The Crazy Plan That Could Be Boston's Amazon HQ2 Silver Bullet
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While Boston is a top contender in the race for Amazon’s HQ2, critics say it is impossible to build 8M SF of offices in the city’s core. But transit upgrades tied to visionary commercial projects surrounding the region’s busiest train station would give downtown Boston more than enough room to house the company.
The U.S. Postal Service sorting facility along Fort Point Channel has been at the heart of conversation regarding the future of South Station. Talks between Massachusetts leaders, the Postal Service and Massport have endured for more than 15 years in hopes of striking a land swap deal to move the facility to Massport-owned land in the Seaport, which would enable the neighboring train station’s expansion.
Some Amazon executives view Boston as a front-runner for HQ2, Bloomberg reported this week, and some see the move as an opportunity to simultaneously create better transit while housing Amazon in the heart of the Hub.
“There are many compelling sites throughout the region,” Perry Brokerage Director of Intelligence Brendan Carroll said. “The South Station site is at the nerve center of the region's transportation network and is woven into the fabric of the city and its amenities. I just feel that might be the winner for Amazon and its people.”
Carroll’s Blue quarterly report, which will be released next week, discusses potential Amazon sites around the city. South Station addresses many items on the HQ2 wish list.
The footprint of the post office is 618K SF, according to Carroll. If the city allowed just a 10 Floor Area Ratio on the property, the site would support more than 6M SF. While the current proposal for South Station Expansion calls for a $2B, seven-track project to take the land, Carroll said building the North South Rail Link and using the site for new commercial space and Dorchester Avenue public activation could be an attractive option for Amazon.
“These massive post offices like Boston’s and the Farley Post Office next to Penn Station in New York City were built at a time when rail was a key component of the postal distribution network,” Carroll said. “These sites across the country are now looked at as a spectacular center city locations with unbeatable transit access.”
More Room Needed
The South Station redevelopment could provide ample room for the company, but the project would likely fall short of Amazon’s 8M SF target mentioned in its request for proposals. The company signed a lease in July for 150K SF across Fort Point Channel and intends to hire 900 workers there. But HQ2 would require far more space, which could soon arrive on the other side of South Station.
Hines won city approval and is already permitted for construction on its revised South Station Tower project that will go over existing tracks. It has until the end of the year to finalize a deal with the state to move forward. If it clears this final hurdle, the 690-foot tower will feature more than the 500K SF Amazon requires for HQ2's first phase.
“South Station Tower is very supportive and pro-NSRL, because it would make their property more valuable,” former Massachusetts governor and North South Rail Link advocate Michael Dukakis told Bisnow.
While Dukakis supports the North South Rail Link and other infrastructure upgrades due to their enormous economic potential, he stressed that should be where the state focuses its effort in landing more businesses like Amazon, not with tax breaks.
“I’m all for creating a healthy economic climate and encouraging people to come here,” he said. “But if I were governor, I would say this is the best part of the country to locate. We’re not offering financial incentives.”
If Amazon still needs elbow room in later phases, there is plenty of office development that could directly connect to a potential Amazon HQ2. Rep. Stephen Lynch is receptive to a $100M gondola system Millennium Partners has proposed to run from South Station to a 12-acre site its Cargo Ventures subsidiary owns in the Raymond Flynn Marine Park. As for what could go on those 12 acres, Millennium says it is entirely too early to say.
“None of that surprises me that Boston is one of the more well-thought-of cities for [HQ2],” Milennium Partners Managing Partner Richard Baumert said. “As it relates to our site, it’s very premature.”
A 5.5-acre parcel of state-owned land on Kneeland Street close to South Station is also possible for connected growth at any master development. Gov. Charlie Baker’s administration dubbed the property SouthGate and began marketing it in 2016 for up to 2M SF of development.
“You need to get creative in a dense urban environment like Boston,” Colliers International Director of Research Aaron Jodka said. “That means getting multiple stakeholders together.”
Based on the sheer size of what HQ2 will encompass, it’s hard to fathom a scenario where a single Boston developer would be in charge of everything. Eight million SF is the same as the entire rentable supply of Fenway, North Station and South Station submarkets combined, Jodka said.
How NSRL Can Play A Role
The campaign to build the North South Rail Link grew from the lack of rail connection between Boston’s North Station and South Station transit hubs. NSRL advocates say having two end-point stations segregates Boston’s northern and southern suburbs. While the project was initially included in the Big Dig, Massachusetts canceled the link in 2006 due to ballooning costs. Political support has grown in recent years to pursue the project instead of expanding South Station.
“It’s a no-brainer. You talk to folks who do this kind of stuff, and there isn’t a major city in the world that hasn’t connected these stub-end stations at a reasonable cost,” Dukakis said.
Many of the cities Dukakis has studied have equally high building and labor costs associated with the project, and he said the time to move is now. Low interest rates and improved tunnel-boring technology have made the project more affordable than previous estimates.
Pursuing the link opens developable areas at South Station and Widett Circle, another site floated as a potential HQ2 home, because trains would not require storage space since they would be passing through instead of terminating at the station.
Some argue transit investments like these are better uses of a city’s incentive toolkit to lure Amazon than tax incentives. When Massachusetts and Boston wooed General Electric to the city’s Fort Point neighborhood from its former headquarters in Connecticut, the combined incentive package was $150M. An estimated $120M was tied to infrastructure improvements, and GE executives have implied the city’s talent pool and easy access to Logan Airport were more important than tax breaks.
“Research suggests real economic activity is not responsive to changes in taxes,” Urban-Brookings Tax Policy Center Research Associate Megan Randall said.
Paying For It
Paying for something elaborate like a new Amazon complex over and around South Station would not be cheap, but attaching it to an infrastructure project could make it more feasible both in luring the company to Boston as well as raising funds. There were no bids on the SouthGate property, and former Boston City Council President and Nixon Peabody partner Larry DiCara said it all comes down to high construction costs.
“When we looked at putting towers [on that site], the infrastructure costs to build just the platform ran $50M to $100M,” DiCara said. “It’s a puzzle trying to figure it out, and it would be wonderful if we could do it.”
While he is not advocating a specific proposal for HQ2, DiCara said it will take enormous will and public-private partnerships to make the development doable for all parties. The Massachusetts Infrastructure Investment Incentive program, or I-Cubed, earmarks state funds for infrastructure improvements to support major private developments. Combining some form of this program with a special tax district on a planned development area could make a downtown HQ2 possible.
“This is our Hudson Yards,” DiCara said. “Throw in 50 cents on every hotel room or a dollar for every meal to justify the costs on it, because the infrastructure costs are going to be extraordinary. That’s how you pull it off.”