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.

Related Office Listings
Boston Commercial Real Estate

0 Boston Office Market Ranks Third In Global Rent Growth

view of Boston's office buildings over the water

Credit: Banker&Tradesman

Boston is 3rd in office rent growth for 2014 behind Singapore and San Francisco.  The factors that drive Boston are the innovative economy and the extensive university presence.  The YE Market Report (link below) goes through the Downtown Class B office market fundamentals.

“According to Banker&Tradesman, Boston ranked first globally with a 34.6-percent increase in capital value growth. Foreign investors drove up prices of the Boston region’s commercial real estate, with investors such as Toronto-based Oxford Properties Group and Norges Bank Investment Management buying trophy office buildings in Boston and Cambridge. The index is designed to identify which cities are changing the fastest by combining real estate data with socioeconomic factors.”

You can download a pdf of the report here: http://www.bostonrealestates.com/reports/year-end-2014/Downtown/YE-MarketReport-Downtown-lo.pdf

0 Spec Office Construction Coming to Boston

Boston Spec SuitesSpec office construction is coming to Boston In 2015 – for who?  Well, not for the smaller companies, their footprint would be far smaller than the new construction Class A can accommodate.  The recent 4 quarters has seen a tremendous migration to the Financial District from the Seaport and East Cambridge for the value oriented office tenant.  Rent within the Class B market still fall within the mid to upper $30’s per square foot.

Banker & Tradesman offers some perspective on the market shift in downtown Boston, noting “the office market continues to recover from the 2008 downturn because of an expanding tech sector and relocations of companies from Cambridge and the suburbs. Recent acquisitions of trophy office towers in Boston and Cambridge reflect the continuing interest of foreign investors seeking higher yields than government bonds, panelists said. In 2015, office investment sales are expected to slow, but overseas investors will continue to put money to work in Greater Boston, said Jessica Hughes, a managing director for JLL.”

You can read the B&T report, here, or check out our analysis of Boston Spec Suites.

0 Boston Wharf Co. Building at 51 Melcher Sells for $52.7M

For $513.49 PSF Synergy Investments has sold 51 Melcher Street to Zurich North America. The building went through a complete renovation and was delivered fully leased to WeWork, Life is Good, and NetSuite.

According to Banker & Tradesman, “Synergy spent millions of dollars repositioning the building in the market, including base building renovations, a new main entrance and lobby, HVAC systems, new and restored windows and new roof, restrooms, plumbing, electrical service and elevators.”

Pricing with the Seaport Class B Market now is running in the upper $30’s to low $40’s PSF.

Class B office space in Boston

Click to view the full size graphic

0 This is What Today’s Class B Office Space Tenants Value

What tenants value in Boston class B office space

·         75% of current market demand is within the creative economy i.e. Tech, Advertising, Architecture & Design

·         Landlords using demand to improve spaces and increase rents. Spending TI money now for long term increase their lease ability.

·         Small suites are disappearing, especially in the Seaport. Does it make sense to go smaller?

·         Low rise Class A vs quality b/b+….the price gap is narrowing.

·         Sublease and move?…tenants are weighing this options as rents continue to rise and their current leases have value.

·         Red Line is still the demand driver…tenants are looking towards new stops (Park St., Central, Davis) where value exists.

·         Unique amenities are important i.e. bike storage, pet friendly, shared conference space, ROOF DECKS!