No More Room In Boston For Amazon HQ2? Guess Again
Boston’s tech scene has exploded in recent years and caused concern over whether there was enough room for Amazon to fill 50,000 high-skill jobs. John Hancock’s announcement this week that it is leaving the Seaport for Back Bay opens a prime office building blocks from where the Seattle-based company is said to be moving ahead with a non-HQ2 expansion.
The fortuitous timing comes as hotly contested property in other potential local HQ2 sites gets snapped up.
“If Amazon picks Boston, the industry will make them fit,” NAI Hunneman Director of Research Liz Berthelette said.
John Hancock, an early Seaport tenant when it moved its headquarters to the neighborhood in 2004, announced Tuesday it was returning to Back Bay by the end of 2018. The move will leave a 465K SF office building at 601 Congress St. vacant. Amazon calls for 500K SF for the first phase of HQ2 by the end of 2019.
Amazon already has a growing presence in the neighborhood, with a 150K SF office at 253 Summer St. expected to open later in 2018. The company is also negotiating a lease for 430K SF at a WS Development Seaport Square office building. The building would house 2,000 employees, and an option that would need to be exercised by 2020 could lead to a second office building and double the headcount.
Boston has prioritized HYM Investment Group’s Suffolk Downs in East Boston in the race for HQ2. Leaders pushed the property forward, as it offered Amazon so much available land under a single owner. The Seaport, which has seen a tremendous volume of tech activity in recent years, was initially viewed as too space-constrained given Amazon’s 8M SF requirement.
“I feel the signal could go either way,” Berthelette said. “They could create an HQ2 cluster in the neighborhood across several properties, or it could just be that they want a strong presence in Boston regardless and ramp up hiring for HQ2 somewhere else.”
The space constraint today may actually lie in the Somerville bid.
Rapid7 is relocating its Boston headquarters to a 147K SF office at Hub on Causeway. Oath, a Verizon tech subsidiary, is said to be considering a 300K SF lease at the 1.9M SF mixed-use project, which would lead developer Boston Properties to begin construction on a 495-foot office tower to accommodate the digital media company’s needs.
Both companies are taking space cited in Somerville’s HQ2 bid, which envisions Amazon along the MBTA Orange Line from North Station through Cambridge Crossing, where Philips has plans for a 2,000-person office, up to Assembly Row. Elsewhere in the city, more space is getting snapped up by tech tenants.
The Financial District is better known as downtown these days because of tech companies backfilling space left behind by financial and law firms that are ditching the neighborhood for the Seaport. Back Bay is having its own tech moment with DraftKings expanding to a 105K SF office at 500 Boylston St. and Wayfair is said to be in the market for up to 1M SF in the neighborhood.
“If Amazon were to choose Boston’s preferred site at Suffolk Downs, then no, these new developments and major leases would not prevent a full HQ2 build-out,” Colliers International Senior Vice President Lauren Vecchione said. “A scattered campus, with operations in, or throughout, the Seaport, and perhaps other submarkets as well, could also be achieved. If Boston has the chance to land a 50,000-person office, we will find a way to make that happen.”
With so many companies expanding in the market, finding and hiring talent has been a chief complaint. Tech executives described the talent and expansion headwinds in 2016 as worse than the dot-com boom of the 1990s, and some argued it could prevent the next Amazon from forming. That is no longer the case, both in terms of capital and real estate, Cramer Advisory Group CEO Bob Cramer said.
“I think a lot of people are asking if there is so much expansion, isn’t that going to be a horrible thing for driving up wages and attracting talent,” he said. “It’s almost the opposite. It attracts and keeps the really good people here.”
Boston may be known as the “Athens of America” for its numerous institutes of higher learning, but it has also been notable for post-graduation brain drain to the Bay Area, leading some to question if there is enough talent to handle the 50,000-employee whale that is Amazon HQ2.
Cramer, who runs a consulting company for venture-backed, high-growth tech companies, was a serial tech CEO of an array of companies like LiveVault and Nimbit, which he grew to extraordinary profit. After working with startups in Silicon Valley and the Northeast, he thinks Boston’s tech scene is increasingly on par with the Bay Area.
Boston and Cambridge combined receive about $1,500 of outside funding from venture capital and National Institutes of Health grants for every person in Massachusetts, according to Vecchione. Thanks to increasing capital in the region, many tech companies are eyeing or already expanding in Boston, and graduates are sticking around.
“There’s always been money, but the money in the Northeast was and still is more conservative money than West Coast money,” Cramer said. “But you’ve now had a decade or two of startups investing in both the biotech and tech space here. People are coming up with amazing ideas and are able to get capital.”