Why The Reinvention Of Boston Will Continue In '17
There's never been a boom like now in Boston. The city has grown before, but now it's being reinvented, a process that's going to continue in 2017, according to the speakers at our Boston 2017 Outlook event. Entire neighborhoods are being transformed as businesses and their workers want to be there.
MIT global adviser and research affiliate Michael Joroff kicked off the event by saying the world now wants to come to Boston, because Boston represents the future. Kendall Square in particular is the shape of the future, as a hub of research and innovation linked to other hubs in the city and in the Northeast. But one tricky thing about being the future is, how do you keep that going and growing so it doesn't stagnate?
Mixed-use is an important component—a vital component—in keeping Boston on the cutting edge, Joroff said. That means more than different property types near each other. Business and academics and large and small firms need to be close. So do people at different stages of their careers—Millennials, but also Baby Boomers with more experience. Various innovative disciplines need to be close together and interacting.
In other words, Joroff said, mixed-use is more than physical proximity. It's a psychological connection. Neighborhoods that foster that connection, such as Kendall Square, will continue to be successful.
CoStar Group quantitative analyst Mark Hickey spoke about the impact of multifamily construction on Boston. The market has seen a great deal more construction than the national average, especially in North Cambridge, Seaport and Chinatown. The amount of multifamily space in Seaport, for instance, has growth by 120% in the last six years.
During the 2010-15 period in Boston, apartment rent growth has been robust. Over the past year, however, growth has started to slow. Most submarkets are now enjoying 2% to 3% rent growth, especially Class-B and C product. Luxury product might even see declines in rents in the coming year, and definitely an increase in concessions. For Class-A buildings of 50 or more units, landlords are offering at least two weeks' rent, maybe more. Vacancies have been creeping up in some places, especially for Class-A.
Here are Boston Planning & Development Agency director of development review Jonathan Greeley, Vidaris regional director Walter Hartnett and CBT Architects principal David Hancock, who spoke about Boston's office building boom.
Boston has seen office booms before, but this one is different, our speakers said. Previously, booms were more about adding space: a quantitative boom. This time, quantity is growing, but it's also a qualitative boom. Office space has been reinvented in Boston. The design of workspace has been revolutionized. The quality is much better, not only with open plan space, but space that includes a variety of features and amenities that companies and their employees want.
The boom is also about the reinvention of the area around office buildings. To be successful now, an office building has to be mixed-use in character and fit into the surrounding urban fabric. It has to invite people in. Ground floors need to be compelling, meaning not only retail, but a design that contributes to placemaking. Fortunately, Boston is far ahead of a lot of cities in that its existing neighborhoods are already authentic.
Also part of the office boom panel: RSM partner Robert Langley, who moderated, and Stantec Architecture senior principal Lisa Killaby.
Another factor in the current office market, according to our speakers, is that there's a limited amount of Class-A space. That gives the owners of Class-B space an incentive to redevelop. Different tenants have different requirements, but unique space in good locations does very well in Boston. Brick-and-timber is especially popular.
There are opportunities now for older buildings to fully reconceive their designs and reconnect to the surrounding neighborhood, to make them more attractive to new tenants. With an investment of $100/SF to $200/SF in an older property, owners can drive rents up by $10/SF to $20/SF annually. That's a compelling story, and considering the age of the building stock in Downtown Boston, a trend that will accelerate.
Our expert speakers on the Fenway included Stewart Title Commercial Services senior business development officer Shane Miklas, who moderated, Samuels & Associates principal Peter Sougarides, Meredith Management Corp president John Rosenthal and KIG Real Estate Advisors president Justin Krebs.
Samuels & Associates is at work on Pierce Boston and Van Ness; Meredith Management is developing Fenway Center, with Phase 1 starting next summer; and KIG Real Estate is working on behalf of Transnational Properties to develop 2 Charlesgate West, which is working through approvals now.
The Fenway is a focus for smart growth and transit-oriented development, and mixed-use there makes a lot of sense, our speakers said. There can be a mix of residential and commercial in the neighborhood that wasn't as common in the past. The neighborhood is becoming where people want to live, work and play, as much as anywhere in Boston.
The neighborhood also has an arts base to go along with more traditional retail, and a lot of people who live in the Fenway who care about the neighborhood. Moreover, the Fens are an important component in making the neighborhood, comparable to the way that the Commons was important in remaking Beacon Hill once upon a time.
As for Fenway Park, experience in other parts of the country shows that ballparks can be an important part of an up-and-coming urban fabric. They're much more of a positive than a negative, since people like the energy and excitement of the streets when the games are going on.