Boston’s Biggest Real Estate Stories Of 2018
Boston may have lost the Amazon HQ2 race, but the city still had plenty of CRE activity to talk about in 2018.
Amazon skipped Boston when it made a final decision to break HQ2 into two pieces and give them to Northern Virginia and New York City. Massachusetts isn’t exactly crying over the defeat.
Instead, the region’s developers tout the cranes in the sky going to a diverse array of companies instead of just one. Offices and lab space are sprouting up in unexpected places. Hotels, convention-sized and boutique, are filling up the pipeline. Amazon still wants to be in Boston, and so does Chick-fil-A.
Not everything is rosy in Beantown. The city’s business community is tackling the opioid epidemic outside its own front door. Transit advocates call for fixing the MBTA in order to win the next Amazon, and the fate of a $2.6B casino north of Boston still isn’t clear.
Bisnow looked back on 2018 to show off Boston's biggest stories, the good and the bad.
Chick-fil-A Plans Boston Debut
Boston has lowered its iron curtain when it comes to Chick-fil-A’s fried chicken and waffle fries. Bisnow first reported in November the Atlanta-based chicken chain would make its Boston debut in Copley Square.
Chick-fil-A has been a presence in Greater Boston for years, but it hasn’t been inside city limits. The absence was attributed to the late Boston Mayor Thomas Menino, who vowed to block the company from opening after Chick-fil-A CEO Dan Cathy publicly opposed gay marriage in 2012. The company has since distanced itself from politics and expanded beyond its Southern roots into large cities like New York and Chicago.
Boston may have a reputation of an unfriendly city, but 2018 has been a busy year for the city’s hospitality industry. Hotels of all sizes are in the pipeline and will offer a variety of guest experiences when open.
Mount Vernon Co. founder and Chairman Bruce Percelay opened The Revolution Hotel, a 164-room South End hotel geared toward younger travelers. The project documents Boston’s penchant for innovation with décor that highlights the city’s numerous “firsts,” like the Chuck Taylor sneaker, the newspaper and even the country’s first brothel.
St. Regis will make its Boston debut, minus the hotel rooms. Cronin Group principal Jon Cronin is working with the upscale hotel flag on his luxury condo development under construction at 150 Seaport Blvd. The St. Regis Residences, Boston, is part of a global trend of hotel-branded condo developments that lack an actual hotel.
A 1,055-room Omni hotel broke ground in the Seaport in May, but the developers were immediately sued by Fidelity. The financial giant owns the nearby Seaport Hotel and was concerned Omni’s planned “Omni Boston Seaport Hotel” sounded too similar. Fidelity also used the lawsuit as a reminder of how it was an early force in turning the neighborhood into what it is today.
“When the Seaport Hotel first opened in 1998, the waterfront area in which it is located was described by the Wall Street Journal as ‘a ghastly mix of polluted junkyards, construction cranes, parking lots and warehouses badly in need of new development,’” the lawsuit states. “Today, in stark contrast to 1998, the area is a hotbed of residential, business, and hospitality growth.”
The Hamptons vs. Nantucket
The playground for the 1% now includes an island off the coast of Cape Cod. Nantucket overtook the Hamptons this year for residential real estate value, with the average home on Nantucket going for $2.4M compared to $2.1M in the glitzy stretch of Long Island. Overexposure is partly to blame for the Hamptons slump.
“Nobody on Nantucket is judged by what car they drive, unless it’s too nice,” said Percelay, who owns two Nantucket hotels and is the publisher of Nantucket Magazine. “This is a culture that is far more grounded than a Palm Beach or Aspen or Hamptons.”
Boston's Brokerage Battle
The war for talent is often cited as why so many companies are ditching Boston’s suburbs for downtown and the Seaport. But a different kind of talent war resonated throughout the city’s brokerage community in 2018.
Transwestern RBJ talent leaked like a sieve at the beginning of the year to other firms. Bob Richards, a founding partner at Transwestern predecessor Richards Barry Joyce & Partners, left in early February for an executive vice chairman role at Cushman & Wakefield. Michael Joyce, another founding partner, left the previous month for a vice chairman position at C&W.
The biggest move came when Steve Purpura led a 48-person team from Transwestern to CBRE New England at the end of February. The team also included John Lashar, Jon Varholak, John Barry, Brian McKenzie and John Wilson. All were founding partners at RBJ.
Winthrop Center Breaks Ground
The long-awaited Winthrop Square tower is under construction, albeit hundreds of feet shorter than what Menino once envisioned.
Millennium Partners broke ground on the 691-foot Winthrop Center in October. The project faced years of scrutiny by park advocates concerned with new shadows the building might cast. Even the Federal Aviation Administration weighed in, saying Millennium’s original 775-foot design would impede operations at nearby Logan International Airport. The tower was shortened, and Boston got $163M for selling a dilapidated parking garage on the property to Millennium.
“We are proud of our accomplishments in 2018, including the successful groundbreaking of Winthrop Center, a transformative project that is aligned with the goals and objectives of the City of Boston,” MP Boston principal Joe Larkin told Bisnow in a prepared statement.
Boston’s Next Innovation District
Kendall Square is a victim of its own success. The East Cambridge neighborhood is known for its near-zero lab vacancy rate, and prices continue to skyrocket for land anytime it becomes available. While developers in Kendall are beginning to build taller buildings to house growing tenants like Google, the Kendall squeeze is benefiting other neighborhoods. Developers like Related Beal, The Davis Cos. and Millennium Partners are pursuing projects on the Seaport’s eastern edge that are boosting the neighborhood’s life science appeal.
The South End has also emerged as a dark horse contender, offering access to Boston Medical Center’s research community as well as the neighborhood’s popular retail and residential developments.
Harvard’s Allston expansion, along with NB Development Group’s tech and life science appeal at Boston Landing, have many in Boston’s real estate community already calling the neighborhood Kendall Square 2.0. Straightening the Massachusetts Turnpike remains a thorn in Allston’s side, with critics arguing the wrong design could leave decades of real estate impact in the area.
CRE Tackles The Opioid Epidemic
The opioid epidemic continues to ravage Massachusetts, and it is a growing concern to Massachusetts property owners. Boston’s building boom has caused developers to snap up land in Newmarket, an industrial neighborhood that is also the city’s ground zero for illicit drug use. Bisnow talked to business owners, neighborhood leaders and law enforcement officials on what it would take to fix the status quo. Hundreds of people line Newmarket streets each day in states of drug-addled stupor. Unfortunately, those interviewed don’t see it changing anytime soon.
“I’ve had pictures of police cruisers and 30 people doing drugs right behind it,” one Newmarket business owner told Bisnow in July. “I’ve also had incidents where the city will come down [on us] because we spoke up. Everyone is too afraid to speak up because you’re going against the city and afraid of retaliation.”
A Potential No-Wynn Situation
Legalized gambling is spreading throughout the East Coast, and 2018 delivered Massachusetts’ first resort casino. MGM opened MGM Springfield in August, but most of the state’s casino chatter has surrounded a $2.6B casino under construction outside Boston.
Encore Boston Harbor is scheduled to open in June, but its future is still unclear following the bombshell report of decades of sexual misconduct by Steve Wynn, the former CEO of Encore parent company Wynn Resorts. The casino project, originally called Wynn Boston Harbor, changed names, and the company purged its board of members with ties to Wynn.
The Massachusetts Gaming Commission was expected to announce a decision in December regarding Wynn Resorts’ ability to keep its Greater Boston casino license, but that has been stalled. Steve Wynn filed a lawsuit against his former company and the MGC over whether the report contained privileged communications with his attorneys and Wynn Resorts.
Boston Loses Amazon HQ2
After more than a year of silence from Seattle and plenty of speculation around the country, Amazon announced where it was going to locate its second headquarters. It wasn’t Boston.
The Seattle-based company decided to split HQ2 between New York and Virginia and even threw in an operations center for Nashville. Boston wasn’t feeling burned.
A week before the HQ2 winners were announced, Boston’s real estate community touted the benefits of Massachusetts having so many startups with valuations of at least $1B in the area. Why bother with Amazon when the region can grow its own? The region is also using the back-to-back losses of the 2024 Summer Olympics and Amazon as motivation to finally recognize an inadequate transit system is hindering the region’s ability to attract large-scale events and big business.
As for the local proposals, Somerville’s "Amazon on the Orange Line" concept is still humming along but with a variety of company logos. Verizon is planning a move into a future North Station office tower, Philips North America and Sanofi are heading to Cambridge Crossing and Assembly Row, home to Partners Healthcare, is growing just as it was before HQ2.
“It’s business as usual, and we’re going to keep on the trajectory that we’ve laid out,” Federal Realty Investment Trust Vice President Patrick McMahon told Bisnow in November.
Boston’s preferred HQ2 site in Suffolk Downs is also reverting to its original plan, which means a greater focus on bringing much-needed housing to the area. HYM Investment Group still plans to turn the 161-acre horse track into a 16M SF transit-oriented mixed-use development. While his company may have lost Amazon, HYM Investment Group Managing Director and founder Thomas O’Brien still expects to attract office tenants to his East Boston megaproject.
“We think if we create a great place for people to live, the companies will want to be there," he said.