Tag Archives: development

Optimism Colors Shifting Views of Development Market

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Biotech Could Benefit From Open Office Space

Written By: Colin A. Young

This article was originally published by The State House News on September 15, 2020.

SEPT. 15, 2020…..Commercial real estate and development experts said they are confident that the pandemic won’t spell the end of the development boom in and around Boston, but they said they are keeping their eyes on consumer and workforce trends that might reshape their industry.

During a virtual panel convened by NAOIP Massachusetts, the development pros said that while the COVID-19 pandemic slowed construction timelines and injected generous doses of uncertainty into the equation, development still has plenty of track in front of it in the Boston region.

“We operate between Boston and Washington, D.C., and I think that Boston is clearly the strongest market of those three and maybe the strongest market in the country,” Shawn Hurley, president of Marcus Partners said, referring to the Boston, New York City and Washington, D.C., markets. “It certainly seems that development in this market remains really strong and that our economy is more diversified than ever before. So we feel very good about the Boston market and how we’re positioned today, albeit in a very volatile world and as we enter what appears to be a potentially very volatile fall.”

Lauren O’Neil, senior managing director at JLL Capital Markets, said she doesn’t foresee a persistent slowdown in development in the Boston area. After desirable long-term investment-grade tenant leases, she said development appears to be second on the investment strategy depth chart.

“I think the thesis is that we may be in a bit of a slowdown now, but in two to three years when a project is set to deliver it sets up nicely for the rebound in this current slowdown, I won’t go as far as to call it a recession. And so we’ve seen investors and debt capital alike gravitating towards new developments,” O’Neil said. “And in fact, it’s probably easier right now to capitalize on new ground-up development than it is a value-add office deal, for example, where you might have 70 percent occupancy and you’re trying to get to 90 percent occupancy in the near term. There’s just more conviction on what the world will look like in a couple years versus over the next six months.”

O’Neil said hotels and retail developments are struggling to get financed right now. Retail developments with a grocer and that have “a compelling story” might fare better, she said.

“But with the delinquency rate on existing loans in the mid-teens for those product types, it’s going to be a bit of a challenge to get those C-Suites on board with making any sort of aggressive bets on retail and hotel for the foreseeable future,” she said.

Chris Brown, CEO of construction management firm John Moriarty & Associates, said biotech remains one of the hottest sectors in the marketplace right now and the “great need” for added research and lab space has not been diminished by the pandemic. At the same time, there’s “a little hesitancy” to commit to any deals involving traditional office space, given the uncertainties around the future of remote working and the return of most employees to the office.

“Biotech is probably the sector of the market that … will have the most traction moving forward,” he said.

Tamara Small, the CEO of NAIOP Massachusetts who moderated Tuesday’s discussion, asked Brown about converting office space to research or lab space, citing conversations she’s had with people who have suggested that “biotech is the new office.” Brown said his firm is working to “reposition” some office space at the Cambridgeside Galleria and has “a few other projects in the pipeline that look to take existing office space and potentially either add on to it or reposition it for biotech and lab space.”

“That seems to be one of the hottest sectors for us and the most interesting questions we get is in regards to that type of product as well,” he said.

O’Neil said converting office spaces to research or lab space for life sciences and biotech companies could help meet some of the demand for those spaces sooner than the pipeline of new construction could on its own.

“The demand from the tenants on the life science side was growing at an annual growth rate of a little over 8 percent and it’s projected to continue through 2023 at just over 7 percent, which if you look at the current 25.7 million square foot market, that means there’s demand for over 34 million square feet,” she said. “We’re about 3 million short of meeting that demand based on the current pipeline for 2023. Now, that generally includes only ground-up, brand new developments, so maybe the conversion factor will start to fill in some of that.”

The panel also took on the suburbs and the question of whether the pandemic, and the changes it has brought to commutes and daily life, is creating a time for the suburbs to shine and draw even more people out of urban cores. In July, real estate market analysts at the Warren Group said increases in sales in more rural parts of Massachusetts were “far in excess” of the state average.

“Cities are going to endure. The intrinsic qualities that brought everybody to them pre-COVID, we’re going to appreciate them all the more when this ends, and it will end. So we just envision a totally different kind of lifestyle returning when we’re through this,” Abe Menzin, a principal at the development firm Samuels & Associates, said. “In my more optimistic moments, I actually think that remote work options for people could actually enhance the vitality of cities. It could help shave the peaks off of some of the congestion issues that we’ve encountered, and could give people more flexibility in their lifestyle and make a livable city like Boston even more liveable.”

Kirk Sykes, a managing partner at Accordia Partners, is banking on people continuing to want to live in Boston but said aspects of two of his most significant projects aim to address concerns that the pandemic has highlighted. Sykes is involved in the plan to redevelop the site of the Boston State Hospital into a development with more than 360 housing units near Franklin Park and Mass. Audubon’s Boston Nature Center and Wildlife Sanctuary in Mattapan. He’s also part of the plan to convert the old Bayside Expo site in Dorchester into more than 1,000 units of housing, retail space, office space and more.

“We feel extremely blessed to have a 65-acre park, and the beach and the ocean in front of Bayside. And as such, I think those characteristics will play heavily into corporate relocations for campuses or even the decision to get on the train and go for five minutes to Kendall [Square] as opposed to being in Kendall,” he said. “So we’re designing in the desire to be in an environment that gives you the air, the light, the breath, the view that you might get in the suburbs, but getting it in a 20-minute bike ride, 30-minute walk or five-minute Uber/Lyft to the Financial District.”

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09/15/2020

COVID-19 Update: Boston Announces Incremental Start to Construction

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On May 5, City of Boston announced it will be taking an incremental approach to broadening the allowable categories of construction. Effective May 5, all essential construction projects (as defined by the state, which currently means residential, hospitals, public schools, mixed use with residential, public works and construction related to COVID-19) with approved safety plans and signed affidavits as required under the COVID-19 Safety Policy for Construction will be authorized to prepare the site with project specific COVID-19 safety measures.

As of May 18, the City of Boston will allow a subset of essential construction projects on sites that meet specific criteria to commence (hospitals, public schools, 1-3 unit residential buildings, road and utility work or other outdoor/open-air work such as steel erection). On May 26, all essential construction projects as defined by the state may re-commence construction in adherence to safety plans.

At no time will the City of Boston permit any construction beyond what is allowed by the Commonwealth. DPW and ISD will continue to monitor and enforce the COVID-19 Safety Plans for Construction. In accordance with the signed affidavit, contractors acknowledge and agree that non-compliance with any requirements may result in suspension of termination of work in progress of revocation of the City’s permit for such work.

NAIOP will continue to advocate for policies, Executive Orders and legislation that address how this public health crisis is affecting real estate and overall economic development. We are working on numerous initiatives. Please feel free to reach out to CEO Tamara Small or Government Affairs Associate Anastasia Nicolaou if you have any questions.

Event Recap: Leadership Lunch + Learn at 101 Seaport

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The following blog post was written by Chloe Louise Bouscaren, Marketing and Business Development at CBT Architects.

“An Inventive Setting to Spark Inventive Thinking”

IMG_20151111_122627151On Wednesday, Nov 9th NAIOP hosted a Members-Only Leadership Luncheon at 101 Seaport Boulevard, the new home for PricewaterhouseCoopers, a multinational professional services network. PwC relocated 3000 employees from 125 High Street to Boston’s Seaport District. Shawn Hurley, the Executive Vice President and Regional Manager of SKANSKA USA Commercial Development hosted NAIOP on the building’s 7th floor, the only space that has yet to be leased. Shawn was joined by Charley Leatherbee, VP of Development; Levi Reilly, Director of Development; and Patrick Sousa, Manager of Development, who all played important roles in the success of this high-profile project.

IMG_20151111_121118778The newly constructed 17-story, 440,000 RSF, LEED Platinum state-of-the-art office building was developed by SKANKSA USA Commercial Development Team in Boston. Highlights included a chilled beam mechanical system, triple glazing curtain wall, 300 underground parking spaces, world class retail by WS Development, expansive views of the harbor and Seaport, conference and training centers, and virtually column free floorplates. 82% of the building is occupied by PwC, tenants Red Thread and Skanska will be joining them soon. NKGF’s Dave Martel and Bill Anderson are responsible for the leasing and deal negotiation.IMG_20151111_120951643_TOP

Located on what will be the new Seaport Square Green, 101 Seaport connects directly to Fan Pier Park, creating a continuous public space that reaches Boston Harbor and connects to the Harborwalk Grand civic lawn to support active recreation and public events.CBT2

SKANSKA is also currently working a neighboring 17-story office tower, 121 Seaport, as well as Watermark Seaport, a 300-unit residential complex both on neighboring parcels.CTjJnD2VAAAiuyx.jpg large

For those who have yet to hear Shawn’s presentations on SKANKSA’s developments in the Seaport and beyond, his confidence and presence is unparalleled. Shawn has an innate way of making an audience feel comfortable and that day, we all felt we were part of something big. SKANSKA is clearly making development history in Boston and Shawn and his group are leading that charge the titans of the real estate industry. Hats off gents.

Quick Project Stats
Project Cost: $290M
Project Duration: 26 months
PwC Employees: 3000 (20% more people in 12% less space)
Designer / Design Firm: Jonathan McGuiness, Jacobs Engineering Group

NAIOP’s on-going Leadership Lunch and Learn series is open only to Members and offers unparalleled access to top local real estate leaders. Attendees get an inside look at the area’s most active CRE companies and hear about their latest developments, recent activity, upcoming projects, and more. Not yet a NAIOP Member? Join today!

Developers take steps to reinvent suburban office parks

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The following article was written by Jay Fitzgerald and appeared in the July 27, 2014 edition of The Boston Globe:

When the exodus to the suburbs got underway more than a half-century ago, employers followed, and the office park was born. But today, as younger workers return to the city, and employers again follow the labor, these isolated campuses of low-slung buildings, parking lots, and company cafeterias face challenges, from new competitors to aging facilities to high vacancy rates.

As a result, owners and developers across Eastern Massachusetts are seeking to reinvent the suburban office park, taking a page from urban revitalization that transformed old mill and factory buildings into mixed-use developments of housing, retail, and office spaces. In communities such as Burlington and Marlborough, developers are adding restaurants, hotels, and other amenities, as well as housing, to compete with the “live, work, play” attraction of the city.

In Marlborough, for example, Atlantic Management Inc. of Framingham purchased the former Hewlett-Packard campus three years ago to launch a more than $200 million rehab of the 110-acre site, which dates back to the 1960s. The project is well underway, with Atlantic refurbishing the two office buildings, while AvalonBay Communities of Virginia, which purchased 26 acres at the site, builds 350 luxury apartments.

Atlantic Management also plans to develop a 153-room hotel and 50,000 square feet of retail and restaurant space that may one day include a farmers market. Already, this redevelopment of the Marlborough Hills office park has attracted a major corporate tenant, Quest Diagnostics of New Jersey, which plans to locate more than 1,000 lab workers there later this year.w

“The number-one challenge for many companies is how to attract talent,” said Joseph Zink, chief executive of Atlantic Management.“Companies need to attract talent and this is one way to do it. I think we’re going to see more of this in Massachusetts.”

Suburban office parks across the nation are trying to respond to tenants insisting on more amenities, said David Begelfer, chief executive of NAIOP Massachusetts, a real estate trade group. In Massachusetts, there’s no precise figure on how many office parks are undertaking renovations large and small, Begelfer said, but “it’s dozens of them and they’re easily spending billions of dollars.”

“The market is demanding it,” he said.

Commercial real estate specialists say the trend in office park redevelopment is driven by two forces. First, property owners need to renovate aging, outdated buildings, some of which are a half-century old. Second, they must meet increasing competition from Boston, Cambridge, and other nearby urban communities.

Along Interstate 495, the vacancy rate for Class A offices is hovering at nearly 18 percent, compared with 11.5 percent in Boston and less than 6 percent in Cambridge. Commercial rents are depressed. Offices lease for only $20 per square foot in the region, less than half of what similar space fetches in Boston and Cambridge, according to Jones Lang LaSalle, a commercial real estate firm.

The site of the former headquarters of data storage giant EMC Corp. in Hopkinton is an extreme case of a struggling suburban property. The 160,000-square-foot building, just off I-495, has sat empty for 13 years, ever since EMC moved to newer offices elsewhere in town, said Steven Zieff, a partner with Hopkinton’s Crossroads Redevelopment LLC.

Crossroads has an option to buy the 38-acre property, which also includes four one-story buildings, and hopes to redevelop the site into a mixed-use complex of housing, retail stores, restaurants, and office space.

“People are looking for something different,” said Zieff. “It’s the entire ‘live, work, play’ environment that people want. They don’t want to go to just an office park with a cafeteria and parking lots.”

Along Route 128, the situation is not nearly as dire, with the office vacancy rate between Woburn and Needham running at 6.4 percent, below Boston’s. Rents near that stretch of the highway are rising as the economy continues to improve, averaging about $34 per square foot, about $20 less than office space in Boston and Cambridge.

But office park owners still feel pressure from intensifying competition with cities. In recent years, a number of suburban companies have moved to Boston or Cambridge, including ad firm Allen & Gerritsen, which moved to the Seaport District from Watertown. Biogen Idec soon will move from a Weston office campus to a new headquarters under construction in Kendall Square.

At the 13-building New England Executive Park in Burlington, the vacancy rate is 10 percent, with tenants that include tech firms BAE Systems, Charles River Systems, and Black Duck Software. Still, National Development, the park’s owner, is convinced it needs improvements to stay competitive.

Later this year the firm plans to start a major overhaul that includes demolishing an office building — all 13 buildings were built between 1969 and 1986 — and constructing 300,000 square feet of new development. The new additions will include a 170-room hotel, three full-service restaurants, and new retail and office space.

“We’re seeing this great rush to the city [by tenants],” said Ted Tye, managing partner at the Newton-based National Development. “What that’s doing is forcing suburban properties to stay on their toes. And we’re responding to that.”

National Development, however, won’t add housing to its New England Executive Park mix. Tye said he’s not convinced that housing within office parks is a smart idea. Some towns might end up getting financially hurt because commercial and industrial properties are usually taxed at higher levels than residential properties, he said.

He added that it’s also hard to duplicate urban settings within suburban parks if they’re not near public transit and don’t have easy pedestrian access to offices. “This is a source of some disagreement within the industry,” he said of housing’s role in office park redevelopment.

In contrast, Nordblom Co., owner of Northwest Park in Burlington, is a firm believer in “live, work, play.” Three years ago, it launched a massive $500 million project to redevelop about half the 285-acre office park to include 600,000 square feet of retail space, 300 new apartments, a 225-room hotel, and 3.5 million square feet of new or refurbished offices.

Todd Fremont-Smith, senior vice president of Nordblom, said the redevelopment, which could take another 10 years to complete, has already attracted new office tenants, a steakhouse restaurant called The Bancroft, and a new Wegman’s supermarket, which opens in October.

“By mixing the uses, you have a more dynamic environment — and it’s more rentable,” Fremont-Smith said. “People are seeking urban-like amenities where they work. I think we’re going to see more of this at both office and industrial parks. People want it.”

View the original article here.

2013 Bus Tour Recap: The Suburban Transformation

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The following blog post was submitted by David Fleming, Principal at PACE Communications Group, a marketing and PR firm that specializes in commercial real estate and retail.Elisif_20130501_0150

Three signs that spring has finally arrived in Boston: 1) green grass on the Esplanade, 2) the Red Sox back at Fenway Park, and 3) NAIOP MA’s Annual Bus Tour. The 11th edition of the tour took place on Wednesday as more than 250 people aboard five buses toured properties along what is suddenly one of the hottest stretches in commercial real estate in the region: the Route 128 Corridor from Needham to Lynnfield. Here’s a summary:

Elisif_20130501_0115Kickoff at Needham Crossing

  • Needham’s Economic Development Director Devra Bailin, discussed efforts to rebrand the former New England Business Center as Needham Crossing
  • Justin Krebs and Mark Roopenian described two of Normandy Real Estate Partners’ projects along the route:
    • Center 128, which will redevelop Needham’s former New England Business Center into an 825,000-square-foot “super-park,” including a Marriott Residence Inn Hotel
    • Station at Riverside, which will transform MBTA’s Riverside Station into a mixed-use development featuring 295 apartments, a 10-story 225,000 square foot office building, and a 20,000 square foot retail village
    • Mike Wilcox of The Bulfinch Companies discussed development at Needham Crossing and the branding and leasing efforts at Atrium Center. Wilcox concluded with an exciting Atrium Center video that you can see here.
    • In his market overview, Jeremy Grossman of CBRE/Grossman Retail Advisors noted the “flight to quality” among retailers, New Urbanism, the continued expansion of restaurants, the intensifying battle among grocers, and the strengthening of regional markets such as Chestnut Hill, Lynnfield, and Northborough as key trends

Elisif_20130501_0215Bus Tour Highlights

Six tour buses, escorted by members of the MA State Police, traveled along Route 128 beginning in the Needham/Newton area and ending in Lynnfield. Here are a few highlights:

 

Elisif_20130501_0268Lunch and Learn at MarketStreet Lynnfield

The tour stopped in Lynnfield for lunch at MarketStreet Lynnfield, a 680,000 square foot mixed-use development currently under construction. Inside a space that will become a Shoe Market store, WS Development’s Tom DeSimone and National Development’s Ted Tye shared details of the joint venture scheduled to open in August 2013.

When complete, MarketStreet Lynnfield will include 395,000 square feet of shops and restaurants, 80,000 square feet of office space, 180 residential apartments known as Arborpoint at MarketStreet, and the 9-hole King Rail Reserve golf course.

Elisif_20130501_0282Voices on Tour

I caught up with a few people on tour. Here’s what they had to say:

  • Tom DeSimone, partner, WS Development: “There’s no better way to understand real estate than to actually be there. The NAIOP Bus Tour gets you closer to the real estate by providing an introduction. Then you can go back and look at whatever may have peaked your interest.”
  • Ted Tye, managing partner, National Development: “It’s great to people out here having a nice day, getting out from behind their desks, and seeing some projects that are being built. And, it’s incredible that in 2013 that we actually have things being built.”
  • David Chilinski, co-founder and president, PCA: “The best part of the NAIOP Bus Tour is that you really get a sense of what’s happening and, importantly, what’s new in the marketplace.  We all know the tried and true properties, but the tour lets you see new projects as well as cases where people are reinventing or adding to projects. That’s the importance of this tour.”
  • Sarah Walker Weatherbee, managing director, Keller Augusta: “You get a sense of history as well as what the future holds for the Boston-area markets like the ones we saw today. And, the networking that the Bus Tour enables is unique to NAIOP—that really makes the day exceptional.”


While here, please read David’s important post below about National Development’s Roseann Sdoia, who was seriously injured in the Boston Marathon bombings. David includes a link to Roseann’s Recovery Fund for those who wish to donate toward expenses for Roseann’s treatment and recovery.