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Real Estate Bisnow
January 3, 2013 

Boston #1 in US


In office property sale prices, Boston leads the nation in values that have surpassed the peak level reached in '07. RCA managing director Dan Fasulo tells us values are 105% of peak, outpacing DC and NY metros. (To be fair, DC was distracted by the fiscal cliff, and NY was distracted by trying not to anger Chris Christie.)

Cresset Group prez Ed Nardi
How does a 133% gain sound? Reportedly, Atlanta-based Invesco has agreed to pay Cresset Group (prez Ed Nardi above) $70M for the 75k SF Liberty Wharf complex it developed for $30M. Back in the dark days of late ’09, Cresset was nearly alone starting construction on this restaurant and boutique office project. Although it sits on Boston Harbor with an outdoor terrace overlooking the water, the location then seemed like an outlier. But it became a favorite when it opened in ’11, with all 27k SF of offices leased and restaurants such as Legal Sea Foods, Remy's, and Del Frisco.
Liberty Wharf Boston
Liberty Wharf (above) isn’t the only good sale news. Recently, Clarion paid $129M, or $315/SF, to National Development & Investment and Angelo Gordon for a portfolio that includes 332 Congress St. Dan tells us that's a 74% gain from the last sale in ’06, when it changed hands for $74.3M. It’s an older building but very sharp, he says, with a loft feel that attracts tech companies. Nationwide, most downtown CBD properties are selling for an average of 11% below peak, according to Moody's CPPI. Boston’s 21st century economy—based on life science, research and tech companies—gives our market an edge. These companies are adding jobs and leasing space.

                          Boston Office Hits Top 5

CBRE Econometrics Advisors senior managing economist Arthur Jones
Boston offices will catapult the Hub into a top five US market for rent growth, up from 17th in Q3 ’10, CBRE Econometrics Advisors senior managing economist Arthur Jones tells us. (It's great, but it's also not #1. Our lead story proves office sales loves to steal office rent's thunder.) In ’13 and ‘14, with healthy demand and less space available, he expects effective rents to grow 9.4% in downtown Boston, up from $36.05 today on an average annual basis. In Cambridge, where rent grew 11.3% in the past two years, it will grow 8% going forward, up from $36.86 now. The extraordinary increase of high value-add jobs and vacancy rates below the region’s historic trend, mean the area is “well positioned for growth.”
Vertex HQ being built at Fan Pier
One major factor: payroll employment is fast approaching its pre-recession peak. Just the new Vertex HQ (above) being built at Fan Pier will bring nearly 2,000 new jobs. Today, the region employs 720,600 people in office-using jobs, just 1% below the peak of 729,000 in mid-‘08. These folks are working in high tech, science, R&D, and professional services like law, architecture, and accounting. This performance is somewhat surprising considering  the comparatively high cost of doing business in Boston. Still, by ’14, the region will surpass the peak with 754,000 office jobs.
Kendall Square Cambridge

The metro office vacancy rate is 11.1%, just above the 10% that connotes a market in equilibrium, and well below its historical trend of 12.2%. In Cambridge, where Kendall Square (above) and East Cambridge are superstars, the vacancy rate is an even better 8.2%, compared to the long term trend of 10.5%. In ’11 and ’12, tenants absorbed space at a 1.6% pace, far surpassing the national average of 1%. “That’s very healthy,” Arthur notes. For landlords, it means time to raise rents.

The Hamilton Co Still Growing
The Hamilton Co CEO Harold Brown, 87

The Hamilton Co, New England’s largest private multifamily investor, acquired about 200 Boston units last year, says CEO Harold Brown, looking good at 87 years. The company, which has a $1.4B portfolio of mostly multifamily assets, is also building two new apartment buildings downtown and planning several large projects. By March 1, construction will be completed on a gut rehab of historic 8 Winter St. in Downtown Crossing. Of the six major new developments under way in and around the neighborhood, only 8 Winter St will offer all moderately priced apartments with rents about 40% below comparable new units. Already, the building is nearly half leased. Hear more from Harold at Bisnow’s Boston Multifamily Summit, Jan. 16 at the Westin Boston Waterfront. Register here.

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