How Boston's Top Developers Discover Emerging Markets
Every developer wants the next big thing. Yesterday, we asked developers how they go out and find it at Bisnow’s Boston’s Suburban and Emerging Markets event at the Westin Waltham.
The panel on emerging urban submarkets (above) included moderator Prellwitz Chilinski’s David Chilinski; Mount Vernon Co's chairman, Bruce Percelay; US2’s Greg Karczewski; Boylston Properties’ Bill McQuillan; and Boston Realty Advisors’ Chris Sower, a broker.
The developers on our first panel are doing projects in Allston, Somerville and Watertown. Here are some features they seek when choosing a site and some challenges they face.
Bruce, who sold his multifamily Green District in Allston, has a “voracious appetite” for new sites. For a development on Western Avenue in Allston, he’s “racking his brain” trying to come up with a compelling product. Such differentiators help a developer survive a down cycle. For The Green District, the first major new multifamily development in Allston in at least 50 years, Bruce saw what others missed: a location with convenient T service that borders the hot Boston and Cambridge markets, and was filled with derelict buildings.
Greg leads Union Square Station Associates (US2), the master developer that’s planning the $1B, 2.3M SF redevelopment of Union Square. He gives lots of credit to Somerville and Mayor Joseph Curtatone. The mayor, a lifelong resident, lobbied hard to get the T to agree to build six new stations in the former industrial city. He’s also strongly supported Federal Realty Trust’s $1.3B Assembly Row mixed-use project, where Partners Healthcare is building an office complex that could reach 1.1M SF. Demographically, Somerville has a population heavy with Millennial college grads, the type of workers sought by companies in the surrounding “Brain Triangle” of Tufts, MIT and Harvard, Greg says.
To Bill, raised in Needham and living in Brookline, Watertown is not the “hinterlands” described by some. It sits between Cambridge and Boston. A quick bike ride from his sites, which include (and are near) the Arsenal Mall, is a dynamic mix of new developments including the $500M mixed-use Boston Landing and Harvard’s site for its Allston campus. Last year, after his firm opened a 175-key Marriott in Brookline, the hotelier decided to focus on Watertown and is partnering with Bill’s firm on a hotel that recently broke ground. Boylston Properties is also redeveloping the Arsenal Mall and planning an office building nearby.
The Future of the Suburbs panel included: moderator Lean Project Consulting’s Hal Macomber, National Development’s Andrew Gallinaro, The Davis Cos’ Quentin Reynolds, and Sam Park & Co’s Sam Park.
Sam and his partners (developers of the $100M Point on 90 acres in Littleton) face the lingering aftershock from the Great Recession that hit the outer suburbs hard. But he figures that building across Rte 495 from IBM’s largest software R&D site in North America with 1,600 employees means, “We won’t fall on our face.” The key is to invest in density and amenities, he says. He plans to plow back 10% of expected office rents of about $32/SF into amenities like fire pits, climbing walls and outdoor walkways. Already in the 270k SF Phase 1: a Market Basket and Starbucks, and, coming soon, a Marriott, Tavern In the Square and Digital Credit Union.
Retaining tenants calls for significant TI, says Quentin. In older buildings, opening up floor plates and activating a lobby can bring new life and new tenants. In Burlington, where TDC paid $36M in Q1 for One Burlington Business Center—now The Center at Corporate Drive—there’s a strong existing market, infrastructure and a deep tenant pool.
Andrew's (center) firm--with partners AEW Capital Management and Charles River Realty Investors-- paid $216M for New England Executive Park two years ago. Construction started on a major renovation and addition to bring the Class-B complex up to Class-A. They'll convert the old fashioned suburban offices into a walkable, amenity rich environment with open plan offices, more retail and a new hotel. Class-B product may soon become obsolete, as owners reinvent or redevelop them, he says. Big issues for suburban towns: create access to public transit and encourage more residential development near office nodes.
Finding the next hot market takes “pioneers,” and we had plenty of those on our panel, Chris says. Still, it isn’t easy to find big sites for a major mixed-use project. Typically, they’re industrial sites with existing businesses on them. Once he identifies them, he tries to get in front of the property owners to explain the value of the land. It’s important to be creative and flexible so the acquisition isn’t presented as just buying the land and shuttering the businesses.
Our events always include time for fruitful networking. Here's Gilbane's Michael Kennedy and a mysterious hand.
Thank you to our wonderful sponsors: unispace; Boston Realty Advisors; PCA Architecture; and Lean Project Consulting, who's Hal Macomber (above) was a panel moderator.