Boston: Hang On To Life Science; New York Is Coming!
Investors are so eager to be in Boston that one developer’s bank just raised $200M in a day rather than the 30 days it anticipated. But, Boston has to keep improving to compete with the New Yorks of the world.
Our city may seem to have a lock on life science, technology and knowledge industries but other cities are nipping at our heels, 300 guests were told by the expert panelists at Bisnow’s Boston 2015 Forecast on Wednesday at the Sheraton Boston.
Boston and its neighbors need to lobby for better transportation, infrastructure and amenities, Boston chief of economic development John Barros said in the keynote address. The city would like to see private developers launch more student and mid-market multifamily housing projects. It would welcome more late night restaurants and cafes. The state may then issue more liquor licenses. But clearly, the city is in the midst of a two-year economic and real estate boom--the local economy grew 4.6% in ’14, and 2015 will be stronger.
Boston’s transformation from a small provincial city to a huge world-class market has captivated world attention. Look at the speed with which Citibank just raised about $200M of equity from high net worth individuals in 39 countries for One Dalton, the $700M mixed-use project in Back Bay being developed by Carpenter & Co, says its president Richard Friedman. He thought he’d have to spend a month raising money but the bank raised it in 24 hours and turned away many investors. Now, the Boston luxury housing market is having a spectacular moment. It can’t get any better and in the future, is likely to get worse.
In ’15, Boston commercial property rents will definitely go up because demand is strong, says Synergy Investments president David Greaney, an active buyer, seller and owner of urban offices and retail. Demand is coming from businesses like his 400-plus tenants, many of whom plan to hire in the coming year. And the demand will continue because there a lot of companies that aren’t in Boston that want to be here. But landlords and investors should be careful. Don’t wade into the market expecting soaring rents and quick profits; be realistic, he cautions.
Boston has to work to do on housing, public schools and transportation to continue to be a leader in biotech and technology. Tough competitors like New York are "coming after our tech and life science jobs,” says HYM Investment Group managing director Tom O’Brien. He’s developing with partners, and co-developing, major mixed-use projects: the$2B NorthPoint, the $500M New Balance complex and the $1B One Congress. The Big Apple is building a major new subway line and in 2010, attracted Google to spend nearly $2B to acquire a building. But Boston still has an edge. These days, if a life science company isn’t in Kendall Square, its board asks: Why not?
Boston Realty Advisors founder Jason Weissman says Boston outshines New York because it has less exposure to a downturn in government spending. Based on fundamentals and cash flow, he expects to see lots more property sales in 3% cap rate territory in 2015. Retail and office rents still have room for appreciation and greater cash flow will boost asset values. So much so that investors will start searching for deals in outlier markets, namely I-495 and southern New Hampshire.
Boston is the top US city for international conventions, says Boston Convention & Exhibition Center executive director Jim Rooney. 2014 has been good, and 2015 will be better with 34% more shows contracted. The BCEC has three new hotels in development, including an approximately $650M, 1,200-room headquarters hotel it will develop with Massport. Once in construction, it will be the largest hotel project in the country. As for the traffic around downtown—including Logan International Airport—Jim says the solutions will arise from communities demanding improved transportation infrastructure and expanded mass transit.