Category Archives: Uncategorized

0 Could Boston Office Rents Hit $100 Per Square Foot

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The Boston office market is not only more expensive, but there are far fewer options.  That, combined with construction costs, has put a real increase in the price for office occupiers in The Hub. Tenants are trying to do more with less; reconfigure their existing space to accommodate how it use it currently.  Solutions that, at one point, seemed simple require a little more thought, open plans with picnic tables are not the solution.  Employers are more and more accommodating flexibility in employees’ schedules.  Four day works weeks and working remotely have allowed companies to increase staff while maintaining their footprint by offering a hot desk solution.

Second generation options are a significant cost-saving solution. When your peers expand after they closed their round, jump on their sublease option.  The office space might not be perfect, but for 24 – 48 months, it would be the best value play.

Boston’s Booming Economy Turns Demand Toward Office Towers

By Scott Van Voorhis | Banker & Tradesman Columnist | Jan 26, 2020 |

 

 

 

 

 

 

Boston’s skyline is poised to be transformed in the next few years as millions of square feet of office space come online as developers respond to per-square-foot rents that flirt with triple digits.

A bevy of new luxury condominium and apartment towers have joined Boston’s skyline over the past two decades, with sales of multimillion-dollar units at the 60-story One Dalton and the Mandarin Oriental, among many others, powering an historic building boom.

Now, after decades as a supporting cast member amid an epic surge of development, Boston’s office market is poised to take center stage over the next couple years, with record-breaking rents and a mini–surge in new tower construction.

All told, Boston’s office market may be poised to make its biggest splash since the 1980s, when a myriad of new office towers went up in the Financial District, from the 46-story One Financial Center across the street from South Station, to Don Chiofaro’s twin–tower International Place complex and its distinctive, rose-granite panels and tripartite-style windows.

 

A Forest of New Towers

The aggregate rent for both class A and class B office buildings in downtown Boston is at a record high $65 a square foot, beating previous peaks in 2008 and during the dot–com bubble, circa 1999/2000.

“We are at the highest rent level we have ever seen in aggregate in the city of Boston,” said Aaron Jodka, managing director for research and client services for Colliers International.

In a sign of the times, Texas developer Hines is finally moving ahead with plans to build a 51-story office tower over South Station. The project has been deferred and delayed so many times since the 1980s that is has graced by annual column in these pages on “turkey projects” more than once.

 

Hines’ website still touts how the new high-rise is ready to break ground in 2018, though I guess after 40 years of delays and false starts – or as they say in Texas, “all hat and no cattle” – what’s a year or two?

With new investors, construction on the tower is set to finally kick off this year – cross our fingers – with plans for 768,000 square feet of office space and 175 condos.

A short walk away in the heart of the Financial District, Millennium Partners is plunging ahead with its own plans for 691-foot-high office and condo tower at Winthrop Square in the heart of the Financial District.

The new building is slated to open in 2022, and will boast 775,000 square feet of pricey, top-shelf office space along with 420 luxury residential units.

Down near City Hall and Government Center, HYM’s One Congress, a $1 billion, 1–million–square–foot-plus edifice, will open later that year.

Around the corner, owners of the One Post Office Square tower are near the finish line with their sweeping, $250 million renovation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

While office demand will take center stage by driving new projects in 2020, expect the condominium market to stay healthy, even if it won’t capture headlines.

Rents Hit Record Heights

Meanwhile, office rents, already at record levels, are poised to go even higher in downtown Boston in 2020, with the average rent for existing class A and B towers likely to shoot well into the $70-dollar-a–square foot range and up, according to Jodka.

The Colliers research chief expects another year of double-digit rent increases in 2020 for both top-shelf towers and their respectable but less glamorous class B neighbors.

It comes atop an expensive 2019, with rents in class A towers having shot up 13 percent, followed by a 10 percent increase in rents in class B buildings, Jodka noted.

And developers of the new office towers are going for broke, seeking rents as high as $90 a square foot and, in some cases, $100 or more in the case of One Post Office Square as it completes its gold-plated revamp.

Putting aside a deal or two in the Hancock tower, reaching triple digits with any consistency has been an elusive goal for real estate companies and investors that own Boston’s office towers.

Howewer, a surge of pricey, new office towers promises to finally push Boston’s leading corporate addresses over a benchmark it is has been flirting with for decades.

 

Demand for 5M SF

Underwriting this rent growth has been steady and strong job growth powered by the Boston area’s big economic engines: life sciences, technology, higher ed, health care and financial services.

Companies are on the hunt for 5 million square feet of space, according to Colliers, a staggering number that is equivalent to five Prudential towers.

That demand has steadily driven down office vacancy rates and driven up rents.

By contrast, while Boston’s condo market is likely to have another solid year, for once it appears likely to take a back seat to what’s happening in the office market.

If anything, Boston is glutted at this point with posh new luxury condos and apartments, all of which are beginning to look the same, whatever the boasts of the developers.

 

There’s also a question of whether there is truly enough demand – or in other words, enough people making at least half a million a year – to support this huge and growing pool of multimillion-dollar condos and apartments.

There is likely far more speculative buying than we realize, with investors, both overseas and local, snapping up condos in towers across the city as you would with a hot stock, with hopes of flipping them later.

But while the luxury condo market is likely to eventually get its comeuppance, that reckoning will likely have to wait.

The recession clouds that overshadowed everything last year as the stock market gyrated have parted, yielding to blue skies and hopes for a banner year ahead.

So, here’s to Boston’s office market. May 2020 end on as promising a note as it is starting off on.

 

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.

 

 

0 As Garage Usage Dwindles, Operators Are Starting To Charge More To Park Luxury Vehicles

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Parking in major cities is expensive.  The closer to the urban core the more you can expect to pay.  Visits to a special event like a concert at the Garden or a game at Fenway could set you back $40.  I park in Back Bay on Boylston Street and pay $510 per month for unlimited access and I have not been hit with a premium parking fee despite driving a full size truck.  I suppose if my garage wanted to implement such a fee I might consider where my additional $2,400 per annum could be better spent.

By Cameron Sperance, Bisnow Boston | January 5, 2020

When Lisa Nickerson, the owner of a Boston-based marketing firm, traded in her Audi for a Tesla last year, a representative with Icon Parking Systems — which owns the garage where Nickerson had a monthly parking membership for more than five years, she said — reached out with bad news for her wallet.

The garage operator told Nickerson her monthly rate was going up by $200 each month. She initially figured it was because the garage was going to charge the electric car while it was parked, but Nickerson said she found out the hike from $325 per month to $525 — according to documents Bisnow verified — was simply because she was now driving “an exotic car.”

Higher monthly parking rates are common in New York City, where land prices and construction costs are higher than anywhere else in the country. But the practice is beginning to spread to Boston, portending future proliferation in other high-cost cities.

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“When I drove in with the Tesla, they told me there’s an upcharge because they have to be more careful with exotic cars,” Nickerson said. “Were they not being careful with my Audi? And are they not just as careful with a Ford?”

Manhattan Parking Group, the owner of more than 100 New York parking facilities, charges an additional $150 each month for luxury cars. MPG’s definition of luxury cars includes brands like Lexus, Audi, Mercedes and BMW, according to signs at the operator’s garage at 530 West 30th St. near Hudson Yards.

Icon Parking Systems doesn’t have a defined list of cars for which the garage operator requires a luxury surcharge but says the fee is only deployed on exotic cars like Maserati and Rolls-Royce as well as more tech-geared automobiles like Tesla, Icon Parking Systems Vice President of Customer Relations Betsy Wiesener said.

“Generally, the high-performance, luxury exotic cars do need extra care,” she added. “It’s the difference between a newborn and a 16-year-old. They just need more attention.”

Icon Parking will only allow certain members of its team to park cars it deems luxury models. The operator also mandates those automobiles get extra space on the main floor and remain in eyesight of the garage office to prevent scratches or potential damage, as cars like Teslas have heftier repair bills than a regular Ford sedan, Wiesener said.

Depending on who you ask, a higher monthly parking rate for luxury cars in urban garages is either about liability over increasingly tech-savvy automobiles with rising repair costs, or it is a sign of difficult times ahead for garage owners and operators in an industry where garage utilization is down as much as 25%. No matter why luxury fees are proliferating, shifting trends in mobility are driving changes in the way garage operators do business.

“In an era where things were different or if you had better margins, you could leave things on the table,” Wiesener said. “In this climate, you can’t.”

The Vanishing Parking Garage

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Costs are rising for garage operators while garage utilization is declining.

The minimum wage in New York City, now at $15 an hour, has increased three times for employers with 11 or more employees since 2016. The $15 per hour rate became standard for businesses of all sizes at the end of 2019. That has taken a toll on garage operators, because many of the employees who park cars make minimum wage.

Total utilization of transient parking is down between 10% and 25%, according to research conducted on parking and mobility by the Gensler Research Institute in 2017 and 2018.

“Almost every urban garage is way down on utilization, and most operators are raising prices to keep revenue equal,” said Gensler principal J.F. Finn, who is based in Boston.

Garage operators are also threatened by legislation aimed at curbing congestion. A congestion pricing plan — which would be used to fund mass transit improvements — included in New York Gov. Andrew Cuomo’s $175B 2019 budget calls for fees to be levied on cars entering Manhattan south of 60th Street. While the toll rate has yet to be finalized, the fee expected to be enacted at the end of this year could surpass $11 for some drivers with a personal vehicle.

Although congestion pricing isn’t approved for Massachusetts roadways, several bills have been filed and a growing campaign from transit advocates calls for boosted tolling to get people out of their cars and onto mass transit or in a shared vehicle or on a bicycle to reduce traffic.

As early as 2040, more than half the miles traveled in the U.S. could be in shared autonomous vehicles that don’t require the type of idle time in a parking garage used today by monthly users, according to a 2018 Deloitte report.
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Urban millennials’ reliance on ride-share platforms like Uber or car-share companies like Zipcar have also thrown out the conventional school of thought in designing urban garages, Finn said. Gensler almost always designs urban parking garages today to accommodate future conversion to alternative uses like flexible office and lab space or urban farming.

Only one of the four floors of above-ground parking at Kroger subsidiary 84.51°’s Cincinnati headquarters was designed to only accommodate parking. The rest, with 14-foot floor-to-floor ceiling heights, has future office use in mind.

“It used to be a no-brainer: If an office was coming into a project with 300 people, that meant 250 cars,” Finn said. “That’s not happening anymore, and that’s why luxury prices are going up.”

Finn admits he can only speculate on what is driving operators to levy the specific luxury parking surcharge in markets like New York City and Boston. But when he looks at the urban parking utilization data and real estate trends, it may not be a sustainable solution.

As urban parking utilization goes down, owners and operators have to increase rates to maintain existing revenue. But eventually, owners and operators may find converting the parking garage to alternative uses and charging rent is a more viable financial path forward.

Gensler has already designed conversions for about 300K SF of parking garages in the U.S. in the last two years and anticipates significantly more in the future, Finn said.

“It could be that jacking up prices for the luxury market is to generate a revenue stream, but my sense is it’s a temporary Band-Aid solution,” he added. “You’re not generating something that’s sustainable in the long-run — just treading water.”

0 Boston Office Report – Fall 2019

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By Corina Stef Commerical Property Executive | December 17, 2019

Demand for new space continues to outpace supply, pushing smaller companies to the suburbs.

Boston continues to show solid fundamentals, outperforming expectations amid a cooling economy. The metro’s diversified economy and strong academic footprint continue to provide an endless technology, life sciences and biotech talent pool for companies to draw from. Government officials launched the Boston 2030 initiative, which calls for an upgraded subway system and expanded Green Line subway. The favorable business climate continues to attract various international investors to the market, including Siemens Healthineers and Takeda Pharmaceutical. The recently rebranded Raytheon Technologies Corp. has also announced plans to relocate from Connecticut to Boston.

READ THE FULL YARDI MATRIX REPORT

The professional and business services sector led the way in job gains (9,300 jobs, up 1.5 percent year-over-year in August). The information sector gained 3,400 jobs due to tech titans such as Google and Apple expanding their operations in the metro. The influx of new companies and large expansions—particularly in and around the metro’s innovation clusters such as Cambridge, the Back Bay and the Seaport Innovation District—led to an office vacancy rate of 9.7 percent as of September.

Despite a ballooning pipeline comprising some 8.8 million square feet under construction as of September, demand continues to outpace the existing supply. Tight conditions are pushing smaller tenants into the suburbs, while landlords are seizing the opportunity to convert the existing inventory into lab product and office space.

0 Cape Air targets Boston’s Long Wharf as a seaplane docking spot

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Seaplanes are making waves in Boston.  Boston Harbor last saw seaplanes in the 1940’s and as the congestion continues worsen it appears they will be making a comeback for trips to NYC.

Cape Air targets Boston’s Long Wharf as a seaplane docking spot

The Boston skyline is viewed from Long Wharf.
GARY HIGGINS

By   – Real Estate Editor, Boston Business Journal | 

 

Cape Air has its eyes on a new location on Boston Harbor to launch its long-planned seaplane service between Boston and New York: Long Wharf.

Officials from the Hyannis-based airline will host a public meeting Wednesday, Dec. 18 at the Long Wharf Marriott to discuss “a proposal to serve Boston Waterboat Marina, 66 Long Wharf, with a 9-seat seaplane airline service available to the public.”

Andrew Bonney, senior vice president of planning for Cape Air, said in an interview that the airline has worked with officials including the Federal Aviation Administration, the U.S. Coast Guard and the Boston Planning and Development Agency regarding launching a Cessna Caravan Amphibian between Boston and New York.

Cape Air flights would load at the tip of Long Wharf before taxiing one mile out to Boston Logan International Airport’s Runway 1432 and taking off, Bonney said. The flights would use the same spot for landing.

Before the service can launch, Cape Air would need to obtain a license amendment from the BPDA, which owns Long Wharf.

“The BPDA has asked Cape Air to conduct a community process, including stakeholder outreach, about their proposal for Long Wharf before anything can move forward,” spokesperson Bonnie McGilpin said in a statement. “If there is support for the proposal, BPDA would need to amend the license for Long Wharf to reflect these uses and that would require approval by the BPDA Board.”

If Cape Air receives the city license amendment and other federal regulatory requirements, Bonney hopes to launch by springtime.

A one-way flight would cost between $320 and $340 to travel the 191 miles between the two cities, according to Bonney. Traveling by plane or train from Boston to New York typically takes around three and a half hours, while a seaplane can go downtown to downtown in one hour, he said.

In the 1920s, seaplanes going between Boston and New York would dock behind South Station. But seaplane service hasn’t existed in Boston since the 1940s.

“We think it’s really exciting to be able to bring back this mode of transportation to the city of Boston,” Bonney said.

Catherine Carlock can be reached at ccarlock@bizjournals.com. Follow her on Twitter at @BosBizCatherine 

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

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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.”