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 Empty store space in Downtown Crossing may become offices

Does the Amazon effect play into retail vacancy in Boston?  We, in short yes.  How we shop and what we shop for online has changed and will continue to do so.  Retail is still vibrant and strong, but not all retail spaces are created equal.  Some historical retails spaces are better suited for office which in part has to do their size and proximity to public transit.

An example of this transformation is the Cambridge Side Galleria Mall in the East Cambridge.  The red hot Kendal office and lab market will continue to gobble up under performing assets.

An empty storefront near 560 Washington St.

By Tim Logan GLOBE STAFF  APRIL 12, 2019

One of the biggest retail spaces in Downtown Crossing may soon become home to offices.

The Boston Planning & Development Agency on Thursday approved plans by the owner of Lafayette City Center to convert much of its long-empty ground floor into office space, perhaps to house the state agency that handles workers’ compensation claims.

The move by veteran Boston developers The Abbey Group highlights the soft market for large-format retailers as they face mounting online competition. The change also has something to do with the particular quirks of the building, which was built in the 1980s as the inward-facing Lafayette Place Mall before being repositioned as storefronts with office space above.

The proposed change also is raising concerns in some quarters about a block and a half of Washington Street in the busy shopping district being converted to office space.

Much of the building’s ground floor — about 75,000 square feet — has been empty for at least 15 years. The last sizable tenant, an Eddie Bauer outlet store, closed in early 2016. Abbey and its brokers have struggled to fill the space. Among other challenges, the first floor is as much as 7 feet higher than street level in places — a design quirk of the old indoor mall and its underground garage.

“We think of ourselves as creative developers who apply innovative thinking to problems like this,” Abbey chief operating officer David Epstein said. “It simply isn’t feasible” to use the space for retail, he said.

 

But Abbey has leased more than 500,000 square feet of office space on the floors above street level, mostly to tech companies. When the state began looking for 33,700 square feet to house its Division of Industrial Accidents — which needs to move out of the Government Center Garage ahead of a redevelopment there — Abbey offered up the ground floor.

A spokesman for the state’s real estate agency said it received five proposals for the office, including Lafayette Center. A final decision has not been made, he said.

Workers’ compensation courtrooms may not be the sort of retail and restaurant Downtown Crossing is known for, but it fits with other legal offices around the neighborhood, said Rosemarie Sansone, president of the Downtown Boston Business Improvement District.

“This place has been empty for 20 years,” she said. “They found an unusual and interesting use for it. This is all good.”

Still, the shift comes as several key locations sit empty along Washington Street, from Lafayette Center to the long-shuttered Barnes & Noble (which is now being renovated by a new owner) to a cluster of empty storefronts at Washington and Bromfield streets that have been largely dark since plans to build a skyscraper there stalled in 2016.

Sansone acknowledged the empty buildings but also noted that several restaurants and stores have opened in and around Downtown Crossing in recent years. Building owners and the BID, she said, are aiming to bring in more retailers to cater to residents and workers who fill nearby office towers, including a day care center, pet stores, and more home goods stores. She also said Trader Joe’s is considering opening a grocery store in the neighborhood, though a Trader Joe’s spokeswoman would not confirm that.

 

Some landlords on Washington Street, Sansone said, are being patient, waiting for the right tenant.

“There have been some deliberate attempts to make sure that whatever comes is going to be successful, that it’s what people want,” she said.

One BPDA board member Thursday asked Epstein about the wisdom of leaving retail space like Lafayette Center vacant for years, especially given the effect on foot traffic for neighboring businesses.

“It’s a form of job destruction,” Carol Downs said. “I don’t really understand why this space was let to stay empty for so long.”

Epstein said the market has shifted away from the larger-format retailers it originally envisioned would lease at Lafayette City Center, and the technical challenges of opening in the building were too great for smaller stores. Filling two-thirds of the long empty storefront with office workers will bring foot traffic and, he hopes, will make it easier to rent the rest of the vacant space.

“We’re excited about the prospect,” Epstein said.

Tim Logan can be reached at tim.logan@globe.com. Follow him on Twitter at @bytimlogan.

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 Winthrop Sq. Tower Casts Shadows on Boston Common

Winthrop Sq. development in downtown Boston

Credit: Boston Herald

Should the shadows make way for the Winthrop Square tower, or should the law enacted in 1990 and 1992 hold the line? This will have a direct impact on the Boston Common and Boston Public Garden.

From the Boston Herald:

Laws enacted in 1990 and 1992 dictate new buildings in that area only can cast shadows over the parks during the first hour after sunrise or before 7 a.m. — whichever is later — or the last hour before sunset.

The tower is expected to cast new morning shadows for as long as 90 minutes on the Common and 29 minutes on the Public Garden. No shadow would be cast past 9:25 a.m. on the Common and 8 a.m. on the Public Garden.

“Based on this data, we believe the project’s many benefits more than compensate for the shadow cast over the Common and the Public Garden,” Millennium partner Joe Larkin said. “We continue to welcome dialogue with all concerned parties and remain confident that a mutually agreeable resolution of this issue will be achieved.”

0 Boston’s 70 Franklin Street Sells for $42M

financial district office building at 70 Franklin Street

Image Credit: cpexecutive

The Class B office market in Boston Financial District sees another trade: 70 Franklin Street.

From CPExecutive.com:

“70 Franklin’s timeless architecture combines with its flexible floor plates, open office layouts and modern building systems to create one of Boston’s premier Class B buildings. As a result, the asset boasts exceptional leasing momentum with tangible upside potential in Boston’s booming Downtown district,” said [Capital Markets Vice Chairman Edward] Maher.

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Financial District Office Space in Boston

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 Synergy Investments Sells Class B Portfolio

Credit: Boston Business Journal

Credit: Boston Business Journal

Value in the Class B market continues to be achieved with Synergy’s sale of a 4 building portfolio.

According to Bizjournals.com, the four-property portfolio spans a combined 237,434 square feet and was acquired for an average of $379 per square foot, up by $143 from the $236 per square foot paid by Synergy and GreenOak.”

The BBJ continued, noting “the deal is the latest in a wave of local Class B transactions. For example, Webster-based property insurer Mapfre Insurance bought One Winthrop Square in October for $55 million with plans to move some executive offices there. Boston-based commercial real estate firm Winhall Cos. bought Two Liberty Square in September for $28.25 million, up more than $10 million from the $18 million the property had traded for in January 2013. And New York-based DLJ Real Estate Capital Partners in October accquired 18 Tremont St. for $77.5 million.”
You can read the full article on the BBJ’s website, here.

0 ‘Jewel Box’ Building at 15 Broad Street goes up for Sale

15 Broad Street in Boston Financial District

Credit: Pinterest

Trades continue to take place in the Class B office sector with 15 Broad Street coming to market.

From The Real Reporter:

“the 73,500-sf “jewel box” building that is 100 percent occupied and has a cachet one observer terms “exceptional,” so much so that market estimates are putting the anticipated price range for an exchange around $475 per sf, which if accurate would be in the range of $35 million…As to pricing prospects, the concept of a deal around $475 per sf is bolstered by a similarly sized trade of another nearby asset in May when JLL delivered its client $479 per sf on the sale of One Milk St. to Midwood Investment and the $438 per sf Capital Properties paid to ELV Associates via Cushman & Wakefield a month before that for 66 Long Wharf, a 77,600-sf waterfront building blocks from Broad Street that carried a capitalization rate of 5.0 percent. “I could see that,” one downtown specialist says when asked if 15 Broad St. could even eclipse that $34.0 million outcome. The industry veteran looks more to the building itself for that conclusion, citing its proven appeal to small- and medium-size companies who have 15 Broad St. filled to the rafters with leases ranging from under 1,000 sf to a 14,300-sf pact involving the top two floors that runs to March 2024.”

0 Older Office Buildings in Boston Yielding Higher Rent Prices

office space at 10 Post office square in Boston

Credit: Boston Globe

It is true, Class B office rents are on par with the low rise space in class a towers.

From the Boston Globe:

What they lack in modern conveniences, the Class B buildings make up in character: Many have exposed bricks and beams or ornate stairways and other finishings that have caught the eye of young technology companies and other startups looking for more authentic digs.

Vacancy rates for those buildings have been consistently below those of the more modern, taller downtown towers, something unheard of in previous decades, according to JLL, a Chicago commercial real estate firm with offices in Boston.

Rents at Class B buildings in downtown Boston have increased about 32 percent over the past three years, compared with 18 percent for space in Class A towers, according to Cushman & Wakefield.

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Boston Commercial Real Estate