Seaport: The Hottest Neighborhood in Boston

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.

Mandates Not the Tool to Increase Energy Efficiency in Commercial Buildings

In a recent blog, How Many Miles Per Gallon Does Your Building Get? The Ratings Game Comes to Buildings, NAIOP member Seth Jaffe of Foley Hoag makes some observations about the recent report issued by the Institute for Market Transformation.  The report describes the existing efforts to rate the energy efficiency of commercial buildings in the country.

Although I appreciate the reasonable dose of skepticism that he expresses, I am a bit more doubtful of the intent of the pilot program originally drafted by our state Department of Energy Resources.  The DOER report, issued in December 2010, states that the intent of an energy rating program is to devalue properties that are less energy efficient (e.g. older building in Gateway Cities) so that there would be an “incentive” for owners to upgrade their buildings prior to financing or sale. This is not the same goal as providing information so that a building owner can make the best economic analysis to determine which energy efficiencies make financial sense.

The decision to invest in building upgrades is dependent on a number of factors including market rents, educated tenants, costs and benefits of efficiency measures, availability of capital, competition, etc.

New buildings are now much more energy efficient than their predecessors.  Developers over the past five years have produced many buildings with LEED certifications.  That said, we all know that the big challenge is with less efficient existing buildings.

However, the best incentive for upgrading that building stock will be an improving economy.  As demand for space increases, rents move up, energy costs continue to rise, and the price of efficiency technologies drop, we will see a major investment in building upgrades.

As we have said before, mandates are not the answer.  The market will lead the way and there is no doubt that, on this particular issue, regulators will do more damage trying to push businesses into expenditures ahead of their economic feasibility.

Millenials and the Alternative Workplace: The Future of the Commercial Real Estate Industry

At a recent NAIOP Massachusetts program, a panel of leading professionals discussed the changing workplace that is being driven, in part, by a new demographic – the Millennials.

As Martha (Marty) O’Mara, PhD, CRE, Managing Director of Corporate Portfolio Analytics, said about this influential category, “they are no longer our kids, but our co-workers.”

This shift is bound to have an impact as they enter the workforce, and Marty’s presentation outlined some surprising facts about this group:

  • Only 15% of Millennials (age 19-29) say having a high-paying career is their top priority.  They place parenthood (52%) and a successful marriage (32%) much higher.
  • 63% have graduated from college, or plan to graduate.
  • Most in the workforce have already experienced bouts of unemployment.
  • Only 61% grew up in a household with both parents.
  • 38% have a tattoo.
  • 8/10 sleep with their cellphone.

They are a powerful market driver and their communication and work style preferences (consuming “experiences” rather than “things”, for example) are already shaping the commercial real estate industry.   

Marty’s bottom line:  “Don’t let a Boomer make a real estate decision.”  More and more companies are recognizing this and designing an “Alternative Workplace” as they plan for the future.

In a short slideshow, Marc Margulies, Margulies Perruzzi Architects shared the key elements of the new Alternative Workplace:

  • Few/no high wall cubicles
  • Multiple workplace environments
  • Density at 165 RSF/person
  • Amenity-rich
  • Dynamic

A panel of experts including Marty and Marc, as well as Bob Richards of Richards Barry Joyce & Partners; Janet Nicholas of Dassault Systèmes; and Greg Lewis of Shire Human Genetic Therapies, then discussed what all of this really means.  

Highlights and things to think about:

  • The Alternative Workplace is designed to support diverse demographics and to be conducive to multiple work styles (mobility being an important element.) 
  • Producing a corporate community that increases productivity through collaboration and interactivity is accomplished through a dramatic change from the historically private spaces (individual worksettings ) to ”neighborhoods” (more collaborative community spaces).
  • The new term is “benching,” providing bench space that can be shared, moved, configured.  The amount of space per employee can change based on the users from a 1.3:1 ratio that efficiently utilizes vacant space due to normal absenteeism, to up to 3:1 for a group that has higher sales and/or consulting staff that travels.
  • Lastly the “town common” area has plenty of amenities.  Picture this as the Kendall Square within the company where different specialties come together as a community in a social, casual area.  These tend to be food oriented, nature focused, bright, and inspirational.

Many of these changes are already being seen in the new designs and renovations of firms throughout the region, but this is just the tip of the iceberg, according to O’Mara and the other speakers.  Big changes are on the horizon for anyone involved in corporate real estate, and those changes will create countless opportunities for the firms who are ready.

Did you attend Wednesday’s program? Share your key takeaways and questions in the comments below!

State Proposing Energy Asset Rating for Commercial Buildings

Yesterday I attended a Department of Energy Resources (DOER) hearing on its draft Commercial Building Energy Asset Labeling Program in Massachusetts. It would be the first energy asset labeling program of its kind in the world.

Initially a two – three year pilot, the goal is to require all existing commercial buildings to acquire an energy asset rating before a specific “trigger event” (e.g., building sale, re-finance, or major renovation). The lower the energy efficiency, the lower the rating. DOER’s goal is to motivate owners to invest in energy efficiency to avoid a bad score and a devaluation of the property. The proposed program would rate buildings against a “zero net energy benchmark.” As a result, most commercial buildings would be branded with a low score.

NAIOP is concerned that no business group was informed of this initiative until the white paper went out for public comment – especially given the significant impact this will have on investment and lending in the Commonwealth. The comment period closes on February 12 and NAIOP will be submitting detailed comments. In the meantime, here are the highlights from my testimony at yesterday’s hearing: Continue reading