Yesterday's Real Estate Forecast
Will companies still rush to lease downtown? Will multifamily rentals continue the juggernaut? Will Batman capture the Penguin? The nearly 300 guests at yesterday’s Bisnow 2014 Boston Real Estate Forecast got answers to almost all of those.
Our panel: moderator Prince Lobel’s Michael Ross; Related Beal EVP Peter Spellios, The Davis Cos managing director Jon Frey, Normandy Real Estate partner Justin Krebs, and Diamond Sinacori founding partner Merrill Diamond. (The chairs are bigger than some downtown micro-units.)
Related/Beal’s redevelopment of Lovejoy Wharf into condos and a HQ for Converse reflects trends that will amplify. Converse is relocating its home base there from N Andover because the good transportation access and rare waterfront location in a building with historic charm will allow it to retain staff and recruit the Millennial/echo boomer crowd who eschew cars. Also, while the 150-year-old wharf building was profoundly deteriorated, Converse saw an opportunity to have a highly visible rooftop sign. Peter says Related/Beal, which recently acquired the Fidelity Block, sees the Financial District as the new Innovation District for companies and residents priced out of the Seaport.
Some Financial District tower offices are becoming “value space” now that Seaport rents are $45/SF, Jon Says. Young tech firms can have funky offices--i.e. Pay Pal at International Place--if they get creative in redesigning and landlords are generous with TI. In the ‘burbs, landlords creating the live/work/play space that's in demand will do well while older less well-located commodity office parks will struggle, Jon says. For multifamily, in-town condos will flourish thanks to a lack of supply and willing lenders for these projects. But with housing prices hitting new highs and lots of luxury rental product in the pipeline, where Boston’s workforce lives is still a question mark.
Normandy is building a $100M, 280k SF HQ for TripAdvisor, which looked in Cambridge and the Seaport before it chose Needham where Normandy is developing a new mixed-use complex, Center 128. It’s creating a dense/diverse environment (made easier by the condominiumization of the commercial space) that will feature restaurants, hotel, multifamily, and office. By leasing a BTS, the online travel company will get space created for the way it works at a cost only a few dollars/SF more than their old space, when efficiency is factored into the equation. As growing companies consider Cambridge rents that are up to $65/SF NNN, suburban rents of $35/SF NNN are appealing if the properties have transportation access.
2014 will be the tipping point for condos, says Merrill who develops for-sale housing exclusively. There’s a glut of rental apartments, in part, because they were the sole housing asset that was “financeable” for several years. But now as a condo developer, “it’s a new financing world." On the other hand, offers of free rent in some new apartment buildings points to oversupply, he says. (Or apartment owners watching too many car commercials and getting swept away in it all.) The pioneering condo projects in the current cycle, such as Millennium Place, have done “phenomenally well,” Merrill says. Over time, more buyers will see a financial advantage in ownership and he predicts Brighton will be the next hot market.
Event sponsor, Feldman Land Surveyors' VP Paul Foley and 3D services director Stephen Wilkes flew the flag for the 68-year-old company that’s working on some of the largest projects in town. For the Millennium Tower complex Feldman is using 3D laser scanning on the former Filene’s building to locate variations in the steel and stone structure and to measure all the floor surfaces, capturing every “lump and bump” for the retrofit. For Simon’s expansion of Copley Place, Feldman is doing a full existing conditions survey to help determine where to drive piles for the new building over the Pike.
Sponsor Commonwealth Land Title Insurance Co’s Anthony Bucchere says the Boston office is busy coordinating titles on transactions in-state and nationwide on all commercial asset types for owners and lenders. So far, Q1 has been busier than normal, a trend he hopes continues throughout the year. In Boston, so much new development is focused on the Seaport, it’s good to see Related/Beal doing deals like the Fidelity Block, which can introduce new uses to the Financial District submarket, he says.