Boston Is Still Banking On GE, Even In Condensed Form
Don’t expect real estate tears to flood Fort Point Channel over GE anytime soon.
General Electric confirmed last week what many in Boston’s real estate community had assumed for months: There won’t be a prominent, 12-story second phase to its headquarters along Fort Point Channel. The company has shed assets, burned through CEOs and looked for solid financial footing since shortly after breaking ground in 2017 on the $200M complex originally envisioned as Innovation Point.
But while there will be fewer innovators on Innovation Point than anticipated (250 employees instead of the intended 800), Boston still sees GE as a vital tool in the rebirth of its waterfront.
Plus, it has still pocketed $2M in additional tax revenue and has a $50M charitable commitment from the company.
“I’m not going to lie awake over this,” attorney and former Boston City Council President Larry DiCara said. “I think we’ll be fine. It’s a question of, if you get lemons, do you make lemonade?”
GE was not the first company drawn to the Seaport and Fort Point. Fidelity Investments has had a large presence at the World Trade Center for years and Vertex Pharmaceuticals moved into a 1.1M SF Fan Pier headquarters in 2014. Former Financial District tenants like PwC have also migrated into the neighborhood.
But GE’s 2016 announcement that it would move from Fairfield, Connecticut, to Fort Point was a high-profile shot in the Seaport office arm.
“What GE has done, even if they’re not building this nice headquarters on Innovation Point, was the catalyst for growth in the Seaport,” Colliers International Director of Research Aaron Jodka said. “They validated Boston as a place to locate or relocate to.”
Reebok, Alexion Pharmaceuticals and PTC have all moved their headquarters into the Seaport since GE first announced its planned migration into the neighborhood. MassMutual also has plans to move into a $240M, 300K SF Fan Pier office.
Amazon made an initial foray into Fort Point in early 2018 with its 150K SF office at 253 Summer St., next to where GE’s smaller-than-expected headquarters will be. The Seattle-based company is also planning to move into a nearby 430K SF Seaport Square office that will employ 2,000 people.
It may have ushered in the latest era of big Seaport offices, but GE’s presence there will be modest.
When construction finishes, GE will have a 95K SF Boston headquarters. The company is selling those buildings, at 5 and 6 Necco St., and the adjoining 2.7-acre property where the 300K SF tower would have gone to pay back the $87M in incentives it received from Massachusetts to move to Boston. It plans to execute a 10-year leaseback deal for the former candy factory it will occupy.
GE has not received any of the $25M incentive package Boston agreed to provide, and its commitment to remain in Boston has kept area officials optimistic.
“General Electric chose Boston because it is a thriving city with a talented and diverse workforce, culture of innovation and opportunity for all,” Boston Mayor Martin Walsh said in a prepared statement. “I'm proud that General Electric brought its headquarters to Boston, and I look forward to our continued partnership."
The company is expected to receive plenty of buyer demand for its unused land, and it could even turn a profit in one of the hottest real estate submarkets in the U.S. CBRE’s investment sales team, led by Scott Dragos, is handling the sale but declined to comment for this story.
“My feeling is if anything comes on the market in this city, it gets national attention,” Colliers Executive Vice President Kristin Blount said.
Large blocks of developable land don’t come often — or cheap — in the area surrounding GE’s headquarters. Anchor Line Partners paid just over $31M last year for a 47K SF property near A and West Second streets, where Alexandria Real Estate Equities is proposing a 300K SF life science building, the Boston Business Journal reported in December.
Gillette parent company Procter & Gamble has reportedly committed to sell Related Beal a 6.5-acre piece of the Gillette World Shaving Headquarters property next to where GE’s 12-story building would have gone. The deal is expected to close for more than $200M. Gillette previously sold off 2.5 acres of its headquarters for $83M to GE.
Related Beal and Procter & Gamble both declined to comment for this story.
There has been a rise in lab development in the Seaport, and Related Beal has been behind much of it. The developer broke ground in late 2017 on Innovation Square, or iSQ, a 375K SF lab development on the neighborhood’s eastern side. It also acquired 451 D St. last summer for $276M and plans to convert some of the 480K SF building’s vacant office space into labs.
But Fort Point could also benefit from newer office development. The submarket’s 15.2% office vacancy rate was well above the 9.2% Boston average at the end of 2018. The neighborhood is home to mainly older wharf buildings, and tenants may be drawn to newer, modern assets, Jodka said.
The overall Seaport development trajectory remains strong despite the GE news. Colliers expects an additional 8M SF of office and lab development to take place in the Seaport until it reaches full build-out, making it the second-largest Boston submarket after the Financial District.
As for what will take place on GE’s property, a lot is riding on what takes place next door at the rumored Related parcel.
“If [the 6.5 acres ends up being] office, the GE land probably will, too,” Jodka said. “If it’s lab-driven, then the GE site probably will be, too.”