KS Partners continues to expand its portfolio inside 128 with the acquisitions of buildings in Newton and Watertown. Boston Realty Advisors’ suburban team of Adam Meixner, Jeremy Freid, Doug Adamian and Tyler Griffin is looking forward to working with KS Partners on filling the remaining vacancies. The team is expecting to see quite a few tenants being priced out of the Kendall Square submarket in Cambridge and looking for more affordable options just west in Watertown and Newton.
“What we see happening there is very dramatic,” says [Davis Cos. CEO] Jonathan Davis. “Watertown in general and the Arsenal Street area in particular have been an underappreciated sweet spot for a very long time that is going to only get better in the next five to 10 years . . . It really feels like this wave of activity is here to stay; this is not a temporary trend.”
Real Reporter first announced Davis Cos. had both 101 Walnut St. and two Waltham buildings under agreement in August, the latter purchase a separate pact negotiated by HFF involving 303,000 sf at 1025 and 1075 Main St. which were acquired from Gramercy Capital for $52.5 million. Davis calculates the former Baybanks headquarters now occupied by Bank of America was purchased for half its replacement cost and has badly needed space available in one of suburban Boston’s top business addresses while being close to the city center that has an expanding menu of LWP elements plus a commuter rail connecting to Boston. “We’ve got a quality property with good cash flow and 80,000 square feet to lease in a strong market, so we are very excited by this purchase,” says Davis.
Is Boston office space getting too expensive with vacancy rates just above 8 percent? Class A Boston assets are trading nearly double pre-recession levels while suburban comparable assets are still trading 23 percent below the pre-recession levels.
According to a post from Banker&Tradesman, “with fewer Boston trophy properties in play this year, investors may bid up demand in top-tier suburban markets…Properties in suburban core markets such as Route 128, Route 9 and Watertown are selling for just 21 percent above the 2006-2007 peak. Properties in all other Boston suburban markets are selling for 23 percent below the peak.”
The Seaport just got harder to get to and from. Not only are there fewer parking spaces, now there is one less pedestrian walkway from the Financial District to the Seaport. The ultimate plan is to reopen the bridge to cars and pedestrian traffic, but no date has been given.
Credit: Boston Herald
A Boston Herald report states “structural conditions and “deterioration beyond repair” prompted the city to close the Old Northern Avenue bridge that serves as a pedestrian link between South Boston’s Seaport District and the Financial District…analysis of the 106-year-old truss bridge’s load capacity by TranSystems, a transportation consultant hired by the city, found 13 floor beams with a “zero-ton rating” in the part of the bridge that was open to pedestrians crossing the Fort Point Channel.”
The greater Boston economy is strong with jobs, construction and capital. Many office users are seeking value while trying to straddle the live-work-play model for their staff. Not every company can be located within a five-minute walk of South Station, nor can they offer free parking to their employees. What we are seeing is locations that offer infrastructure, reap the benefits of today’s strong office market.
A recent Boston Globe article remarked, “the western suburbs around Route 128 are experiencing a building boom, with new headquarters for growing companies such as TripAdvisor and Vistaprint among five huge developments under construction in Needham, Waltham, and neighboring towns…The attractions of the suburbs include much lower rents and lots of choices. Moreover, the workspaces — either new or newly renovated — are far from the souless corporate boxes of the 1980s that dotted the suburban landscape. The interiors of some new offices look as if they could comfortably fit along Seaport Boulevard in Boston or Broadway in Cambridge.”
Athenahealth is planning to re-invigorate the historic Watertown arsenal and the area with the addition of restaurants, retail stores and an internal expansion. In the process, they also seek to create an 1,800-car garage on the west end of the campus. With the addition of amenities, downtown Tenants will be attracted to the area due to its cost effectiveness, accessibility to Boston and public transportation as well as the ability to provide parking for employees. This should have a positive overall impact on businesses moving to the area and office space in surrounding markets such as Needham and Newton.
“The new owners of the 29-acre former Army complex wants to add restaurants, retail stores and increase the size of their corporate headquarters. In the process, they also seek to create about seven acres of open space by removing surface parking and moving it into an 1,800-car garage on the west end of the campus.”
Pleasant Street in Watertown is undergoing rapid change in regards to new construction and the purchase of existing buildings between there and Waltham. It is becoming a hotbed for CRE investors and start-up tech firms are beginning to trickle in from Cambridge because of how competitive the market is.
Maybe this trend will continue to push out into Greater Boston and will have a long term effect on Needham and Newton office space?
The Wellesley Inn Site, home to a future re-development of Class A residential condominiums, is finally making progress after it has sat vacant for nearly a decade. Maybe this will motivate Ownerships along the Washington Street corridor to capitalize on the “highest and best-use” for their property. With a future influx of residents coming to the area, perhaps local developers will see the need to build additional office buildings in Wellesley and the strong markets surrounding such as Needham and Newton.
Wicked Local offers the following quote from John Warshaw, developer of Belclare in Wellesley:
“It was a bit of a challenge at the beginning to get people interested,” [Belclare developer Jordan Warshaw] said, “Once it got going there’s been great momentum.” After only a few months on the market, Warshaw said that nearly half of the new units were spoken for. Eight months into construction the residential units are nearly sold out.”
Developers in the town of Watertown will now be required to hold Site Plan Review meetings to allow nearby residents the opportunity to voice their opinions about new developments. Although Residents in West Watertown have been holding similar meetings for years, one councilman was quoted on Watertown’s edition of Wicked Local, saying, “it’s good to finally formalize these meetings. Good proposal.” Similar meetings are held in nearby Towns such as Needham and Newton to discuss newly developed office and retail buildings. You can imagine how busy this group may be with the abundance of Needham and Newton office space coming to the market in the next several years.
Watertown is changing and so is the landscape for retailers and office space within this active market. Typically known as a town with office space that is offered at a more cost-efficient rate when compared to office space within Needham and Newton, today Watertown is undergoing revitalization and reinvention in order to draw a new generation of enthusiastic shoppers and diners as well as tenants looking for creative, brick-and-beam office space.
“Instead of focusing solely on retail, a modernized Arsenal Project will be reconfigured to become a vibrant destination of national, regional and local retailers, with fresh, new restaurant, retail and entertainment choices. Recent renovations that signal the changes to come include exterior building and landscaping upgrades, new common area seating and even, during the darkness of the winter months, a remote-controlled light show playfully executed on the brick sides of the buildings. Currently underway are interior and exterior energy-efficient lighting upgrades and a redesign of signage.”