Why John Hancock’s Former Seaport HQ Is Still Empty
When John Hancock announced in March 2018 it would vacate its 482K SF Seaport headquarters and consolidate in the Back Bay, most in Boston real estate figured a tenant would quickly snap up the space. But nearly a year after the financial giant moved out, 601 Congress still has no replacement.
Boston’s office market is the hottest it has been in nearly 20 years. Urban Boston office vacancies are at 7.4% and Class-A rents are up nearly 10% over the last year, according to Perry data. Most Boston real estate experts say the only office headwind is there simply aren’t enough large blocks of available space for tenants in the market for more than 100K SF.
601 Congress is a rarity: a readily available block of space in Boston’s hottest development district, and many of the city’s office brokers are stumped at its sustained vacancy.
“Frankly, I’m surprised it hasn’t leased,” a source close with 601’s leasing said, who was granted anonymity to discuss ongoing negotiations. “It’s a newish building in a hotly desired market. You should be able to push that kind of real estate.”
The building's leasing team maintains the current vacancy is part of a strategy to land bigger tenants.
“We had a game plan on how we wanted the lease-up to work, and those tenants don’t occupy in three months,” Newmark Knight Frank Executive Managing Director Debra Gould, who is leading the leasing efforts for the building, told Bisnow this week.
Gould said four competing brokerage teams pitched a similar strategy to 601 Congress owner Manulife, John Hancock’s parent company.
“If you decide you’re going to multi-tenant a building and start leasing out 7K SF [deals], you can get a deal done in six months or 12 months, but not if you’re going to lease to a larger tenant,” Gould said. “So it’s not at all surprising the tenants we’re talking to have lease expirations running in ’21, ’22 or ’23.”
The Seaport and Back Bay are benefiting from Boston’s landlord-friendly office market: both submarkets have landed nearly 800K SF in office leases this year so far, and office availabilities have leased on average quicker in the Seaport (11 months) than Back Bay (13 months), according to JLL.
“You’re seeing just as much office activity in the Seaport as you do elsewhere in Greater Boston,” JLL Executive Managing Director Benjamin Heller said. “If you’re a tenant of a certain size, you can’t really narrow down on one submarket over the other. There are only five or six options that can house them.”
But 601 Congress has stagnated despite its prime location, multiple brokers told Bisnow. The 14-story office building is less than a mile from two of Boston’s busiest highways, minutes from Logan International Airport and South Station and has direct access to the MBTA Silver Line.
In the 21 months since John Hancock announced its Back Bay consolidation plans, many of Boston’s active tenants with size requirements ideal for 601 Congress have gone elsewhere or toured the property with interest only to be turned away, sources say.
State Street plans to move its headquarters in 2023 to a 510K SF office at One Congress, an office building under construction at Bulfinch Crossing, it announced in January. Wayfair has centered much of its ongoing expansion in Back Bay. Bank of America signed a 15-year, 545K SF lease in late April at 100 Federal St. ahead of its 2022 lease expiration.
Multiple sources familiar with the leasing strategy at 601 Congress told Bisnow Manulife turned down potential deals with WeWork, due to the perception the coworking company would bring to the building, and State Street because it wouldn’t be able to move in for several years.
Talks with State Street happened before NKF was brought on to market the building. Manulife didn’t respond to Bisnow’s request for comment as of press time.
“They’re looking for a whale tenant, but that hasn’t come,” a broker familiar with Manulife's thinking said. “All these bigger active tenants stayed in place or, if they moved, it wasn’t to 601. Now, the next big blocks of space are rolling in 2024 or 2025.”
The 601 Congress team is no longer just holding out for a nearly 500K SF lease. After a review of the building’s infrastructure, while looking to tap into the Seaport’s momentum as a life sciences cluster, the NKF leasing team has begun to market 130K SF as a possible conversion into lab space on the building’s second, third and fourth floors.
These lower floors have ceiling heights that top out at 14 feet and minimal interior columns, which Gould said is conducive to a lab conversion. Marketing materials for the building estimate an 18-month timeline for that build-out, but, even with the Seaport evolving into a waterfront Kendall Square, Gould said the development team isn’t willing to start that process speculatively.
“There is a lot of infrastructure you have to put in the building to be lab show-ready,” she added. “We will want a tenant in hand to spend that kind of money.”
The development team is also working with architecture firm CBT on a new lobby and coffee bar, a fitness center, an atrium and a conferencing center.
Rather than the building’s historically single-tenant status, the Newmark team anticipates 601 Congress will eventually feature more than one anchor tenant — one likely a lab user — and then fill in the rest with some single- or double-floor tenants. While she didn’t give specifics, Gould said her team continues to see significant interest in the building and deals are on the horizon.
“I don’t think [the leasing brokers] have done anything wrong,” the broker said. “The timing to catch a whale just didn’t work out.”