How The Era Of Megaprojects Is Reshaping Boston
AEW Capital Management managing director Robert Plumb has seen a lot in his 32 years as an investor. But our current cycle is a rare one. When carefully managed, he says big, bold mixed-use projects can deliver returns to investors and breathe new life into the city. Hear about what's driving the city from Robert and others at Bisnow's Boston's Major Projects event Aug. 11.
There are plenty of major mixed-use developments proving to be game-changers around town, including some in neighborhoods once considered edge locations. Today’s development boom is bringing new personality to old industrial districts in the South End, Seaport, Fenway and East Cambridge, Bob says.
Rising rents make more of these megaprojects financially feasible than in the past. As rents move, they enhance the developer's return. The new supply addresses the pent-up demand for housing everywhere, and for investors, Boston commercial property is still relatively cheap compared to other global gateway cities, he says.
Developing in Boston is great and challenging, Bob tells us. In picking a location, infrastructure and public transit are high on a developer’s must-have list. It’s easy to understand why. The mostly federally funded Big Dig, which demolished the elevated roadway that blocked downtown from the waterfront and introduced new bridges, tunnels and T-service, brought big changes to the real estate market.
Real estate is led by infrastructure, Bob says. Before the $16B Big Dig, Third Harbor Tunnel and Boston Harbor cleanup projects were completed, owners couldn’t give away buildings in the Fort Point neighborhood. Now, they’re selling for $700/SF. But in Boston, built out years ago, assembling a suitable site is tricky. The approvals process is still difficult and some “pioneering” locations still don’t have the supermarkets or pharmacies people want, Bob says.
AEW owned and built the InkBlock South End complex with National Development. It features apartments, condominiums, retail and extensive amenities, including a Whole Foods Market. Over the past 20 years, there have been other developments and improvements in the area. But InkBlock South End, under the expressway in a once industrial part of the neighborhood, formed a critical mass in establishing a market for luxury residential. Other game-changers: North Point in East Cambridge, and the multibillion-dollar investment Samuels and JP Morgan have been making in the Fenway.
In a sign of the times, Converse did a relo from suburbia into the north End downtown (above). Even in these good times, it’s wise to be cautious. The market may be at an inflection point of affordability, Bob says. So when he looks for a development opportunity he considers: employment growth, replacement cost, transportation access and the level of competition from others building new product. Lenders, meanwhile, want development teams to bring more equity into deals. Underlying these criteria, Bob says he looks for places where people want to live/play/work.
Hear more insider thoughts at Bisnow's Boston's Major Projects event Aug. 11 at 226 Causeway St at 7:30am.