“The challenge you have in the city of Boston is: do we create too much supply and get to a point where we’re not seeing rent growth?” said Mitchell Roschelle, PwC’s national practice head of real estate advisory. “We heard this quarter in the survey a little bit of concern on the part of some investors about the new supply to the market. How that supply performs is going to dictate whether we see investors flooding the market with capital.”
The tenant retention rate was 68 percent in the first quarter with landlords offering an average of five months of free rent, according to the survey. Cap rates averaged 5.7 percent in the Boston central business district and 7.2 percent in the suburbs. Boston is one of 32 U.S. office markets expected to remain in expansion phase in 2015, the PwC report said, with employment generating demand for office space outpacing new supply…San Francisco, which shares many of Boston’s market characteristics, is expected to contract in 2015 and enter a recession mode with negative rental growth in 2017.
Oxford Properties continues its buying spree by plunking down $114.5 million for 745 Atlantic Avenue or $657 per square foot. 745 Atlantic Avenue is home to WeWork and Dain Torphy as well as a number of companies. WeWork will be building out a Café on the 1st floor as part of their future expansion.
From the BBJ:
“It really fits our profile of what we like to buy for the long-term: Class A assets in downtown cores near transit-oriented locations,” said Chad Remis, the head of Oxford Properties’ Boston office.
Its $114.5 million acquisition of 745 Atlantic, which closed May 29, is more than double the $54.65 million sale price 745 Atlantic fetched in 2003. The property sold again in 2008 as part of a $1.7 billion office property acquisition invovlingBeacon Capital Partners and Charter Hall Office REIT of Sydney, Australia.
Building trades continue with Brickman of New York acquiring 186 Lincoln Street for just over $300 per square foot.
Banker&Tradesman offered context on the sale, indicating “the 68,526-square-foot multi-tenant office building near South Station is 70 percent leased, with tenants including Roche Diagnostics, Full Contact and Greystone Solutions…The South Station submarket contains 1.3 million square feet of office space in 22 buildings, 85 percent of which is class B product.”
Suffolk Construction decides to stay put in Roxbury. In a conversation with the Boston Globe, “Suffolk CEO John Fish said his company spent around $600,000 ahead of the planned South Boston move but ultimately reversed course for a variety of operating as well as cultural reasons. ‘We studied the hell out of it,’ Fish told the Globe. ‘At the end of the day, it’s not us. We are a very proud organization, and I think Roxbury is a home we’re very proud of.'”
Office Building at 745 Boylston Street in Copley Sq.
Boston leads New York, D.C., Chicago and L.A. not only in the bid for the 2024 Olympics, but also for CMBS loans.
The Boston Business Journal is reporting the “percentage of Boston-area commercial mortgage backed security real estate loans with late payments is its lowest in months and is among the best in the country, according to new data from real estate information provider Trepp,,,According to Trepp, 2.84 percent of Boston-area CMBS loans were 30 days delinquent or more as of the end of November. A year ago, the rate was 4.02 percent. The decline has been more or less steady, with slight increases a few months…The Boston-area compares especially well with other major U.S markets.
Looking to use your smartphone to pay for parking in Boston? Thank the Mayor, who pushed a new app out the doors of city hall and launched in as a pilot in Back Bay. It was one of the Mayor’s six technology-centric initiatives announced recently. The full six tech initiatives are the following:
1. Boston drivers can now feed their meters with a mobile app.
2. Boston’s new partnership with SAP.
3. The creation of “StartHub.”
4. Leveraging big data.
5. The unveiling of a “startup czar” position.
6. New 3-1-1 upgrades.
You can read more on each of Mayor Walsh’s tech initiatives for Boston on the BizJournals website.
Our city continues to grow and change as evident by the following six projects in 2014. Bisnow selected its six transformative developments from 2014, noting “projects underway in 2014 brought amazing change, reviving tired districts and bringing new ones into the heart of the metro area.” It’s standouts are the following:
• Vertex Pharmaceuticals
• Troy Boston
• New Balance in Brighton Landing
• One Dalton
• Partners Healthcare
Boston Office rents are some of the most expensive nationally and expected to continue upward during 2015. Vacancy in the city has continued downward with value options within the low rise Class A and Class B in the Financial District.
“The vacancy rate in Boston at the end of the fourth quarter was 13.4 percent, the seventh-lowest rate in the country among the roughly 75 markets Reis examined…The national average was 16.7 percent. Average Boston rents rose 0.2 percentage points during the fourth quarter. Most of the cities saw a small decline. Average rent in Boston at the end of the fourth quarter was $32.42 per square foot — fourth highest in the country,” according to stats presented on the Boston Business Journal.
The commercial real estate industry has truly benefited from technology. I entered the industry in 2002 and from then to now is dramatically different; today I can walk down the street, open my tablet and find out what space on what floor is available in any commercial building. This was unheard of 5 years ago and only gets better with version updates of various apps. Not to mention the infusion of data, real-time analytics, and crowdfunding.
The BBJ notes “while data can’t predict the future just yet, big data can tell us the probability of future decisions, which can lead to actionable decision-making.” The article also mentions the benefit to “accredited and non-accredited investors, through a multitude of platforms, have the ability to invest in early-stage companies. What this means for commercial real estate is that everyone’s customer base broadens as fractional “ownership” increases. It also results in more capital outlets and providers for a more competitive landscape.”
You can read the full Boston Business Journal article on its website.
100 Cambridge Street has a buyer. Intercontinental is a Boston-based real estate firm that focuses on acquisitions, asset management, portfolio management, finance, development, construction management and property management.
“That’s what we’re hearing,” says one market observer who maintains suitors were drawn to the opportunity listed by Colliers International “in droves” for a unique 590,000-sf facility that includes commercial tenants and state agencies occupying a tower that was revamped from an aging state-occupied structure into a mix of private and public space a decade ago. The initiative has lower levels housing multiple agencies and high-rise floors leased to top-name companies including Cannon Design, a nationally known healthcare architect in 27,500 sf on Floor 14 and law firm Prince Lobel occupying the 21st and 22nd floors. American Student Assistance fills 151,000 sf on six floors and Massachusetts General Hospital is on a trio of leases expiring from April 2015 to June 2016.