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 Newbury Street Remains ‘Super-Submarket’ within the Back Bay

office space on newbury street 531

Credit: Bisnow

Newbury Street has been a passion of mine since the early ’80’s when I spent time doing deliveries for my late father’s art gallery. Thank you to: BisnowAaron TwerskyDavid Gerzof RichardAVALTAsana PartnersJamestownDartagnan BrownUrbanMeritageBIGfish Communications

The Newbury Street ‘super-sub’ market has continued to develop and flourish since that time into its current iteration, where “the spaces above the ground floor are now some of the most desirable workspaces in Boston. These 207 buildings in Back Bay form a submarket within a submarket, a working enclave totaling over 3M SF. Properties on Newbury Street are able to leverage a built-in cool factor that most office buildings and new developments can’t duplicate. Unlike other Boston submarkets with seasonal attractions, Newbury Street is a year-round destination — the neighborhood has a perpetual energy,” according the Bisnow.

“You never have to leave the street. Every possible food and beverage option, as well as every type of service, is just steps from your office front door,” Back Bay Association President Meg Mainzer-Cohen said. “Newbury Street is also a stone’s throw from a park system that is one of the best in the country, including Boston Public Garden and the Esplanade, making it easy to step out and recharge.”

You can read the full Bisnow article on its website, here.

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 Back Bay Office Market Shows Continued Resurgence

Back bay commercial real estate at night

Credit: Flickr/Emmanuel Huybrechts

The office market in Back Bay is vibrant and alive with activity. It’s 18M square feet not only boasts the 1st (200 Clarendon Street) and 2nd (Prudential) tallest buildings in New England, but also will possess the tallest residential building (1 Dalton) as well.

Vacancy is down and cost of occupancy has increased. Newbury Street office rents can range from upper $40’s t0 low $70’s per square foot.

From Bisnow:

“I think Back Bay has the amenities, the public transportation and all the attractive features a company is looking for,” said Avison Young principal Ron Perry, who is speaking at Bisnow’s Boston Office of the Future event later this month. “At night, it’s alive with restaurants. Traditional firms like it, and they’ve done a good job lately in making that appeal to technology companies.”

“Boston has an amazing talent base with great universities, a strong diversity of industries and an innovative culture,” Wayfair Head of Real Estate and Workplace Services Reed Gilbert said. “Wayfair’s headquarters, centrally located in Boston’s Back Bay, makes it easy for employees to bike, walk and take public transportation to work.”

Available Listings
Back Bay Office Space for lease

0 John Hancock to Return to Back Bay

Hancock tower boston

Credit: Bisnow

Back Bay becomes home to John Hancock – 2.0.

From Bisnow:

The insurance company is returning its headquarters to Back Bay, where it already has a 1.2M SF campus and employs over 2,000. Its 465K SF Seaport headquarters at 601 Congress St. employs 1,100 people, all of whom will be transferred by the end of 2018 to two Back Bay buildings at 200 Berkeley St. and 197 Clarendon St., the Boston Business Journal reports.

[John Hancock CEO Marianne] Harrison sent a memo to Hancock employees Tuesday, saying the company had enough space in Back Bay, given the number of local employees and how many work remotely. Along with the weather beacon-capped 200 Berkeley and 197 Clarendon, Hancock has approval to build a third office tower in Back Bay. The 26-story, 388-foot tower at 380 Stuart St. could be developed for Hancock or another tenant.

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 Commercial Office Markets to Watch in 2018

Office towers in Boston

Credit: Commercial Cafe

Boston has strong fundamentals and looks for increased rent growth in 2018.

Here’s a 2017 Assessment from Commercial Cafe:

Boston averaged between 11% and 12% office vacancy in 2017. Desirable tech submarkets are priced at a premium here, while emerging submarkets often offer discounts–the overall average asking rent in tech submarkets is priced at a 16% premium in East Cambridge (where inventory has decreased).

The Boston market also retained positive absorption, as vacancy dropped 0.4 percentage points to 12.0 percent last year. Large tenant move-ins have driven the 2017 Boston CBD market, with major shifts including Natixis Global Asset Management’s move into its new 150,000-square-foot headquarters at 888 Boylston St. in the Back Bay.

0 Penthouse Office Space in Back Bay at 116 Huntington Ave.

Back bay office space on Huntington Ave.

Credit: BBJ

Rood Deck, parking and a newly renovated lobby can all be found at 116 Huntington Avenue in Boston’s Back Bay. The 275,000-square-foot, 14-story building is situated directly across the street from 101 and 111 Huntington Avenue at the intersection of Ring Road and Huntington Avenue.

From Bizjournals:

“We were drawn to its location in Boston’s most vibrant neighborhood and to the opportunity to reimagine it as a best-in-class office destination,” said Adam Popper, Columbia’s senior vice president for the Eastern region, in a statement. “We believe the penthouse space, with its wrap-around terraces, high ceilings, modern amenities and incredible views, will soon be recognized as one of Boston’s premier corporate environments, and we’re already seeing significant interest from prospects as we seek to fill the building’s remaining availability.”

Shawmut Design and Construction, the third-largest general contractor in Massachusetts, completed the $10 million renovation, which was designed by Dyer Brown. Work included upgrades to the building’s lobby, installing a glass facade and bronze panels along the building’s exterior, and adding close to 1,500 square feet of private outdoor terrace space for a future tenant for the 25,366-square-foot penthouse space.