Category Archives: Land Use & Development

Place Your Bets on Opening Dates for Massachusetts Casinos

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With Governor Patrick signing the first ever, full-scale casino bill, the race is on to develop three resort casinos and one slot parlor.

However, this will be more like a steeple chase race with many obstacles to overcome.  There are the procedural steps of choosing a chairman and members of the yet to be formed gaming commission, and developing the regulations and processes for applicants.  Each potential developer will have to gain control of a potential site, obtain all local approvals, commit and fund the off-site infrastructure improvements, and show financial wherewithal to complete the development plans.  Then there are the public “threats” that already include one local developer’s lawsuit challenging the fairness of the law, the possibility of a ballot initiative to overturn the statute, and the likely local appeals from abutters and other citizen suits.

Welcome to the world of the real estate developer.  There are reasons why Massachusetts projects take longer to permit and build.

That being said, there are highly motivated, well-funded, and patient corporations that have already lined up and others that will be announcing their interest over the next few weeks. Let the games begin!

To learn more about this process and the players, don’t miss NAIOP’s January 19th breakfast program, Casino Gambling Coming to the Commonwealth, at the Westin Waterfront Hotel.

If You Build It, They Will Come: Demand Exists for More Multifamily Housing in Greater Boston

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A recent article in The Boston Globe talked of the recent surge in apartment construction, identifying 11 developments either under construction or about to receive final approvals. Although not as many, there are also large multifamily projects underway in the suburbs, including John M. Corcoran’s development in SouthField (the former Weymouth Naval Air Base) that Rick High described at NAIOP’s recent lunch program.

Some skeptics believe that the weak economy and high supply will result in an oversupply of multifamily housing. I disagree. There is no doubt we have room in the market for quite a few more projects, both in Boston and the surrounding communities.

Since the recession began in 2009, the vacancy rates for rental housing have plummeted and, not surprisingly,  the rents have pushed upwards.  Boston now has one of the lowest vacancy rates in the country. With higher rents and interest rates remaining historically low, new multifamily developments are finally viable.  Though the costs of housing production in Massachusetts are still among the highest in the nation, due in part to labor costs, these projects are profitable (by some rather thin margins, though.)

If you believe the increased demand is only due to the burst of the single family housing bubble and the resulting foreclosures, you need only look at the other drivers in this area. The research firm REIS has reported that the net absorption in this market is the highest on record since it started tracking the data in 1980!

As reported by Cushman & Wakefield, there are a number of factors contributing to the growth of the rental housing market in the Boston area:

  •  Job Growth: With a conservative 35,000 jobs a year projected to be created, there will be an additional 35,000 households over the next 5 years;
  • Change of Ownership: 87,000 rental households are needed to fulfill the demand created by the shift in ownership from single family to rental;
  • Increase of Echo Boomers (ages 21-34): 27,000 rental units are needed to satisfy the demand created by this generation. Approximately 75% of this population are renters and this demographic is expected to grow by 2.2% over 5 years.

Bottom line – that’s a lot of demand!  And even with all of the construction planned, the vacancy rate is still projected to drop.  Certainly good news for developers and the Massachusetts economy!

Retainage Legislation Increases Risks and Hinders Development

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Yesterday I testified before the Legislature’s Joint Committee on Labor & Workforce Development in opposition to legislation that would make substantial changes to contractor retainage payments. NAIOP believes that the legislation, An Act Relative to Fair Retainage Payments in Private Construction – H. 1401 and S. 956, would hinder economic development at a time when the construction and development sectors are still reeling from the worst recession in a generation.

The bill sets an outside limit of 5% (reduced from the standard practice of 10%) for approved contract payments that can be withheld for retainage.  Retainage is traditionally held until final completion of a project in order to incentivize prompt completion of the project and guarantee that the contract is fulfilled as agreed.  The legislation changes the final payment date to within 30 days after “substantial completion” (a phrase that is unclear and likely to be the source of many legal battles) and it would create enormous uncertainty for developers.

Very few development projects are moving forward.  Financing, especially for larger projects, is extremely difficult to obtain.  Anything that increases uncertainty could make financing a project even more difficult.

Finally, though supported by the Associated Subcontractors of Massachusetts, this legislation could actually have a negative impact on the smaller, less established subcontractors.  Without adequate retainage, developers will not be willing to take a risk with a lesser known subcontractor.  As a result, the legislation would give an advantage to the bigger subcontractors.

Given the current economy, the Commonwealth should be doing all it can to encourage job creation, not find ways to slow or hinder economic development.  Though we do not think the legislation has a high likelihood of passage, we will continue to advocate against it through the remainder of the legislative session.

Shadow Bill Would Kill Jobs and Economic Development

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Yesterday, I testified before the Legislature’s Joint Committee on the Environment, Natural Resources & Agriculture in opposition to H. 1169, An Act Protecting Sunlight in Certain Public Parks.  If passed, the bill would eliminate local authority to permit certain projects and would prohibit any structure that could create a new shadow on certain properties in Cambridge and Boston.

The bill would add shadows affecting Charles River Esplanade, Christopher Columbus Park, Commonwealth Avenue Mall, Copley Square Park, Back Bay Fens, and Magazine Beach Park to provisions of a law which currently exist protecting Boston Common and Lynn Common.  It would create legislative restrictions on certain developments which could not be varied locally.

There is no question that if this bill is passed, the economic impact would be staggering. At the hearing yesterday, there was compelling testimony from labor interests regarding the number of desperately needed jobs that would be lost.  Some of the most well respected developers in the city, Robert Beal and Ronald Druker, testified in opposition to the bill along with representatives from academic institutions, the Mass Municipal Association, the Boston Redevelopment Authority, and business groups.  Due to the height restrictions that would be imposed as a result of this bill, many development projects would not be viable. Lost development means lost jobs, lost property taxes, a reduction of affordable housing funds, and less housing.  The bill would affect areas including the Longwood Medical Area – a neighborhood where city and business leaders have long sought (and succeeded in) attracting research, academic institutions, and economic development.

Furthermore, there are no provisions for variances or relief from the legislation.  Therefore, the effect of the bill would be to make development projects subject to state legislative restrictions which could only be changed by additional legislation, completely removing local authority to permit these projects.  It ignores the extensive review process now in place at the local level.  For example, the City of Boston requires in-depth wind, shadow and environmental analyses as part of its review process for large projects.

Finally, it’s important to note that density, which this bill significantly limits, combined with proper planning, are what cities need to thrive and grow.  Density is smart growth and it makes economic sense.

NAIOP will continue to advocate against passage of this bill and we’ll keep NAIOP members posted on this issue as the legislative session draws to a close in July.

Mass Historical Commission Needs Reform

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The Massachusetts Historic Commission (MHC) is an unusual agency of government, in that it frequently acts as if it is not accountable to the Governor or the Legislature – only to the Secretary of State’s Office.  As such, it often acts alone and in conflict with the other arms of government.

While most government agencies at least aspire to provide a transparent, fair, and predictable process, the MHC operates in a “black box.”  Although the MHC has regulations for the review of properties listed on the State Register of Historic Places, those regulations are not even available to the public on its website.  Furthermore, the review of the 180,000 sites that get listed on the MHC Inventory of Historic and Archaeological Assets of the Commonwealth is unclear and unpredictable.  The MHC has no regulations for submittal requirements, review timing and deadlines, or Memoranda of Agreement (MOA) for such projects so proponents are left without direction.

Project proponents must also deal separately with the requirements of the Mass Environmental Policy Act (MEPA) process and the MHC, often on different timetables, resulting in significant delays.  MEPA virtually always reaches its decisions in 30 or 37 days, as required by its regulations.  However, the MHC is required to make a determination within 30 days, and that deadline is rarely met.  The MHC staff and Director often do not respond to written notices, requests for information, or requests for meetings.  Further, they sometimes simply do not return phone calls to developers, other agencies, or the public.

Until recently, this was a dirty secret.  No one wanted to come forward to complain about the unreasonableness of the MHC’s actions (or inactions) for fear of retribution on a future project.  However, the recent episode involving Meditech has finally shown a bright light on this problem.

Meditech proposed to build a $65 million business park on 138 acres in Freetown near the new Route 24 interchange, eventually employing 800 workers.  No government funds or tax benefits are being used.  This facility would be their second project in the SouthCoast in the past two years. The first, located in Fall River, employs 500 workers.

Although Meditech agreed to leave 117 acres of the site undeveloped, the MHC still required Meditech to strip two feet of the remaining 21 acres to be sieved and inspected by archaeologists. Not surprisingly, with this requirement deemed impractical by the project proponent, the MHC refused to meet with them or representatives from the administration or legislature to discuss and resolve this problem.

As a result, Meditech may be walking away from a project in which they already invested $2 million.  The project would have provided needed jobs in a high unemployment area.  In response, Senator Michael Rodrigues just filed legislation that would limit the powers of the MHC. The proposed law would enable businesses, like Meditech, to develop their properties with input from the MHC, but it would reconfirm the statutory authority of the MHC only to properties listed on the State Register of Historic Places.

It should not be necessary to pass laws to require fairness and transparency from a state agency.  However, in this case, this seems to be the only way.

Seaport, the hottest neighborhood in Boston – Part Two

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In yesterday’s post I looked at the history of Boston’s Seaport Area and the new Innovation District, with insights from last week’s “Windows on the Waterfront” program. Today I finish up with a closer look at residential and retail activity, Liberty Wharf, and what to expect next as projects make the move from drawing board to construction site.

The Silver Line helped Boston's Seaport become a viable destination to work, shop, play, and live.

Interest in residential use dates back to artists’ lofts in Fort Point Channel, which  eventually led to Beacon Partners’ development of Channel Center with over 200 new condominiums.   Then came the award-winning FP3 residences and restaurants developed by Berkeley Investments.

It was Liberty Wharf, though, that brought a whole new group of visitors to the Seaport with its 70,000 sq. ft. office and retail development that includes Legal Harborside, Del Frisco’s, Temazcal Tequila Cantina, and Jerry Remy’s Sports Bar & Grille. Two-hour waits and a vibrant neighborhood buzzing with excitement are the result. Ed Nardi, working with Massport and the Jimmy’s Restaurant family was able to produce a concept that not only satisfied stakeholders, but far surpassed their expectations.  Hot off this success, Cresset recently committed to purchasing another property in the area for redevelopment.

In an excellent overview of the neighborhood’s history and future promise, architect David Manfredi gave the NAIOP audience a summary of the last 10 years of development in the area:

  • Work:    2.3 million square feet of new office space
  • Live:       750+ new residences
  • Play:      +4.7 acres of new public park and the extended Harborwalk
  • Visit:      1,639 guest rooms
  • Learn:   ICA & BCEC
  • Dine:     40 restaurants, cafes, food venues
  • Shop:    Louis

What’s coming next?

  • 1,160,000 square feet of innovation space
  • 1,500+ residences
  • BCEC expansion
  • More restaurants, cafes, food venues
  • 360,000+ square feet retail

New apartments are arriving with John Drew and HYM Development at Waterside Place, Steve Karp with Hanover Company at Pier 4, and John Hynes at Seaport Square. Innovation centers for start-up companies will be built by Drew and Hynes. And retail is finally on the drawing board for Waterside Place and a major joint venture with W/S Development at Seaport Square.  Who will get the first supermarket?  Both companies report they are currently in talks with grocery chains.

The hotel question still lingers.  With the Waterfront Renaissance Hotel in foreclosure, it is clear the market is not ready for a new hotel right now.  Some feel the elephant in the room is the BCEC expansion and that new hotel(s) will be dependent on the deal cut with the convention center.

As for the office market, as Charles Reid from Boston Global Investors indicated, there are a lot of parking lots right now and it will take some time before the Financial District feels the pinch as the Seaport lots get transformed into new development.  Other than build-to-suits (e.g. Vertex), spec development is highly unlikely in the near future.  However, there are some large blocks of space coming up for renewal in downtown – it’s possible one of those businesses could decide to relocate to a new state-of-the-art building in the Innovation District.

The bottom line is that the Innovation District has come a long way from the days when Anthony’s, Jimmy’s, and the No Name were the only major draws to cross the Fort Point Channel.  And while it may be a long way from its final build-out, there is no doubt this hot new neighborhood is here to stay.

Seaport: The Hottest Neighborhood in Boston

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If attendance is any indicator, the record-breaking 700 registrants at NAIOP’s “Windows on the Waterfront” event confirmed that the newly-rebranded Innovation District in the Boston Seaport district is indeed hot.  This is the year when the long-awaited neighborhood became a reality, spurred in large part by two key events – Vertex’s initial commitment to lease two buildings ( 1.1 million sq. ft.)  on Fan Pier, and Cresset’s opening of Liberty Wharf to the wild acclaim of restaurant and bar aficionados.

Windows on the Waterfront

An aerial shot from David Manfredi's presentation

However, as the NAIOP audience learned, that is just the beginning for development in this area. In an outstanding overview of the neighborhood, David Manfredi described the “promise” of this new district as:

  • A vibrant, new mixed use neighborhood
  • A neighborhood driven by innovation
  • A place to live, work, play, shop, dine, learn and visit

Helping developers fulfill that promise are several massive infrastructure improvements over the past decade, including: access to a redeveloped highway system that includes the Big Dig; an upgraded Logan Airport; expanded water transit; and the construction of the Silver Line.  Add to that the Boston Convention and Exhibition Center (BCEC), the Federal Court House, the beginning of a local park system and Harborwalk, the ICA relocation, and the city’s energetic branding of the Innovation District, and it’s hard to imagine why anyone wouldn’t want to be there!

At the event, Mayor Menino indicated that the city did not want the development of this area to be rushed, avoiding a cold, uninviting commercial zone.  He wanted, and now sees forming, a 24-hour, mixed use area that will attract both families and entrepreneurs.

Despite the large amount of available, buildable land adjacent to downtown (rare for most cities), the redevelopment of this enormous land mass has taken quite a while to get moving.  Early in the last decade, Seaport Place developed 1 million sq. ft. of office space and a full service hotel.  Another 600,000 sq. ft. came along with Manulife’s headquarters.  The next few years were fairly quiet for commercial development, until Joe Fallon built the first office building on Fan Pier, a speculative 526,000 sq. ft. tower at One Marina Park Drive.  Fallon had previously developed the 465 unit Park Lane apartments and partnered on the convention center’s Westin Waterfront hotel.  Soon after, the 470 room Renaissance Hotel was built.

Read more about the city’s hottest neighborhood in Part Two tomorrow – use the buttons at right to subscribe by email or RSS.  Among the topics: residential and retail uses, Liberty Wharf, and what’s next for the Seaport/Innovation District.

Filene’s Site Back in Play?

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In today’s Boston Globe, it was reported that Peter Meade, Director of the BRA, indicated a willingness to work with the REIT, Vornado, to move forward on the stalled Filene’s Franklin Street development.  This is good news for the Washington Street corridor and the city. 

The reality is that the problem with this project has never really been the developer; it has been the deep recession that put a freeze on all speculative commercial development in the country.  There was a thought that the city could permit a downsized project for a new buyer.  The problem with that is two-fold.  First, it was unlikely from the start that Vornado was going to sell the site at a deep discount.  They are not being pressed by a lender to sell –it’s their own money sitting in this hole (all $200 million of it!) Secondly, the city would be shorting themselves of substantial real estate taxes that would have eventually come from the office and hotel towers when the market returned.

This location is a premium one and when office vacancies start to fall and rents rise, this will be one of the first sites to see a crane.  In the meantime, there is demand for retail, parking, and apartments.  It sounds to me like the approval for a phased project allowing for a future tower could be a win-win for the city and the developer.

Let’s just hope the talks continue.

Development Opportunities May Arise Out of Anglo Irish Sale

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As I discussed in today’s Boston Herald, the announcement of the sale of Anglo Irish Bank’s portfolio to Lone Star Funds, JP Morgan Chase and Wells Fargo, means that some of the Boston market’s premier development projects will be changing hands.  Although the bulk of the performing loans will be acquired by the two traditional banking companies, much of the action will come from Lone Star’s share of the nonperforming loans.

Anglo Irish was the go to bank for much of the development action over the past decade.  It provided funding to the region’s top developers for some of the best located projects.  Unfortunately, the 2008 downturn and the continuing recession put a chill on all speculative developments across the country.

The big question is who will get the rights to start these developments when the market begins to improve?  Will it be the existing borrower negotiating a deal to stay with the project or will it be a new player?  It seems clear that Westwood Station will be the latter with a transfer that came close before the whole portfolio was put on the market.

The Greater Boston market has not recovered, but there are pockets of demand that will justify some new development occurring over the next 12-24 months and it is very likely that some of that product will come from this newly sold portfolio.

The Risks and Rewards of Waterfront Development

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On August 17th, NAIOP had its first “Boston by Sea” Harbor Cruise along the waterfront, featuring commentary by Barry Hynes of FHO Partners, Lowell Richards of MassPort, and Kairos Shen of the BRA.

Besides the unique view of the many waterfront development projects, what stood out for me was the extreme difficulty of permitting and building projects on the water, as exemplified by the many projects that have failed financially, in some cases bankrupting the developers.

Attendees get the scoop on the Boston waterfront of the past, present and future

For all its benefits (views, access, etc.), waterfront development has plenty of obstacles and costly surprises for those who want to build.  There is the Chapter 91 law that regulates most of the city’s coastal areas, the Municipal Harbor Planning process, Boston’s Article 80 permitting process, input and review from neighborhood Impact Advisory Groups, pier piling replacement, and, frequently, costly hazardous waste issues.  To top that off, there is the developer’s dilemma of timing the project to match market demand.  With all of the uncertainty associated with getting a project financed and approved in a timely manner, it is difficult to know in advance if there will be the necessary demand for the completed product at a price that will justify the costs.

That can result in prime development locations lying fallow.  During our waterfront tour, we saw a number of development sites in East Boston that have still not started, even though they were planned for construction 5-10 years ago.  Portside at Pier One, New Street, Clippership Wharf, and Hodge Boiler Works have languished for years.  Most were fully permitted.  However, there is talk that Portside at Pier One, proposed by Roseland Property Company, may begin a first phase.

Many properties have changed hands numerous times before being developed.  Prime examples are Fan Pier and the former McCourt assemblage, both having remained primarily parking lots for three decades until the current owners purchased the land.

Clearly there have also been several successful projects.  Without question, Rowes Wharf stands out as one of the premier mixed use development projects in all of Boston.  It also looks like the “tide has turned” for Boston’s Seaport/Innovation Zone, which has many development projects underway.  With one office building up, Joe Fallon and Cornerstone are now starting construction on two more buildings for Vertex.  A hotel is in the works for Pier 4 with New England Development, and an adjacent apartment project is being proposed by Hanover.

Liberty Wharf has transformed the neighborhood with its restaurants – making it the new place to be any night of the week.  In addition, The Drew Company’s project is getting closer with a key residential component and Seaport Square is expected to move forward with a major retail development handled by John Hynes and WS Development (developers of the enormously successful Legacy Place in Dedham.)

Despite the uncertainties in the financial markets, the Seaport area seems to have found the necessary momentum to attract businesses, residents, shoppers, and tourists.  If the developers and the city can keep up the pace, soon the Seaport will no longer evoke memories of failed developments and abandoned plans.  Instead, it can stand as an example of what can be achieved with vision and persistence.

(Editor’s Note: Hear more about the Seaport at NAIOP’s “Windows on the Waterfront”, Sept. 21, featuring Seaport developers John Drew, John Hynes III, Stephen Karp, along with David Manfredi, John P. Fowler, and special guest Mayor Thomas Menino.)