Westwood Station: A New Name, a New Team, and a Different Time

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The transformation begins.  Westwood Station at University Avenue on Route 128 will now be known as University Station.  A new team, led by New England Development along with Eastern Real Estate, National Development/Charles River Realty Investors, and Clarion Partners recently purchased the 135- acre prime development site. The first phase of the new University Station is expected to open in 2014.  The project had been on hold since the market crashed and the previous development team of CC&F/ Commonfund sold the property in 2010 after its lender, Anglo Irish Bank, went bankrupt and was acquired by the Irish government.

While this latest announcement is exciting for the region, credit is due to CC&F for amassing such a large tract of land with direct access to Route 128 and a major transit station and permitting a 4 million square foot, mixed-use, transit-oriented, energy efficient master plan.  With an improving economy, the time is right for this landmark project to move forward.

So, what has changed beside the name?

  • The project will remain a mixed-use project comprised of retail, housing, office and hotel uses.  The market, however, has clearly changed and appears ready for multi-family rental housing and a retail center. It will remain to be seen how much of the development will be office and hotel and when that could happen.
  • A supermarket is almost certain to occupy space here.  Again, this is not a change in plans, especially with Wegmans expected to be the designee for this location.  It will not be surprising if other local grocery store chains continue to oppose such a proposal.
  • The state will continue to invest in the highway infrastructure improvements in and around the University Avenue/Route 128 intersection.
  • The project will be a multi-modal transit oriented development, taking advantage of the Amtrak/MBTA Commuter Rail station and Interstate Route 95 and State Route 128.  Before Westwood Station’s plans, the density of development at this location was one of the lowest of any intersection along Route 128, underutilizing the excellent transit opportunities.
  • Although, probably too early to have financing in place, the debt market is sure to be open to investments such as this.  Now is a very different economy from the late 2008 economic disaster that began with sub-prime home loans, led to debt swap defaults, and ended in the near collapse of the financial markets.

With the development team set, a strong financing market in place, a growing demand for retail and residential space, and a prime location for corporate build-to-suit office sites, University Station should be the first mega-project to break ground within the next 12 months. Congratulations and best of luck to all involved!

The Future of Multifamily

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This blog post was submitted by Allyson Quinby, Account Executive at Solomon McCown & Company.

On Wednesday, April 4, industry experts gathered at Boston’s Seaport Hotel to discuss the future of Boston’s apartment market at NAIOP’s Future of Multifamily breakfast program. The panel featured experts in the industry including, Raymond Torto, Chief Global Economist at CBRE; Kent Larson, Principal Research Scientist at MIT Media Lab; Julie Smith, President of The Bozzuto Group; Simon Butler, Executive Vice President at CBRE New England; and James Gray, Principal at ADD Inc,  as moderator. View panelist video.

Torto kicked off the panel and set the table for the discussion by explaining that from 2007 to 2012, there was an influx of graduating students in Boston. That, compounded with the fact that more individuals chose renting over homeownership skyrocketed Boston to the 7th largest multifamily market in the country—and counting.

Butler expanded on the supply side of the multifamily trend. According to Butler, Greater Boston’s supply of multifamily housing will continue to increase over the next three years.  Currently, there are only a handful of residential construction projects underway in Boston and Cambridge metro areas. However, by 2014 these projects will be completed and almost double that number will be in the pipeline.

Smith addressed the demographic of individuals influencing the multifamily boom. Similar to Baltimore, New York and DC, Boston’s market is made up of single people, divorcees, and those in the 25-40 age group moving into the urban area and opting to rent over buying. Additionally, there is a demographic of individuals between the ages of 50 and 60—frequently empty-nesters—who are moving into luxury apartments. While varying in age, these demographics both expect hotel-like lobbies, energy-efficient appliances, common spaces and fitness centers all within a 30-minute commute to work.

Larson rounded out the panel by wowing the audience with his answer to the growing demand for personalized, high-quality and affordable units. Through the use of robotic walls, smaller apartments can now have multiple functions turning a full dining room into a bedroom with a touch of a button. MIT is providing the technology for these transformable environments that meet the popular need for spaces that can serve as the home and the workplace.

The factors that sustain the multifamily boom are just as interesting as the factors that led to this real estate trend. Rooted in job growth and urbanization, and perpetuated by the growing number of individuals opting to rent over homeownership, the emerging multifamily trend requires architects, developers and marketers to develop new strategies for building and filling these units.

Massachusetts Leads the Country in Regulatory Reform

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Earlier this week, Governor Patrick announced a massive, top-to-bottom regulatory reevaluation for all state agencies.  By the end of 2012, the Administration will have reviewed 1,000 of the regulations that were first put into place prior to 2000, with another 1,000 by the end of 2013. The goal is to determine which regulations should be rescinded, which should be modified, and which could be made more consistent with a national model or standard.

This announcement may be surprising to some since Massachusetts, rightly or not, has not always had a business friendly reputation. With this new sweeping policy, the Governor has taken a hands-on, direct approach to ensure that there will be real results with immediate impacts.

In addition to the regulatory review, any newly proposed regulation must go through an extensive vetting process, lasting over nine months, that starts with a “small business impact statement” consisting of 25 questions delving into the potential financial and time costs.  Small businesses are defined as those with up to 500 employees (85% of the companies in the state.) All draft regulations will go to the Executive Office of Administration and Finance, and to the new Regulatory Ombudsman for fiscal and business impact review .  They will then go to the Governor’s office, where a case must be made that the agency’s recommendations outweigh the impacts and burdens on business and the public.  Only then will these regulations go on to the Secretary of State’s office for posting and public comment.

April Anderson Lamoureux, Assistant Secretary for Economic Development, was just appointed as the first Regulatory Ombudsman between the Administration and the business community.  She gave a detailed presentation on the regulatory reform initiative at the NAIOP Government Affairs program yesterday, along with Alicia McDevitt, Deputy Commissioner at MassDEP.

At the meeting, Assistant Secretary Lamoureux asked that businesses provide her with their suggestions on regulations that do not make sense, have extensive problems, do not add value, or where alternative solutions may better address the issue.  NAIOP has been appointed to a Business Advisory Committee that will help identify problematic regulations and alternative processes.

MassDEP, under the leadership of Commissioner Ken Kimmell and Deputy Commissioner Alicia McDevitt, has led the way on regulatory reform by establishing a target list of 21 different reforms within the Department.  McDevitt provided an update on the Final DEP Regulatory Reform Plan, which was released on Monday.  Although, the reason for this effort originated with a reduced budget affecting staff permitting and oversight, the effort has moved in the direction of creating general permits, self-certification, and third party reviews. Collectively, these reforms will make a substantial improvement on the cost and time for the regulated community, without diminishing environmental protection.

Kudos to the Governor and his Administration for boldly going where few states have gone! Massachusetts has clearly earned the status of “first in the nation” setting a policy to reform one of the most frustrating aspects of government for most businesses and citizens.  As always, others will follow.

Making Air Rights Development Work

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I applaud Matt Kiefer at Goulston &Storrs for his recent article in Commonwealth Magazine regarding the Columbus Center development fiasco and the potential role of government to prevent a similar outcome on future economic development projects.

What first struck me about the difficulty in getting this project through the permitting process in a reasonable amount of time was the lack of public support from the state, city, and neighborhoods.

One would expect loud cheering for a developer who presented a plan to knit back neighborhoods separated for decades and heal a visible, ugly, noisy, urban scar produced by an open sunken turnpike. However, after over 130 public meetings and several years, this project was sufficiently delayed until the development was no longer financially viable. Even with changing design requirements, increasing construction costs, and enormous engineering challenges, the developers still tried to make this project work, requesting state assistance with infrastructure and the affordable housing component. Finally, however, it was a national recession that sealed Columbus Center’s fate.

More recently, other proposed air rights projects have also fallen by the wayside. Four non-profit proposals to build over the Greenway land or exit ramps have failed to move forward. A prime culprit was underestimating the costs to construct over the expressway. And yet, the then-Mass Turnpike Authority continued to consider those and other similar sites as valuable assets worth millions of “up-front” dollars, rather than the liabilities they were to any developer considering construction.

It is challenging enough to commit to build a sizable development in Boston given the high construction costs associated with dense, urban projects.  Add to that the obligation to fund city infrastructure, make linkage payments for affordable housing, and the uncertainty of where the market will be after a lengthy permitting process, and you have a serious set of impediments to growth.

I agree with Matt’s recommendations:

•             MassDOT should look towards ground rents and/or sharing in the profits realized from a sale or refinancing, rather than pressing for larger acquisition costs.  Massport has successfully helped produce many major development projects in the Seaport area using this approach.

•             Building over air-rights is very complicated and costly. Government incentives and a predictable permitting process will be necessary to make the sites over the Turnpike and the Greenway ramps feasible.  The result will be increased tax revenues and a better city.

•             MassDOT should consider outsourcing the oversight for the development of air rights projects to MassDevelopment. It has a proven track record helping to guide development projects throughout the state.

Now is the time to start preparing for an upswing in development interest. If we do not fix these problems now, it could be many years before this highway blight is replaced with productive, well designed, urban mixed use projects.

What the Future Holds for Cambridge, MA – The Innovation Capital of the World

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This blog post was submitted by Allyson Quinby, Account Executive at Solomon McCown & Company.

NAIOP Massachusetts’ “Cambridge: Ready, Set, Go!” breakfast event on February 15 featured a well-versed panel of real estate executives who spoke on “What’s new and what’s next for this hot market.”  Mary Lentz, McCall & Almy, moderated the expert panel that included Tom Andrews, Alexandria Real Estate Equities; Michael Cantalupa, Boston Properties; Shawn Hurley, Skanska USA Commercial Development; Steven Marsh, MIT Investment Management Company; and Thomas O’Brien, The HYM Investment Group.

View photos and event presentation slides.

Marsh noted how the world is changing every day, and that the U.S. along with many other superpowers such as China and India, continues to look for new ways to compete. For example, the U.S. aggressively leads the way when it comes to innovation, and as Marsh discussed, Cambridge has long been the epicenter of innovation productivity.

Due to Vertex’s move to Boston’s Seaport district, many in the real estate industry worry that the Cambridge market no longer holds the same stature it once did. However, NAIOP’s expert panelists assured us that we are in a natural state in Cambridge, and as stated by Cantalupa, “If you can afford to be next to MIT, you will be.” The lab market is steady, and many developers like Skanska USA Commercial Development are currently taking time to re-evaluate outdated space to create real estate opportunities that will fit all types of tenant needs in the future.

Home to two of the finest institutions of higher education in the world, Harvard and MIT, the panelists argued that Cambridge has gained and will maintain a prominent reputation. Companies in the life-sciences, technology, bio-pharmacology, education and innovation sectors, along with many startups, have found their homes in Cambridge. Due to the competitive advantage that comes with a Cambridge address, real estate firms have experienced a tremendous amount of success leasing space in this market. As the panelists noted, there is still an active demand and we continue to see new development activity in this market today.

Marsh and Andrews also spoke about the importance of proximity for lab space to MIT and other academic buildings. It is crucial that all facilities continue to collaborate, creating an environment that fosters innovation. Hurley also noted how mixed-use space needs to continue to be developed; it is important that we connect lab to retail and public spaces.

O’Brien discussed the next generation workforce and the need to build corporate and residential spaces that attract young professionals. His firm is developing the NorthPoint neighborhood, a mixed-use campus with flexibility – one that allows people to live and work in the same place.

Cantalupa and Hurley spoke on how real estate developers need to build flexible buildings that can adjust to market demands. Hurley noted how Skanska’s plan behind 150 Second Street was to deliver a Class-A, highly flexible property with a sustainable design that had features all tenants could enjoy. The building was also designed to accommodate either one or multiple tenants.

As stated by Marsh (and I agree), “Cambridge is special – it goes well beyond real estate” – and it is here that we want to continue the innovation story.

Note from NAIOP: Learn more about the dynamic Cambridge market by attending our 10th Anniversary Bus Tour, Big & Breaking in Greater Boston. Cambridge, along with Fenway, Longwood, Boston’s Seaport and Allston will be featured during this fast-paced and informative live market update bus tour.

The Uptick in Tech – part two

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This blog post was submitted by Ben Breslau, Managing Director, Americas Research at Jones Lang LaSalle.

The third impact of technology on our markets is through the workplace. Here the confluence of demographics and improving technology is enabling and inspiring progressive companies to redesign how we think of space. Employees are clearly more mobile, as technology allows the flexibility to work from anywhere and on any device. But even within the space, tenants are harnessing more open, collaborative, flexible, efficient, and sustainable workplaces.

The driving force for tenants in the past was typically cost, but now in addition to driving efficiency the space itself is being looked at as a way to enable productivity as well as recruit top talent. These trends likely mean lower demand for commodity office space, and a redefinition of the characteristics driving space demand. Office space is not going away, but the target is moving.

One question that I always get is whether the tech boom is just the tech bubble 2.0. Is it sustainable? We recently did an analysis of technology P/E ratios as compared to the dot com bubble and found that valuations remain near the lows of the last 15 years. Today’s tech companies are cash rich and startups have been funded more conservatively. I won’t pretend to know what they all do, but many are making products that enhance and improve the lives of people and the productivity of businesses.

We think this tech wave is still in its early to mid stage with plenty of room to run.

The Uptick in Tech – part one

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This blog post was submitted by Ben Breslau, Managing Director, Americas Research at Jones Lang LaSalle.

Last week I spoke at a NAIOP event titled Boston: Hub of the Future? Technology’s Impact on Commercial Real Estate.  I was joined by Maureen Joyce, AEW and Tim Rowe, Cambridge Innovation Center (see event photos). The focus on technology and real estate is not a new one. In fact, parts of the topic are very reminiscent of the technology boom of the late 1990’s. There are some clear differences too. My talk focused on three primary ways that I see technology impacting the commercial real estate landscape.

The first is through space demand. Tech companies are the fastest growing members of the office tenant base as we analyze demand across the country. As a result, the top tech markets like Silicon Valley, San Francisco, Boston, Austin, and Seattle are among those leading the office recovery.

It’s the tech submarkets within those metros that are really hot. Rental rates last year grew 25% in Palo Alto, 35% in south of San Fran, and 20% right here in Cambridge. The tech services sector and specifically mobile, social media, search, cloud, and gaming that are the most active. They are recruiting young creative tech talent, and have to be in the urban tech hot spots with “creative” space to find and keep them.

The second way technology is impacting real estate is through our business. I see it plainly in my research world, where real time interactive digital content is rapidly replacing traditional quarterly PDF reports. Blogs like this one are the norm. Social media and mobile apps are changing how we connect with and engage clients, prospects, and our own people. There are many other examples, but one thing for sure is that as more millennials enter our industry, technology will play a bigger and bigger role in how we work. View event presentation.

Lowell Richards: A Boston Leader & Visionary Who Will be Missed

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Lowell Richards, Chief Development Officer for the Massachusetts Port Authority, died suddenly this past weekend. This tragic loss is very hard to grasp for many of us that knew him as an energized, dedicated, well-liked advocate and friend, committed to public service throughout his life.

It is very difficult to know the extent of Lowell’s involvement in economic development in Boston and throughout the Commonwealth.  He was not a “grand-stander,” preferring to work quietly behind the scenes making things happen, giving others the spotlight. Lowell enjoyed solving problems, and in development and in politics, there are plenty. The advantages that Lowell brought to the table were his deep understanding of the complex political environment, a clear focus on the public policy objectives, a keen mind regarding finances, and the negotiation skills needed to close the deal.

Lowell graduated from Dartmouth College in 1969, earned a Master’s in City Planning from MIT in 1971, and a J.D. from Harvard Law School.  He began his distinguished career as a college intern at the Boston Redevelopment Authority.

Within Mayor Kevin White’s administration from 1976 to 1984, Lowell served as Collector-Treasurer, and then Deputy Mayor for Fiscal Affairs. (Just last week, he served as a part of the honor guard during the memorial services for Mayor White.)

Lowell’s private sector experience included senior responsibilities at Cabot, Cabot & Forbes, the commercial real estate development company based in Boston.

From 1994 to 1999, under Governor William Weld, Lowell served as Assistant Secretary for Capital Resources of the Executive Office of Administration and Finance, and then Chief Development Officer for the Commonwealth.

He joined Massport in 1999, where he ultimately became the agency’s Chief Development Officer. There, he was responsible for its agency-wide strategic and master planning activities, including the airports and the seaport, as well as Massport’s private commercial and residential real estate development in South Boston, East Boston, and Charlestown.

Under his direction, Massport received MEPA certification for the Commonwealth Flats Development Area (including the newly designated Boston Innovation District), authorizing development of over 3 million square feet of hotel, office, retail and residential development. During his tenure, construction commenced on over 3 million square feet of maritime industrial, commercial office and apartment development on Massport property leased to developers. He also directed third party development at Massport’s three airports.

Lowell had many friends who are now stunned by his departure.  It’s hard to imagine this city without him, but we are fortunate that he left an indelible mark on Boston.  His presence will remain with us as we travel through this great city each day.

Massachusetts Community Colleges Need to be Up to the Challenge

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The Massachusetts Community College system is getting some well-deserved attention in Governor Patrick’s State of the Commonwealth address, the recent Boston Foundation report, and various news articles and editorials.

Primary concerns voiced by many are their underperformance and the current mismatch between the skills taught through our state higher education system in general (and community colleges in particular), and the middle-skilled jobs currently unfilled or expected to be available in the coming years.

One clear indicator of the problem is that graduation rates at the state’s community colleges are very low, especially as compared to other systems across the country.

The Boston Globe editorializes that the community college system needs to focus on being a “springboard to a productive career,” preparing students for gainful employment, especially “in an economy where competition for jobs is fierce.”

“Everyone without a job in Massachusetts today is likely to need more education, more training, directly relevant to employment opportunities, before they find one.” With over 240,000 people unemployed in the Commonwealth, community colleges have a very large pool of potential students to help.

The question becomes: what needs to be done to bring the existing system of community colleges in better alignment with the needs of employers in today’s economy?

To start the process, in 2010 Governor Deval Patrick established the “Vision Project” initiative using data to align higher education with workforce needs, with the objectives of:

  • Improving college readiness;
  • Improving student completion rates;
  • Aligning degrees with workforce needs;
  • Improving student learning; and
  • Decreasing gaps between different groups of students

The Boston Foundation study (The Case for Community Colleges: Aligning Higher Education and Workforce Needs in Massachusetts) developed the following recommendations as a strategic blueprint for “building a system that effectively leverages the capacity of community colleges to be leaders in meeting the workforce needs of Massachusetts”:

  • Clarify the mission of community colleges, with a priority on preparing students to meet critical labor market needs.
  • Strengthen overall community college system governance and accountability.
  • Adopt performance metrics.
  • Better prepare students for community college-level work and graduation.
  • Stabilize community college funding.
  • Form a Community College Coalition.

Now is the time to focus on this critical component of the state’s economic development strategy, by boldly working to reform and strengthen the state’s community college system. We need to make it more accountable and performance driven as a strategic path for workforce development.

In a global economy, education will be the prime differential determining the winners and losers. We can and will rise to the challenges of tomorrow, if we make the right choices today.

Kevin White Made Boston the World Class City it is Today

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Kevin White, who served as Mayor of Boston for four terms from 1968 to 1984, died at his Boston home this past Friday, January 27th.

After leaving office, he was quoted saying, “I left the city a little better than I found it.” Truly, this was a spectacular understatement. The mayor stepped into office with big dreams, big plans, and the belief that Boston could become a great, world class city.

Kevin White built upon the renewals started by the previous two mayors, John B. Hynes and John Collins. But it was the revitalization of the historic Faneuil Hall Marketplace in 1976 that became the “tipping point” for the downtown’s and waterfront’s emergence as vibrant, mixed-use centers of activity.

Looking at the Marketplace today, it is hard to envision what it looked like before its redevelopment – rat infested, crumbling structures; with the highest and best use for two of the buildings being a flea market open on Sundays. When the project went looking for financing, all of the Boston banks showed their pessimism by refusing to participate at any amount.  It took the active role of Mayor White to help secure the financing in New York City (although, only under the condition that the redevelopment be phased to limit the risk.)

During his time in office, new developments sprung up, including towers in the financial district, a redeveloped waterfront, the massive Copley Place retail, office, and hotel complex, and the transformation of the Charlestown Navy Yard.

The Mayor attracted some of the brightest in Boston to be a part of his team to help create this transformation including, Barney Frank, Peter Meade, Lowell Richards, Fred Salvucci, Paul Grogan, Robert Kiley, and Micho Spring.

I will always remember walking through the Boston Garden one evening and running into the Mayor and his wife, Kathryn.  It was not difficult to see his love for his wife and his pride in his city. Mayor Kevin White will never be forgotten – his presence will always be with us, as we look upon our world class city.