At the recent NAIOP/SIOR Annual Market Forecast, there was talk about the possibilities of speculative commercial development in Boston. There was a consensus that we will continue to see new construction in the suburbs, Cambridge and Boston due to falling vacancies, raising rents, building obsolescence, and limited blocks of space available for large users.
The key stumbling block is whether tenants will pay a premium price over the rents available with existing vacant spaces (especially in areas where rents have not grown as quickly, like Boston’s Financial district.) The new buildings will have the greatest challenges in holding down rents due to the rapid rise in construction costs (with Boston having one the highest union labor wages.)
It is said that “time is money”, so a possible solution is to accelerate the speed of construction. Take a look at the following YouTube video of a 30-story tall hotel built in 360 hours (complete with room furnishings!)
Ed Glaeser just penned an op-ed in The Boston Globe entitled “Fix BRA; don’t break it.”
With all the campaign talk about the Boston Redevelopment Authority’s problems, it is sometimes easy to forget what it does well, and all that it has accomplished for the benefit of the City, its businesses and residents. Sometimes, a scalpel is preferable to an axe!
Glaeser’s short list of do’s and don’ts are right on target:
Above all, don’t make it harder to build.
Don’t imitate other cities blindly.
Don’t give neighborhoods a veto.
Don’t create an agency that has too many objectives.
Don’t make a fetish of agency independence.
Do increase independent oversight.
Do set up clear rules.
Mayor-elect Walsh is very fortunate to be coming into office with a healthy business environment. Projects under construction or permitted and ready to go and are at an all-time high. The key is to maintain predictability and keep this momentum going. By working with developers and the community leaders that have valid concerns about growth in all of the neighborhoods, reasonable changes can be made to the permitting process.
The goals of that discussion should be to provide permitting rules that are transparent, consistent, timely, and predictable. We have a great City and we all benefit from thoughtful, well planned growth.
The Boston Mayoral election upon us. No matter who wins the race, either City Councilor John Connolly or State Representative Marty Walsh, we are all in for a dramatic change after the 20 year term of Tom Menino.
With the city experiencing one of its greatest growth spurts, businesses will want to know what this choice will mean for them starting January 1st.
I sat down with George Donnelly and Jon Chesto, Boston Business Journal’s editors,and Sam Tyler President of the Boston Municipal Research Bureau‘s Sam Tyler, to interview these two candidates separately, questioning them on their competing visions of what’s best for business, economic growth and Boston’s future.
Climate change can have significant impacts affecting the overall economy; directly, by damaging structures, and indirectly, by compromising transportation systems, communications, and utilities. An increasing number of extreme weather events and future sea level rise may lead to more frequent and extensive flooding along the coast and inland waterways. In response, local and state agencies, building owners, lenders, insurance underwriters, and tenants are now considering how to prepare for and respond to such events.
NAIOP has developed guiding principles regarding climate change preparedness and the commercial real estate industry:
Preparing for storm related events should be a shared responsibility between the public and private sectors. The primary role for city and state governments should be to ensure the continuity and protection of public infrastructure and public safety. (Having a “climate change proof” building in the middle of a flooded neighborhood, without power or adequate transportation, provides no real public or private benefit.) Stakeholders should be at the table with state and local decision makers early on in the process to prioritize short-term and long-term public and private responses.
Best Management Practices developed in other cities should be shared among public and private sector stakeholders, and their applicability to the Commonwealth should be carefully considered.
Not all properties will be affected by climate change in the same way. Owners should have the flexibility to make decisions based on the needs of the individual properties, ownership, tenancy, and product type. Tenants will have varying expectations for building accessibility during and after severe weather events. (e.g., Institutional owners, such as hospitals, may be more likely to make significant investments in order to prevent a shutdown of any kind, while commercial offices may not need the same investments since a safe shutdown and simple return to service would be sufficient).
Both costs and risks need to be evaluated by the ownership when considering climate change-related investments or upgrades to buildings, as well as regulatory changes (e.g., if the costs are high and the risks are low, owners cannot be expected to incur unsustainable expenses that result in uncompetitive rents).
A combination of incentives and regulatory flexibility may be needed to make the investments in storm preparedness measures viable for the commercial real estate industry (e.g., Zoning changes that would allow for increased building heights, exceptions from gross floor area calculations, or allowing fuel tanks to be stored on a floor above the basement.)
The real estate industry, through the actions of owners, investors, lenders, and insurance carriers, will lead to appropriate property preparation and responses to existing and projected weather trends. Regulatory mandates from the government are not the best way to address this issue, because they inappropriately assume industry inaction, and lack the necessary flexibility to accommodate building and site specific variables.
This is an important issue, but the solution should not be aimed solely at commercial building owners. If we are all affected by the challenges, we should all be doing our part to protect our residents and businesses.
The City of Boston is on a roll with an enormous volume of new construction in many of its neighborhoods. Much of that development was dependent on the ability of the owner to provide funds for local public infrastructure. Unfortunately, that reality can, at times, delay a worthwhile project for many years, missing out on a strong market.
However, a city can be the catalyst for an area, by investing ahead of the market and setting the stage for growth. Through city investments, it can also enhance the efforts for attracting new companies to the area.
A good example is the Seaport/Innovation District. The city can play a very important role by investing in the basic streetscape of this area. Here is a photo of Seaport Boulevard, the main artery running through this district:
Now, imagine the impact of creating public spaces similar to Commonwealth Avenue or Park Avenue in New York City:
Boston is a world class city and it has the very unique advantage of 100 acres of prime real estate being developed adjacent to its downtown market, allowing it to expand its residences, offices, and shopping. As a result, tens of millions of dollars will make their way into the city’s coffers.
Now is the time for Boston to make a solid investment by making Seaport Boulevard a true boulevard with a wide, tree lined sidewalk with trees, benches and art. Let’s make this area the envy of every other city and a true attraction for families, tourists, and businesses, alike.
The following blog post was submitted by Ally Quinby, Account Executive at Solomon McCown.
Real estate professionals gathered last week to discuss the significant transformation happening in our city’s core. The office, retail and residential sectors are all growing and working together to create a true 24/7, live, work, play environment in downtown Boston.
Even with the boom in the Seaport, Downtown is seeing an influx of new office tenants who want to be in the heart of the city. David Greaney of Synergy Investments told us that of the 70 leases his firm has completed this year, 59 of them were located downtown. And these tenants are looking at more than just the office space. Mark Smith said that Equity includes the amenities of the surrounding area on tours with potential tenants. He also told the room that tenants want comfortable, communicative environments.
All these companies have employees who want to be within walking distance of work. Despite the thousands of apartment units that are planned and currently being constructed, Bill McLaughlin of AvalonBay Communities said that the demand is there because young people aspire to live in the city; we are well-positioned to absorb the deliveries we will see in the next five to six years.
Retail is growing too. Andrea Matteson of CBRE/Grossman Retail Advisors highlighted Walgreens, Equinox, Scholars and the coming Legal Seafoods as game changers who have helped Downtown Crossing look better than ever. She said that first floor tenants are key in providing character for downtown buildings.
Foreign investment and continued development make Boston one of the U.S.’s most dynamic cities, and our panelists agreed that downtown is going to be an integral part of Boston’s growth in the coming years.
In a recent BBJ article by Thomas Grillo, there seems to be some interest from the BRA to renew its search for a developer of the city-owned Winthrop Street Garage site on Devonshire Street between Winthrop Square and Federal Street. The previous proposal was to build a 1,000-foot tower with 1.3 million square feet of office space on the approximately one acre parcel.
It’s always exciting for a city to talk about the prospects of having the tallest tower in the city built. However, historically, this city sometimes lacks the patience to allow the marketplace to support the new venture. It is difficult enough to build an office building a quarter of the size of this dream project without substantial pre-leasing at rents that justify the expense of constructing a tower. A delay in development does not equate with a lack of expertise or, even, capital. It just means that there are economic cycles that affect these decisions. To ignore market demand would be at the owner’s financial peril.
If we want to attract serious interest from developers in this site, the BRA and the new Mayor will have to understand that giving a permit to build a project of this magnitude will require the patience of Job!