0 STAY THE COURSE, DESPITE COVID-19

Letter to the Editor by Jason S. WeissmanBanker & Tradesman | March 16, 2020

The communal, personal and economic effect of the coronavirus has infringed every fabric of our daily lives. This unwelcome disruption has generated a panic that we must quickly transcend. Staying healthy is paramount – both physically and mentally. 

We need to be mindful and act responsibly to minimize effected individuals. This includes properly washing hands and listening to the CDC. Companies that are set up with remote access for their employees will experience less impact to their business, and provide the ability to focus on their respective trades and the overall economy. 

Still in its infancy in the United States, the economic consequences of the coronavirus epidemic have caused the stock market to crash and the US Treasury bond yields to hit record lows. While I hope the recent volatility diminishes, the market will likely not fully return until the spread of the coronavirus decelerates. 

The same panic and speculation have crept into the real estate industry. Please stay calm and recognize that today’s realities are based on an event and not a bubble. Further, and unlike many plays in the equities market, decisions for real estate investments are based on a seven- to 10-year action plan. 

Real estate fundamentals are strong. Gateway Cities are expanding in and around CBDs, with an abundance of liquidity waiting to activate their allocated dollars in both urban and suburban markets. Today continues to be a great time to buy a home and invest in high-quality commercial real estate. 

While the drivers and circumstances were very different in the 2008 recession, the real estate investors that persevered were the landlords that stayed the course. When many owners froze out of fear, a few proceeded with their planned capex projects and growth strategy. Staying the course positioned their properties to achieve full occupancy and maximize NOI. 

Do not let panic paralyze the entire country. Stay the course and stay strong. 

— Jason S. Weissman 
CEO, Boston Realty Advisors 

0 Boston Tech Firms Are Laying Off Hundreds. Will The Office Market Feel It?

In Cameron Sperance’s latest, he says that, “TAMI tenants accounted for 40% of all office transactions in Boston’s central business district last year.”  Fresh off of over 140 leases in 2019, Managing Partner of Boston Realty Advisors, Wil Catlin said, “Office space in Boston has become a commodity, and commercial landlords are stepping up to ensure their asset is ready for today’s workforce. It’s a competitive environment and the landlords with quality, ready-to-go space are getting deals done.”

By Cameron Sperance | Bisnow | March 5, 2020

A string of recent layoffs in Boston was bad news for the city’s typically robust tech sector. But analysts say the furloughs have more to do with normal business operations than signs of a tech pullback from Beantown.

Cambridge-based Akamai Technologies cut around 75 jobs in early February. Wayfair laid off 550 employees worldwide, including 350 employees at its Boston headquarters, Feb. 13. The following week, Boston-based software company LogMeIn cut 300 jobs, nearly 70 of which were in Boston. Agricultural tech startup Indigo Ag then announced at the end of last month it was laying off 150 employees.

Wayfair’s job cuts were tied to the company’s previous overexpansion. LogMeIn said its layoffs were due to “evolving priorities,” per the Boston Globe. Indigo Ag is “focusing resources on the fastest growing aspects of the business,” the company said in a statement to Bisnow.

Akamai, Wayfair, LogMeIn declined or didn’t respond to requests for comment. But Boston real estate experts don’t see the layoffs impacting the office market.

“I don’t sit at the dashboard of Wayfair, but it’s normal to right-size,” Boston Realty Advisors Managing Director and Senior Partner Wil Catlin said. “What’s happening is labor is your No. 1 item on the [income statement]. But if you choose to let go of 10% of those people, you’re not going to get rid of 10% of your office space. You’re getting rid of that salary component.”

The February layoffs followed Needham-based TripAdvisor’s 200-job cut in January. Even if the layoffs are perceived as standard business practice, the impacted companies are leading office tenants across Greater Boston, which means this could ripple through property. Numerous tech companies, including Indigo Ag, are actively seeking hundreds of thousands of square feet for office expansion, according to independent brokerage documents obtained by Bisnow.

Catlin, who focuses on small to midsized tenants, doesn’t expect that demand to go away. A little more than 70% of the active tenants of that size are TAMI (tech, advertising, media and information) companies, Catlin said. Office developers are almost exclusively building for those kind of tenants.

“Today, subleases are few and far between and typically lease off market,” Catlin said. “Office space in Boston has become a commodity, and commercial landlords are stepping up to ensure their asset is ready for today’s workforce. It’s a competitive environment and the landlords with quality, ready-to-go space are getting deals done.”

Boston is the third-fastest growing tech hub in the U.S., according to job listing site Indeed. But housing production hasn’t kept up with the surge of new workers flooding into Boston, pushing costs higher and higher. Boston is the second-most-expensive city to own a home, according to a January report by moving research firm Move.org.

The high cost of living could be weighing on employers determining who stays in the urban core and who could be employed in a cheaper environment.

“It’s getting tougher and tougher to keep those borderless sales jobs in downtown Boston,” Hunneman Director of Research Tucker White said.

Other major Boston companies have been moving select operations out of the city for years. Fidelity Investments announced in 2011 it was moving 1,100 jobs from its downtown headquarters to other parts of the country. Liberty Mutual maintains its corporate headquarters in Back Bay, but has also built a Plano, Texas, campus where the insurance provider is expected to eventually employ 4,000.

Tech companies could be looking to do the same, especially with artificial intelligence expected to impact as much as 25% of all U.S. jobs, including many tech jobs.

“Wayfair is committed to Boston and that’s allowed them to grow, but at the end of the day, they’re still paying a comparatively high real estate cost to other markets and can hire similar personnel elsewhere,” White said.

There may have been a string of early 2020 tech layoffs in Boston, but there have also been some industry wins.

Boston-based restaurant tech firm Toast is now valued at $4.9B after a $400M round of fundraising. Its revenue increased 109% in 2019 due to thousands of new restaurants using its payment hardware, Toast announced last month.

Following its planned merger with sportsbook technology provider SBTech, DraftKings is expected to be valued at $3.3B. The fantasy sports company is headquartered in Back Bay and has the leading U.S. market share for sports betting, according to Morgan Stanley.

Amazon continues to expand its tech reach across Greater Boston, with new offices planned for Medford and the Seaport.

There are 23,764 open tech jobs across Massachusetts — with more than 9,000 in Boston alone, according to Burning Glass Labor Insight data. That is more than 1,000 more open positions than there were at the end of 2019.

The collective, ongoing growth is enough to offset the layoffs, according to one of the state’s leading tech voices.

“When you look at each of the examples [of layoffs], there are real business reasons for it and [it] doesn’t reflect a larger trend in the economy,” said Pat Larkin, director of the Massachusetts Technology Collaborative Innovation Institute. “We don’t view what happened as a trend.”

Professional, scientific, technical services and information tenants, which encompass the TAMI sectors, have the largest office footprint in Boston, with a little more than 34% of the overall office sector, according to Newmark Knight Frank. TAMI tenants accounted for 40% of all office transactions in Boston’s central business district last year.

Despite the layoffs, strong demand coupled with job growth from burgeoning sectors like cybersecurity and digital health keep brokers and landlords cautiously optimistic in signing deals with tech tenants.

“Landlords don’t want a repeat of the bust era and are being mindful to sign tenants that can perform to the lease terms they have available,” Catlin said.

0 Boston is on the Rise

Rendering of new Boylston street office building

Credit: Curbed

The Boston real estate market is collectively on the rise, with six impending towers set to stand at least 300 feet. None of these projects are massive in scale on their own, but combined, they fortify Boston’s continued presence on the world’s real estate stage.

The combined projects include office, retail and residential space for lease.

Curbed Boston highlights the elements comprising the project’s relative stout within the traditionally ‘height-averse’ market:

  • One Congress – the tallest new office building in Boston since the 590-foot One Financial Center opened in April 1984
  • Bulfinch Crossing residential tower – residential spire is expected to stretch to 480 feet and 45 stories, and to include 368 apartments and 55 condos.
  • 1000 Boylston – 484-foot, 32-story residential, retail, and parking tower over the Massachusetts Turnpike.
  • Hub on Causeway – 1.87 million mixed-use square feet on and around TD Garden and North Station—includes a 498-foot, 38-story tower.
  • Back Bay Station tower – 1.26 million square feet of residences, offices, retail, and other space around and atop Back Bay Station.
  • Fenway Center – Includes a residential-office-garage tower of 305 feet.

You can read the full article on Curbed Boston

0 Prospective Motor Mart Garage Redevelopment Would Boost Back Bay

Motor Mart Garage redevelopment

Credit: BBJ

Back Bay clearly is a destination for development in the City of Boston. If falls outside the FAA’s domain and doesn’t interfere with the “shadow effect”. One prime example is the Motor Mart Garage at 201 Stuart Street in Boston.

According to the BBJ, “the Motor Mart Garage redevelopment ‘would feature building a 310-foot residential tower atop the eight-story garage and converting 365 parking spaces into residential units…The 20-story tower would contain 222 apartments and condominiums, while the garage’s western portion would be converted into 84 residential units.'”

“The project’s height was considered as a continuation of the high spine of Boston,” the development team wrote in the Sept. 10 project notification form.

Additional details on the redevelopment are available on the Boston Business Journal, or you can view the detail page for further information Back Bay office space.

 

0 The MidTown Hotel on Huntington Ave Slated for Residential Tower

Former Hotel on Huntington Ave site of new Tower

Credit: Curbed Boston

Could the Midtown Hotel site be the home to the next office or residential tower in Boston Back Bay? Speculation says Back Bay would be most receptive to height.

A sale of the one-acre site would likely lead to a much larger building in the 159-room hotel’s place, per the Globe’s Tim Logan. And that sale would likelier be on the pricier side, reflecting the skyrocketing land values of prime development sites in downtown Boston in general.

For instance, the MidTown site’s lease could go for as much as $80 million—$15 million more than developer Carpenter & Co. paid in 2014 for the smaller site that became One Dalton, which is on its way to being one of the five tallest towers in New England.

Additional information is available on Curbed Boston.

0 Residential Tower Proposed on Back Bay Parking Garage

Back Bay Garage, motor mart

Credit: Boston Business Journal

The old parking garage — once, apparently, the largest parking garage in the United States — is getting more than just a makeover. CIM Group, of Los Angeles, is proposing a 17-Story residential tower on top of the existing structure.

According to the BBJ, “CIM Group intends to build a 233,500-square-foot residential tower, with 280 apartment and condominium units, that would rise up to 278 feet to the “top of the highest occupiable floor,” the March 1 letter of intent states…The development would also involve redeveloping 205,000 square feet of the existing Motor Mart Garage “to integrate the structural core of the new tower” and create 106,000 square feet of residential and retail space.”

Additional information is available on the Bizjournals website.

0 Tech Companies Gravitate Back to Cities

Where do venture-backed companies focus when coming to the 617 area code? Unsurprisingly, the list focuses on the city core with areas like the Seaport, Financial District, Back Bay, Kendall Square and some clustered at the 90/95 interchange.

map of office space in Boston and Cambridge

Credit: City Lab

Here’s a national perspective from City Lab:

While many large, high-tech companies like Facebook, Google, Apple, and Microsoft have their main campuses in suburban areas, cities and urban areas house the majority of venture capital–backed startups. My own research estimates that 55 percent of all venture capital investment now flows to urban neighborhoods. In the Bay Area and Boston–Cambridge, more than 60 percent of venture capital investment gravitates to these neighborhoods.

Additional information is available on CityLab’s website.

0 1000 Boylston Looks to Heighten Back Bay Silhouette

Back Bay office building on Boylston st.

Credit: Bisnow

Back Bay could be getting some more height at 1000 Boylston Street from Weiner Ventures.

From Bisnow:

The parcel is a block away from the 254-foot Hilton Back Bay and 360-foot Sheraton North Tower as well as the 756-foot Four Seasons Hotel and Private Residences under construction. The 52-story Prudential Center tower is two blocks down Boylston. The complex would be on four different parcels, three of which are Mass Pike air rights plots.

If completed, 1000 Boylston will feature 182 apartments and 160 condominiums above a six-story podium composed of retail and parking. Its prominent location near the intersection of Boylston and Massachusetts Avenue is particularly complex due to the limited amount of ground the tower has for foundation.

0 2 Charlesgate West Headed to Fenway

Rendering of 2 Charlesgate West

Credit: Boston Herald

More change for the Boston skyline on the Fenway and Back Bay border.

According to the Boston Herald, “Trans National Properties has detailed plans to replace its Fenway headquarters with a 29-story tower called 2 Charlesgate West, which would have 173 apartments and 122 condos…The project would replace parent company Trans National Group Services’ nondescript 40-year headquarters and include 186 parking spaces, a 10,000-square-foot restaurant and 7,500 square feet of office space for Trans National.”

Additional details are available on the Boston Herald, here.

0 The Fate of the Citgo Sign atop Kenmore Square Hangs in the Balance

Back Bay Citgo sign

Credit: Boston Magazine

Boston is in the midst of a dramatic change of how we live, work and play within the city. The daytime and bedtime population is growing and the demand for services is far different than it was 20 years ago, but what hasn’t changed is how much we love our city and appreciate the history and culture that exists here. We are Boston and we love the quirks that makes this home.

Not all historic features and structures merit preserving, but some do. I am sure that prior to filling of what is now Back Bay was very controversial in 1857 when gravel and fill started arriving from Needham at a rate of twenty-five 35-car trains arrived every 24 hours.

With respect to the Citgo sign in Kenmore Square, Boston Magazine reports “the city’s Landmarks Commission met Tuesday night and granted the Citgo sign “pending designation” status. Next, the commission will prepare a report, and a public meeting will be held. If the commission approves its landmark status by a two-thirds vote, Mayor Marty Walsh has 15 days to approve or reject the proposal. If he rejects it, the City Council has 30 days to override his decision.”

You can read more on the status of the Citgo sign on Boston Magazine.