In Just Three Years, Foreign Investment Has Skyrocketed
In 2014, foreign buyers accounted for 42% of the capital invested in the Boston area, compared to just 3% in 2012, according to MetLife. It's obvious that things change fast around here, and we're going to put all the info in one place at our State of the Boston Market —Tuesday, Sept. 29, 7:30am, 2 Center Plaza, third floor and future home of Localytics. We suggest you register now, and we'll even give you a sneak peek. Here are some short tidbits from our panelists.
The competition to buy office, multifamily or retail properties in the Boston area just gets more intense but that’s not dissuading MetLife director of acquisitions in the Northeast Ashleigh R. Simpson from continuing to search. MetLife, which owns One Financial Center, recently acquired One Beacon St, and added a multifamily development site in Quincy. Ashleigh tells us the Financial District cap rate, down to 4.25% and lower, is approaching that of Manhattan.
Investors see the US as a secure place to park capital. They’re fond of Boston's manageable size with discernible market dynamics—especially helpful to investors coming from abroad. The economy, which is driving demand for offices, boasts an employee base that’s deep, experienced and knowledgeable, Ashleigh says. The top Boston submarkets for institutional investors are the Financial District, the Seaport, Back Bay, Cambridge and Medford.
Among the new developments that will make The Hub an even more desirable place to invest are the Wynn casino in Everett and Boston Properties’ mixed-use tower in North Station. Ashleigh tells us the casino will “put Boston on the map” as a place for businesses to entertain. Although the supply of quality product coming to market is scarce, MetLife will keep seeking new opportunities to expand its Boston footprint. (Pictured is MetLife's Charles River Landing in Needham.)
Panelist Oxford Capital CEO John Rutledge is looking forward to the Q4 opening of the company’s 240-key Godfrey Hotel in Downtown Crossing, now one of Boston’s most dynamic submarkets. In summer 2012, when John paid $23M for two antiquated adjacent office buildings on Temple Place and Washington Street he hoped this would happen. In that post-financial crisis era, he saw meaningful development momentum with Millennium Partners' two projects, and several other developments being planned.
Millennium Place and Millennium Tower are successful ($1.5B in condo sales), even though the Tower won’t open for a year. Tenants like Havas/Arnold Worldwide, Primark and Roche Bros supermarket have moved in. Several other residential towers are underway or recently completed. The hotel market, among the nation’s top three (with San Francisco and Honolulu), is crushing it. Downtown RevPAR is up 9% year to date; room rates are “compelling”; and the demand base is wide: healthcare, education, tourism, government, finance, law, technology and life science, John tells us.
It takes patience and respect to successfully navigate the city’s approval process, John says. That’s a good thing, he adds. It preserves Boston’s heritage and leads to quality commercial property products. Like most adaptive reuse projects, reinventing the two Temple Place buildings from office to hotel was challenging. Oxford initiated their inclusion on the National Register of Historic Buildings. It repaired the façade, beaten up by 100 Boston winters; installed all-new systems; designed a hotel with a distinctive exterior and unique interior; and conducted construction in one of the most densely trafficked locations in the nation.
To design the office of the future, CBT Architects principal Haril Pandya is watching how students work. He concludes that for them, it will be the experience and the environment, and not the 100 SF office, that defines their level of creativity and collaboration. As he reimagines the 700k SF Center Plaza downtown and 660k SF Schrafft’s building in Charlestown, he sees new offices as being about zones: quiet, work, café/food, and both indoor and outdoor social spaces.
At his recent TEDx talk on how to make a building more Millennial and Gen Z accessible, he focused on extending the workplace into building lobbies, roof decks and other public spaces. At Center Plaza, in the heart of Government Center, the floor plates are an extensive 68k SF and narrow enough to let in lots of natural light. To alter its Greatest Generation image, Center Plaza will become a living, breathing entity with its own Twitter handle and website. The lobbies, with new glass entries, will become a more active element of the streetscape. New retail and restaurant tenants will introduce exciting food and entertainment options.
Mayor Walsh’s launch of the first citywide master planning process since the ‘60s may provide the push Boston needs to address some long-standing and critical issues, says panelist Fred Kramer, VP of ADD Inc, now with Stantec. Fred and his team have designed buildings for most of the city’s hottest markets: the Seaport, South End and East Boston. He supported the effort to bring the 2024 Summer Olympics here, in part, as a way to impose a deadline for tackling tough issues, but now he hopes the master planning process will provide a foundation for a dialogue about Boston's future.
Fred will detail his to-do list. Some items are: investing in infrastructure and mass transit; producing affordable, mid-market and workforce housing; targeting where to develop; establishing design guidelines and planning principles; determining how to encourage growth while maintaining the quality of life and place, injecting more certainty into the development and approval process, and making the harbor even more accessible. To hear more trends and get answers, come to Bisnow's State of the Boston Market, Tuesday, Sept. 29, 7:30am; 2 Center Plaza. Sign up today!