Boston’s Universities Are Pushing Into Real Estate Development Beyond Academic Buildings
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Recession alarm bells are ringing in one Boston real estate sector, but the backbone of the city’s economy is still pushing forward with more development.
Q3 was the first time since 2009 where there was collective negative office absorption in a fiscal quarter in Boston, Cambridge and the suburbs. This has only happened previously during a recession or in the very early stages of an economic recovery, according to Colliers International Managing Director Aaron Jodka, who still noted strength in the overall market. Greater Boston’s universities are still pushing ahead with their respective real estate strategies, even if economic uncertainty lies ahead.
“We need to be nimble, we plan to stay nimble and we will react to any economic downturn,” said Suffolk University Senior Vice President of External Affairs John Nucci, who is speaking at Bisnow’s Boston Student Housing & Higher Education Summit Oct. 31. “But we have been through them before and will get through them in the future.”
Suffolk closed last month on a $63.5M deal to buy the Ames Hotel and turn it into housing for as many as 280 students. The downtown Boston university currently offers housing to about 30% of its undergraduate population, but the university wants that number to grow to 50%. Suffolk is focused on its residential mission and is even looking to neighborhoods farther from campus, but still connected by direct transit access, like East Boston on the Blue Line. The university is also after secondary real estate needs like a theater and assembly space, Nucci added.
Elsewhere in Boston, it is almost harder to find a college that isn’t embarking on some level of construction.
Boston College is in implementation mode on its 10-year Institutional Master Plan, which calls for $800M in construction and renovation of academic buildings. MIT’s Kendall Square Initiative has made the university a leading landlord of office, retail and housing in one of the world's most sought-after life science markets. Harvard is moving forward with a 14-acre first phase of its Allston Enterprise Research Campus that will include 400K SF of office or labs, 250K SF of housing and 250K SF of hotel and conference space.
The higher education-backed development boom may be coming late in the cycle, but Nucci said universities are a safe bet when economic waters get choppy.
“We’ve been here for over 100 years and will be around for the next 100,” Nucci said. “In many ways, we see increases in enrollment at times of an economic downturn because people come in and realize it’s an opportunity to further their educational career.”
Developing near universities has become a key marketing tool this cycle, as projects from Kendall Square to Assembly Row in Somerville all cite their ease of commute to Harvard and MIT. But Harvard’s Allston push is one of the most-coveted development opportunities in Boston real estate circles.
Harvard has winnowed down a list of nine finalists to develop the first 14 acres in Allston, the Boston Globe reported: Bullfinch Cos. and Harrison Street; Carpenter & Co. and Longfellow Real Estate Partners; DivcoWest; HYM Investment Group; Lendlease Group; National Development and Alexandria Real Estate Equities; New England Development; Tishman Speyer and Bellco Capital; and Wexford Science & Technology and Accordia Partners.
The plot is just the first piece of the nearly 150 acres Harvard owns near the Massachusetts Turnpike. Harvard has an overall 358-acre footprint in Allston. A winner of the initial Allston bid is expected to be announced by the end of this year.
Harvard's development push to create an innovation district makes sense to one developer already working on a ground lease with the university.
“Harvard is just discovering that, in order to grow and compete, they need to expand and be more active in life science,” said Berkeley Investments President Young Park, whose firm was tapped this summer to redevelop the nearly 500K SF warehouse Harvard has owned at 176 Lincoln St. since 2006.
While MIT’s Kendall Square Initiative may be ahead of Harvard’s Allston push, Park said Harvard’s combination of medical school, business school (already located in Allston) and growing school of engineering — on top of essentially a blank canvas to develop — gives developers like him plenty of reason to flock to the area.
“Harvard is a little late to the game but has enormous resources that haven’t been tapped,” he said. “That’s the exciting part of what’s happening in Allston: How can Harvard become the driver in this transformation of that whole area that could benefit both the university in its academic mission and financial viability, and also the city and other institutions?”
As to whether the development is coming too late in this economic cycle, Park said Boston’s research-based economy and hard science insulates it from downturns. While consumer goods developed in Silicon Valley might take a hit in down times when people are cutting costs, the research done in Boston’s burgeoning higher education-backed neighborhoods will still move forward.
“If you combine that with this whole notion of the aging population that will demand more medical and medical-related activities, I think Boston has a lot of resources that would potentially shield it from the wild gyration of a recessionary phase in the economy,” Park said.