One Broadway in Kendall Square (click for property details)
Fewer options exist on the Boston office market, and what is available is more expensive then previous quarters. Combined with fewer concessions offered by landlords, local tenants are feeling the pinch.
Boston’s office market is hopping, according to reports issued by real estate brokerages Transwestern and Jones Lang LaSalle. Driven by strong employment gains and growing companies in need of additional space, rents are rising all across Greater Boston, up 7.6 percent in the last 12 months. Throughout Cambridge, there are just three vacant office spaces of 20,000 square feet or more on the market, and rents in Kendall Square are averaging above $70 per square foot. Along Route 128, vacancy rates are at record lows, while office rents along Interstate 495 are at seven-year highs.
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.
Changes are coming to Copley Place, a 52-story tower to house rental apartments and condos. Currently there is no change to the existing office towers.
Bisnow is reporting that “Simon Property Groups $500M expansion of Copley Place–is advancing with the recent city approval of its revised plan to add rental apartments to the residential mix…Simon will build 433 rental apartments and 109 condos instead of 318 condos in the 625-foot, 52-story tower.”
Will the Financial District be home to a new office tower? There is some speculation that the headquarters of Fidelity will be raised to make way for new construction.
Banker & Tradesman is reporting, “the real estate arm of Boston-based Fidelity Investments is putting four Boston office properties and a small land parcel in the city’s Financial District on the shopping block. The contiguous block of assets totals 343,000 square feet of space and includes 82 and 68 Devonshire St., 19 and 15 Congress St., and the land parcel at 54 Devonshire St.”
The price per square foot for office space in Boston is headed up in all sub markets and in all building classes. Last year many areas rebounded while others continued to lag behind. 2013 marks the change; with demand strong, rents will continue to rise.
A Boston Business Journal report on the 2013 market growth, referencing a Jones Lang LaSalle’s Spring Skyline Review, notes, “Boston is seeing favorable trends in demographics and exposure to growth sectors…The Hub’s downtown submarkets appear to be entering a new chapter in each of their respective history books with the Financial District seeing results in filling up the low-rise portions of towers, as well as a transformation into a true work-play-live submarket.”
The Class B office sale market continues to move in 2013 with the recent closing of 11 Beacon by Synergy Investments for $35M. The acquisition offers the market an expanded footprint by a landlord with a proven track record to get deals done.
Market rents in the Class B market are ranging from the upper $20’s – low to mid $30’s PSF within the Financial District.
According to an article on the Boston Business Journal, “the 93-year-old building was put on the market last fall by DivcoWest Properties, a privately-owned real estate investment firm with offices in Boston, who paid $16 million for the property in 2010. Divco said it spent $4.9 million in capital improvements. The city has assessed the 12-story building at $20.8 million.
Boston’s new Innovation Center is scheduled to open in the Seaport district this Spring. The one-story, 12,000-square foot structure will primarily consist of meeting rooms. It may include a café, and seating areas where visitors can work for a few hours on a laptop.
Photo Credit: NAI Hunneman via Boston Business Journal
Tenants continue to gravitate to the opportunities in the Financial District with vacancies just above 14 percent within the Class A market. Value opportunities still exist unlike Back Bay and the Seaport where vacancy rates are below 5 percent.
Thomas Grillo, Real Estate Editor at the Boston Business Journal is reporting that “Prudential Insurance Co. of America has leased 3,200 square feet of space at One International Place, the 46-story tower on the Rose Fitzgerald Kennedy Greenway in Boston.”
The full BBJ article is available on their website, here.
One Channel Center has secured its $170 million construction loan to build State Street’s 500,000 square foot headquarters. The Seaport continues to be a destination for companies both big and small with rents now firmly over the $40 asking price.
Dailyfinance.com reports that HFF “has arranged a $170 million construction loan for One Channel Center, a 500,000-square-foot office building currently under development by AREA Property Partners and Commonwealth Ventures in Boston’s Seaport District.”