investment Group Senior Development Manager Julie Livingston said. “We’re going through a pause right now, but people are still craving a return to some normalcy.”

In partnership with National Real Estate Advisors, HYM is developing The Sudbury, which is the first residential building in Bulfinch Crossing in Downtown Boston. It includes 55 condos on its top 11 floors and 368 rental units on the lower floors.

Bulfinch Crossing is the 2.9M SF redevelopment of the Government Center garage. Part of the project involves taking down half of the garage and wrapping three new high-rise buildings around the remainder. One of those buildings is The Sudbury.

One reason for the strong interest, Livingston said, is that people still want to be in the city. The Sudbury has a walkability score of 99, but also quick connections to transit.

“For the sales that are happening, prices aren’t coming down,” Livingston said. “We’re targeting between $3.5M and $6M, at over $2K/SF, and we feel confident in the market.”

Community will be an important concept for downtowns after COVID-19 subsides, and Raffles Boston Back Bay Hotel & Residences will take advantage of that, said Noannet Group founder Jordan Warshaw, whose company is developing the new condo/hotel tower with Cain International.

For example, he said, there will be 16 intimate spaces in the building for residents and hotel guests to meet, a design that will cater to the human need for interaction in smaller settings. That is something the pandemic will not destroy.

“Has there been a pause because of COVID? Have suburban sales taken off? Yes,” Warshaw said. “But people are desperate for community, they live for community, and the place to get it is cities. You can’t change the massive demographic phenomenon of people moving toward community.”

Raffles is an international luxury hospitality brand founded in Singapore, with 14 properties worldwide now. When 33-story Boston Raffles opens in 2022, it will be the first North American location for the brand, which is owned by Accor. The tower will include 147 hotel rooms and 146 residences.

“Boston isn’t a newly developed, cookie-cutter type city, and Raffles is the furthest thing in the luxury realm from a cookie-cutter-type brand,” he said.

Cain International CEO Jonathan Goldstein said that his company is a believer in gateway cities, such as Boston, and in the luxury space. There is an undersupply of luxury space in Boston, he said.

“We have a huge amount of confidence we’re in the right position, notwithstanding the pandemic,” Goldstein said. “Whilst we might, for the next six or 12 or even 18 months, be doubting ourselves or our cities, ultimately human talent will want to be in metropolitan cities, and will want the luxury and entertainment and business opportunities.”

0 CRES Stats Report | Week Ending August 7

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CRES Stats Report | Week Ending August 7

Interesting stats from the past 7 days: sublease & direct – in all cases temp space excluded,  in Mass Ave to the Seaport, South to North Station

  • 35 spaces (over 1,000 SF) hit the market as available equaling 235,000 SF, much more than last week and one of the highest in the past 4 weeks;
  • 11 spaces (over 1,000 SF) came off the market (62,000 SF) which has been consistent over the past month;
  • The vacancy rate in ALLSTON/BRIGHTON is 10.9% and the availability rate is 13.0%, MUCH better than many other areas of the city (albeit this is a relatively small office market);
  • The total availability STAYED ROUGHLY THE SAME at 11.2%.  I think there is a gap in the data (in addition to the lag in information bubbling to the surface) with deals happening on shadow space and relets that are not “visible” to the brokerage community.

0 Boston Luxury Condo Update

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Boston luxury condos have always been in high demand, with expansions from the inner city to the Seaport. Like many markets across the country, tenant activity and demands have evolved and the development process was halted.

What communication with tenants is being had? Are developers noticing that tenant design demands are changing? Will rentals numbers in the condo market grow? Which projects are changing the condo landscape despite the coronavirus and which Boston submarkets are seeing buying activity?

Join Bisnow as we connect with Noannet Group Founder Jordan Warshaw, HYM Investment Group Senior Development Manager Julie Livingstone and Cain International CEO Jonathan Goldstein for a discussion on how the Boston condo market has evolved and what that evolution means for the market moving forward.

WEBINAR SUMMARY

  1. Are luxury condos still a viable investment option given the current state of the market?
  2. In traditionally strong submarkets (Seaport, Back Bay, etc) tenant demand remains strong. How is inventory in the other submarkets fairing?
  3. Are condos trading right now? If so, are they discounted or in line with pre-pandemic numbers?
  4. Have design expectations from tenants for developments underway changed?
  5. Will condos as leasing opportunities be explored given the current buying landscape?

Watch webinar HERE.

0 CRES Stats Report | Week Ending July 31

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CRES Report Week Ending July 31, 2020

Continuing the trend 43 spaces (over 1,000 SF) hit the market as available equaling 180,000 SF, much less than last week, but typical for many of the weeks over the past 4 months;

13 spaces (over 1,000 SF) came off the market (56,000 SF) which has been consistent over the past month, many of these spaces are merely going to direct available from a previously listed sublease;

Quarter To Date net absorption is -139,000 SF and Year To Date absorption is -985,000 SF.

The Office VACANCY RATE in Cambridge (“ride the Red Line from Alewife to Kendall”) is 5.5% with 3.9% sublet availability, for a TOTAL AVAILABILITY of 9.4%.

0 CRES Stats Report | Week Ending July 24

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Boston Office stats from the PAST 7 days: (sublease & direct – in all cases temp space excluded) in Mass Ave to the Seaport, South to North Station

  • 39 spaces (over 1,000 SF) hit the market as available equaling 300,000 SF, a 4X increase over the last week;
  • 14 spaces (over 1,000 SF) came off the market (~57,000 SF) averaging only 4,000 SF per suite;
  • Charlestown’s (21 buildings, ~2.4mm SF) vacancy rate is 16.8% and it’s availability rate is 17.7%
  • There is currently 2,800,000 million square feet of sublease space available in the subject area;
  • The total availability STAYED ROUGHLY THE SAME at 11.2%.

 

0 LogMeIn CEO rethinks corporate headquarters for a post-COVID era

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By Jon Chesto | Boston Globe 

As few as one out of five employees will spend all workdays in the office

Six months ago, LogMeIn chief executive Bill Wagner never would have imagined he would hire his next chief financial officer without meeting him in person first. Wagner would have said that’s crazy.

Not anymore. Sure, we live in crazy times now. But some changes won’t be temporary. The ones playing out at LogMeIn, one of Boston’s biggest tech companies and a key player in the remote-work software business, illustrate just how different the office scene in Boston could be once this pandemic finally ends.

All 700-plus of Wagner’s Boston employees work remotely right now — like most of Boston’s white-collar workforce — and they will continue to do so until October. But some won’t ever return to LogMeIn’s headquarters. Only a small portion will work all five weekdays at the main offices along both sides of Summer Street in Fort Point.

How few? Wagner said he expects 20 percent to return five days a week after the pandemic is over. One in five. Let that sink in for a moment. Sure, many colleagues will come in less frequently, but others will be essentially remote workers all of the time. The breakdown won’t be known for months, probably not until a vaccine is widely available.

Wagner predicts LogMeIn’s corporate office will become more of a place for team meetings, training sessions, and similar get-togethers and less of a place where people dutifully show up every morning at 9 to grind out another workday.

Wagner said it’s far too early to know what this means for the 230,000 square feet LogMeIn leases in Fort Point — how much he’ll need, how it will be reconfigured. Even harder for Wagner to predict: What will happen to all the lunch places, bars, and other businesses that serve all the workers who used to arrive like clockwork?

This isn’t primarily about saving money, Wagner said, even though cost savings could be found. (A spokeswoman says some savings would be redeployed to help equip home offices.)

Instead, Wagner said he’s keen on letting employees work where they want to work. LogMeIn surveyed its 3,700 employees worldwide. About 3,200 responded. Of those, only 5 percent said they want to be in the office five days a week. People like the flexibility they have now, he said. They are sleeping and exercising more. And many say they are more productive now that they no longer spend hours commuting.

But employees still miss the social aspects of office life, Wagner said. That’s one reason why Wagner envisions adopting a hybrid model, of sorts.

The shift also significantly widens the pool of talent available. Existing employees might be able to move to another state if they want. In fact, Wagner said his chief of staff, Chris Perrotti, plans to do exactly that: He is moving to his Vermont home. And new hires don’t need to move to Boston. They just need to be in the same time zone.

Case in point: the new chief financial officer. LogMeIn is expected to be acquired by summer’s end by two private equity firms, Francisco Partners and Evergreen Coast Capital, in a deal valued at $4.3 billion when it was announced in December. Wagner wanted someone with experience taking a company private to replace Ed Herdiech, whose retirement was announced last fall. Rich Veldran, the new CFO, fit the bill: He guided the financial information provider Dun & Bradstreet when that company went private.

LogMeIn’s interviews with Veldran were conducted remotely. Like many other CEOs, Wagner considers the chief financial officer to be the number two job, the top lieutenant. Veldran still lives in New Jersey. (He joined LogMeIn on June 15.) While Veldran may get an apartment in Boston, Wagner said he doesn’t expect his right-hand man to have to pick up and move here.

The increasing acceptance of remote work was already under way, Wagner said. COVID-19 just accelerated it. Companies are under pressure to reduce their carbon footprints, to shave real estate and travel expenses, and to hire more diverse workforces. Going remote can help accomplish all three goals.

Sure, Wagner is a bit biased here. He does, in fact, sell software geared specifically for this kind of transition: LastPass, join.me, the entire GoTo suite. Sales have surged through the pandemic, although LogMeIn did make some technology available for free to nonprofits and government agencies.

Executives at other white-collar companies are pondering similar questions. And some are acting.

The real estate brokerage Colliers reported that companies put nearly 900,000 square feet of office space in Boston on the sublease market for the first time in the second quarter. That’s the highest number since 2004 — when corporate giants Fleet and John Hancock were gobbled up within a 12-month time frame — and the third-highest of any quarter since 1990.

(Side note from Aaron Jodka of Colliers: With the exception of a 100,000-square-foot chunk of space opening up at Tripadvisor’s headquarters in Needham, Boston’s suburban office market seems stable right now.)

LogMeIn was a trendsetter back when it relocated from Woburn to Boston in 2013, as suburban companies decamped for the big city in the hunt for talent. It became a flagship member of the city’s Innovation District, the branding applied at the time to Fort Point and nearby environs in the Seaport. The following year, the company even secured $2.5 million in city tax breaks and nearly $1.1 million in state tax credits to help pay for an expansion there.

Now, LogMeIn might be leading a new kind of trend as it rethinks its corporate headquarters, and this one might have even bigger consequences for the Boston economy.