Though as a new neighborhood, Seaport has been in the works for a long time, it seemed to emerge in 2016 as a competitive office submarket—especially competitive against the Financial District, Colliers International director of research Aaron Jodka told us. And the rivalry is just beginning as 2017 gets underway.
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"The Financial District hasn't had to compete so directly with such a nearby market for a long time," Jodka said. During the most recent building cycles, not a lot of new office space was developed in the district, and now Seaport offers new buildings with the latest building technology, along with water and city views. "That appeals to a number of tenants."
As Financial District tenants leave—either for Seaport or elsewhere—or downsize or otherwise rethink their space needs, that's having an impact on vacancies. In space above the 20th floors of Financial District buildings, vacancies are 19.7%, Jodka said, the highest since Colliers started tracking that number.
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Going forward, is Seaport going to completely drink the Financial District's milkshake? No, Jodka predicted. Rents might be reined in, and the area might evolve into something else, but it will still attract tenants. There might even be less emphasis on finance, so much so that "Financial District" might not fit so well some day.
For instance, some tech companies will consider Downtown an option. "Tech companies want character, and that's a bit of a challenge for high-rise buildings," Jodka said. Even so, the Cambridge Innovation Center opened an office at 50 Milk St. "That's as innovative a company as it comes, and they wanted to be Downtown. The district has started to shift away from financial tenants."
One of the Financial District's main strengths is still its location at the epicenter of Boston-area transit. "That's hard for Seaport to compete with right now," said Jodka, adding location helps make some of the Financial District's lower-rise properties very competitive with anything at Seaport.
Find out more about the Financial District's future in our Future of Downtown Boston event on Jan. 17. Speakers include execs from Babson College, Carpenter & Co, the Downtown Boston Business Improvement District, the HYM Investment Group and Nixon Peabody.
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