0 Tenants Returning to Boston Offices Will Find A Strange New World

By Dees Stribling | Bisnow | April 27, 2020

Most Boston commercial space is now empty, but the time is approaching when many or most workers return, perhaps in shifts or only a few days a week.

Property managers are already trying to sort out the transition, speakers on Bisnow’s health and safety in property management webinar Thursday said. The details of bringing people back into commercial space in an orderly and safe way aren’t clear. One thing is clear: It won’t be easy.

Most space in Downtown and in Cambridge is empty, with commercial occupancy below 5%, though occupancy is higher than that in a few pockets, such as life science space, Lincoln Property Co. Vice President of Property Management Scott Rickards said.

“We’re planning for re-occupancy at some point after May 4,” Rickards said. “Could be sooner, we hope. We’re fielding an increasing amount of questions every day from tenants about what they can expect.”

Personal responsibility is going to be critically important to making re-occupancy work, Rickards said.

“We all know people who go to work sick, and that’s what we really can’t have,” he said. “Every company has to be responsible for its employees, and every individual responsible for themselves.”

The focus now, EBI Consulting Director of Environmental Health & Safety Karla King said, is how company policies can evolve to address the future re-entry. Some companies have specific issues, such as those needing to deal with COVID-19 cases at their buildings, while others are simply trying to devise forward-looking planning.

“We’re working closely with some of our clients, evaluating current housekeeping and programs and getting an understanding of high-touch and common spaces,” King said.

In the case of a building with a suspected COVID-19 case, each instance is evaluated based on when it happened and how isolated the space is, King said. Then her company works with the client to identify or evaluate a cleaning company, looking closely at its cleaning products and protocols.

Even without a COVID-19 case, tenants who plan to return need to formulate detailed plans, King said.

“What PPE are people going to be bringing or wearing to the office, mandated by state or federal officials, or by their own choice?” she said. “Where are they going to dispose of their PPE?”

Boston Realty Advisors Managing Principal Wil Catlin, who moderated the webinar, asked whether some landlords will have stricter requirements regarding PPE than others.

“At some level, there needs to be baseline standards,” he said.

PPE use will vary according to the use of the space and how much common space there is, King said, adding that common areas and high-touch spaces are going to be the biggest areas of concern for property managers.

“That’s one thing to communicate to tenants: the importance of everyone controlling their space,” King said.

Property managers can’t be responsible for the cleanliness of every specific desk or other personal area, King said, since it is largely out of their control. Instead, they will be more concerned with common spaces, such as gyms, cafeterias, restrooms and reception areas.

Catlin also asked about security procedures in a post-pandemic environment, specifically how buildings will handle front desks and check-ins. Technology is a longer-term answer to security, Rickards said, and some Class-A buildings probably already have the tech in place to go touchless.

“There are some apps that work with security systems so that your phone has a unique identity, and you can walk into the building, and it knows your app,” Rickards said.

But most Boston real estate doesn’t have that kind of sophistication yet, he said. In many small lobbies, social distancing won’t even be possible.

“So there will be a lot of workarounds, and that’s going to extend the need for PPE,” Rickards said. “You’re going to need to have a mask on, and maybe gloves. Can we come up with a way to show an ID so that no one else touches it? It might be a rudimentary as the security guard doing all the writing. It’s going to be complicated.”

0 Law firm to move out of One Post Office Square, citing renovation work

The biggest isn’t always the best.  Fortunately, Boston is chock-full of great work space. What strategies are you solving for & how can we help?

Law firm to move out of One Post Office Square, citing renovation work

One Post Office Square in Boston.
W. MARC BERNSAU

By   – Law and Money Reporter, Boston Business Journal 

Nelson Mullins Riley & Scarborough LLP plans to move its Boston office to One Financial Center next year, in part to avoid the disruption caused by construction in its current home at One Post Office Square, according to its local managing partner.

The South Carolina-based law firm is taking approximately 43,000 square feet on the 35th and 36th floors of One Financial, the office tower across Atlantic Avenue from South Station, said Peter Haley, the firm’s leader in Boston.

It’s about the same amount of space that it currently occupies at One Post Office Square, where it’s been for most of the decade-plus it’s been in the Boston market. But the Post Office Square building is undergoing a major renovation, including a new-look glass exterior, a large-scale interior makeover, and a significant expansion of rentable space. The project is being co-developed by JLL and Anchorline Partners.

According to Haley, had Nelson Mullins stayed in Post Office Square, it would have needed to move at least once, and perhaps twice, within the building over the short term to accommodate the makeover. The firm’s leaders were wary of that level of disruption. JLL “was great” about trying to find a solution, but the firm “couldn’t quite find something that was right for us,” Haley said.

Nelson Mullins expects to move into One Financial in 2020, potentially in August. Haley anticipates the new space will have about 65 offices, with a more efficient, glass-filled floor plan compared to its current location.

The law firm’s local headcount has changed significantly in recent years. In early 2015, it had 60 attorneys in Boston, but by the next year that figure had dropped to 35 after teams of attorneys left for K&L Gates LLP and LeClairRyan PC.

Since then, however, Haley and the firm’s leadership have been aggressive about wooing partners from other Boston law offices. Its local headcount is back up to 53, according to Haley. The new recruits hail from a variety of firms and practice areas: This year alone, its additions include intellectual property attorneys from Pepper Hamilton LLP and Mintz and a litigator from State Street Corp.

“We’ve had a nice ability to attract lawyers from around the city,” Haley said.

That level of growth is reflected in the firm’s recent financials. In 2014, its $298 million in revenue put it outside the 100 highest-grossing law firms in the U.S., according to American Lawyer Media data. In 2018, it grossed more than $400 million across its more than 20 offices, earning it a ranking as No. 87 in the country.

The new address and new names aren’t the only changes coming to Nelson Mullins. Later this month, Haley is stepping down as office managing partner in favor of his colleague, Brian Moore. Haley has been the office’s leader since 2013 and felt a change in leadership would be good for the future of the firm. He plans to return to his practice full-time, although he will hold onto some managerial responsibilities at the firmwide level.

“The turnover’s very helpful in terms of developing and building leadership within the office,” he said. “Just having one person staying there for 10 or 15 years, I think you miss out on opportunities to build future leaders.”

0 Boston Class A and Class B rents 62% tighter than pre-recession peak

Boston office statsOffice rents in Boston
The Class A & B office space in Boston has never been closer than what we are experiencing now. The rents low rise Class A and Class B are near identical with the differentiators being loss factor, amenities and fit up from union versus nonunion general contractors.

Click to download the full  Rising Market report.

0 Landlords Pitch Amenities to Startups

Office amenities are showcased

Credit: Bloomberg

We too can play at that game! That sentiment is being echoed by landlord’s and is resulting in upping the ante game within Class A towers and Class B midrises. Landlords across the spectrum are looking at where they can add amenities in what has traditionally been poor-performing or unleaseable space.

From Bloomberg:

Companies in every industry, from autos to retail, have been scrambling to adjust to millennials’ tastes and expectations, and commercial real estate is no exception…big landlords are spending millions to inject Silicon Valley playfulness into aging towers in big cities. They’re in an arms race against new construction and co-working businesses such as WeWork Cos. “The way towers were built in the 1980s, they were a monument to the corporation,” says Lisa Picard, chief executive officer and president of Equity Office, a Blackstone unit that owns office buildings. “Now, if it feels corporate, that’s the kiss of death.”

0 BRA Feature: Boston Office Market Update

Google map of boston office space available

Available office space in Cambridge and Boston

As Boston marches through a gilded real estate cycle as insatiable growth spills out of Cambridge into submarkets not traditionally known as tech or life science destinations, we take a moment to pause and survey the evolving office landscape.  Given the strength of the regional economic growth, the compilation of markets including Boston, its inner core and Cambridge have seen the Class A office sector achieve a vacancy rate of 8.0% in the 4Q15 which is an improvement over the prior cycle’s low of 8.3% set in Q108.  The current success of the market is underpinned by positive absorption being posted in 18 of the last 19 quarters.  Not surprisingly, the same asset class has effectively reached the high water rent benchmark of $56.42 PSF set at the peak of the last cycle when the Q415 closed with Class A office rents averaging $56.39 PSF.

While the capital markets sector has been on fire given the health and view of Boston as one of the safest markets for investment, the fundamentals have pushed the development community to enter the discussion in a rather pronounced way.  In 2012, all of the 2.1M SF of product under construction was preleased.  In the 12 month period closing at the end of 2015, only 64% of the 3.2M SF of product under construction had commitments.  This telling stat indicates that developers and their capital partners are underwriting significantly more risk as spec office buildings begin to enter the market but with the belief that tight supply will drive rents through the asset’s absorption period.

Taking a deeper look at recent pure spec office deliveries, which include Samuels & Associates’ Van Ness project at 1325 Boylston Street (237,935 SF), FRIT’s delivery of 450 Artisan Way at Assembly Row (99,000 SF) and the first of Skanska’s office deliveries at 101 Seaport Avenue (440,000 SF), lease up velocity has been impressive.  Within nine months of delivery, Samuels is almost 72% leased with the recent news of UnitedHealth Group’s lease of 125,000 SF.  Skanska is 81% leased with PwC taking 232,938 SF as the anchor tenant and FRIT is100% leased since delivering in 2014.  With CoStar showing another 15 projects under construction totaling 2.32M SF with leasing commitments of 56.9%, it is clear that the spec development cycle is ratcheting up in Boston and its surrounding core submarkets.

Additionally there are several large sites that are toeing the line and potentially adding further office inventory to the market including DIVCO’s Northpoint site which has 2M SF in the pipeline, FRIT who sits on 1.6M SF of inventory at Assembly Row, HYM Group with 1M SF at the redevelopment of The Government Center Garage, Boston Properties Hub on Causeway with 700K SF and New Balance which has another 430K SF in Allston to name a few high profile projects.  The question on the mind of the real estate community is how long this upcycle will last and which of these projects will be able to survive an inevitable down turn.

0 4 Class A Buildings in Boston Under Construction with At Least 50k Sq. Ft.

According to CoStar, there are 4 Class A buildings under construction that can accommodate users of 50,000 square feet or more.  They are located in the Seaport and Back Bay and have combined number of 1,610,202 square feet.

Building Address Submarket Name Number Of Stories Rentable Building Area  Typical Floor Size  Max Floor Contiguous Space  Total Available Space (SF)
888 Boylston Back Bay 17                    425,000             25,000                              26,170                             89,173
100 Northern Ave Seaport 17                    395,202             23,247                              32,006                           154,931
140 Northern Ave Seaport 13                    375,000             30,769                              28,846                           374,998
121 Seaport Blvd Seaport 17                    415,000             24,412                              34,400                           414,202
 Total                 1,610,202

 

 

0 Boston Class A Office Space with at Least 50k Sq. Ft. Draws Interest

101 seaport blvd boston

Credit: Skanska

According to CoStar there are 20 Class A properties that can offer 50,000 square feet or more of contiguous office space in the Seaport, Back Bay or the Financial District (see full chart below).

From the Boston Globe:

Despite Boston’s development boom, big chunks of office space are scarce right now. As of Oct. 1, there were 17 tenants looking for 50,000 square feet or more of top-end office space in downtown Boston, according to real estate firm JLL, and just 11 blocks big enough to house them. That means buildings with room are drawing interest.

Three would-be tenants have proposed leasing all 180,000 square feet that Boston Properties has at 120 St. James, in the base of the old John Hancock Tower, president Douglas Linde told analysts recently. The space PWC left behind for the Seaport, at 125 High Street, also went quick. And Goodwin Procter’s soon-to-be-former home at 53 State has seen strong interest.

One addition to that list may soon be Skanska, offering “brand-new space with all the bells and whistles.”

Building Address Building Name Submarket Name Max Building Contiguous Space
200 Berkeley St Berkeley Bldg Back Bay                                    50,266
501 Boylston St Back Bay                                    62,644
200 Clarendon St John Hancock Tower Back Bay                                  121,989
2 Copley Pl Tower 2 Back Bay                                  122,606
101 Huntington Ave Back Bay                                    60,858
111 Huntington Ave Back Bay                                    70,191
31 Saint James Ave Park Square Bldg Back Bay                                    91,000
1 Beacon St One Beacon Financial District                                  105,786
1 Federal St One Federal Street Financial District                                    55,038
101 Federal St 101 Federal Street Financial District                                    69,873
160 Federal St Landmark Financial District                                    54,221
One Financial Ctr One Financial Center Financial District                                    59,106
125 High St High Street Tower Financial District                                    78,034
50 Milk St Financial District                                    39,644
50 Post Office Sq Financial District                                  117,200
53 State St Exchange Place Financial District                                  382,332
60 State St Financial District                                    57,897
100 Summer St Financial District                                  115,402
40 Water St Congress Square Financial District                                  363,834
101 Seaport Blvd PricewaterhouseCoopers Seaport                                    77,646

 

0 Boston Developers Eye Financial Tech Sector

Rendering of modernized Boston Financial District

Credit: Bisnow

The newest Tech-friendly office tower could be a crucial differentiator in Class A Financial District office space, with delivery in 2020.

According to Bisnow, Trans National CEO Steve Belkin and EVP (development) Justin Krebs want to help Boston become a global financial/tech innovation cluster…proposing “a $900M tower downtown that would include an elaborate two-story 22,500 SF Entrepreneurial Innovation Center that’s free to the public. They hope that the space where financial services pros, tech talent and university folk join forces will help elevate Boston’s brand as a global hotbed of financial innovation. Steve, an entrepreneur who’s launched 30 companies of his own, is also answering Mayor Walsh’s call to help make Boston the world’s innovation leader by 2030.

You can read the full article on the Bisnow website.