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January 15, 2014
New Look for Offices in Old Downtown
Software developer Rapid7's upcoming move to the Financial District isn't the biggest office lease--46k SF--but it says a lot about what's new in this downtown submarket (to misquote Teddy Roosevelt: lease softly, but carry a big implication): fast-growing tech tenants, open plan layouts, smaller leases and reasonable rents. For tenants, opportunities abound; for landlords, it's a race to fill space.
In seven weeks—on March 7--Rapid7 will double its office size when it moves into 100 Summer St where space is being designed for the way it works, CIO Jay Leader tells us. For years, it sublet other company's offices. Now, it has a “huge opportunity” to create a frictionless office with no high walls and few closed rooms. The new design will transmit the Rapid7 “culture and energy between groups.” (And make paper airplanes easier to maneuver.) It's moving from Back Bay to the Financial District because: it wants to stay close to mass transit; it found a large block of space with expansion options; landlords are pushing to find tech tenants and offering good rents, he says.
As a “people company” that develops custom security software, the productivity of its staff--set to grow from 220 to 275—is paramount. Cubicles are banned. (So don't even try to bring your own.) Instead, there will be high-top tables for groups of eight sales people; at Rapid7 they call them “sales buses.” The purpose is to promote a spirited business model that's transmitted throughout the office, Jay says. Much of the space will be collaborative; banquettes and talk rooms, interspersed with soft seating and drop-in space. For privacy, there will be conference rooms and for quiet sales calls, phone booths. The desired “vibe is about energy and collaboration.”
Although the economy is growing and vacancy rates are declining, the Financial District is still a tenant's market with landlords battling to keep those they have and sign-up new ones, says McCall & Almy partner and tenant rep Dave Richardson who arranged the Rapid7 lease with partner Neil Schneider. Most downtown tenants, from law firms to high tech companies, are using 15% to 20% less space per person. (That must be why so many companies are sponsoring weight loss programs.) Companies as different as PwC, PayPal and Rapid7, want offices with more “we” space and less “me” space, he tells us. But having 15% to 20% of supply going back on the market creates headwinds for absorption.
Strong job creation could counteract the space givebacks, but it won't come from big corporations moving into the Financial District from out-of-state to set up HQs, Dave says. Boston has fast-growing startups and tech companies that helped fuel growth at the Seaport. As rents there and in Back Bay rise, some of these tenants want to relocate to the FD where Class-A tower rents range from the low $40s SF on the lower floors to the low $60s on the higher floors; in the Back Bay they range from the low $50s to high $70s. Given these dynamics, Dave doesn't expect to see Financial District rents rise substantially—or spec office construction—in the near term.
Mt Vernon's Percelay at Multifamily Summit
At Bisnow's4th Annual Multifamily Summit, Jan. 30 at the Sheraton Back Bay The Mount Vernon Co chairman Bruce Percelay will discuss his $120M Allston Green District, a cluster of 500 mid-market rental apartments in new and renovated buildings that's bringing more professionals into a neighborhood once dominated by students. Going forward, he plans to launch two more developments in different parts of Allston. More market-rate housing will help balance the profusion of luxury apartments being developed downtown, he says. To hear more from the experts on the panel register here.
Meet Greg Vasil, CEO, Greater Boston Real Estate Board
The 125-year-old board (that makes them older than the Red Sox), the nation's oldest real estate trade association, is dealing with some of the region's newest issues and trends, Greg tells us. As a member of the transition team of Marty Walsh, Boston's first new mayor in 20 years, Greg is helping to formulate private sector solutions to homelessness with developers such as Winn, Beacon Communities, and Schochet. He and GBREB are suggesting guidelines to implement the energy report card that will score office, retail, hotel, and industrial properties on energy efficiency starting this spring.
As projects like Millennium's Millennium Tower at the former Filene's site (above) further the rebirth of the Financial District and other downtown neighborhoods, Greg and GBREB are weighing in on how to promote job growth. To have office development match the wave of multifamily projects being built downtown, he suggests examining possible new subsidies and tax breaks for businesses growing in the region. Meeting with companies operating here but based elsewhere, Greg would like to learn what might motivate them to expand in Boston. Trained as an attorney, Greg also worked for the state on environmental issues for 11 years.
Weight loss mantra? Fat chants! Think summer! Please send news to firstname.lastname@example.org