Office rents in Boston's Back Bay, Financial District and beyond......

Where are office rents in the Boston market today and how much lower will they go?

Boston’s central business district has earned the unfortunate distinction as the most deflated rental market in all of the Americas¹. Combine that with a lackluster economic recovery characterized by problematic job growth will hamper the pace of any real estate market resurgence, which probably cannot gain much traction until late 2011 or 2012².

What does this mean for you and how do you capitalize on it? Landlords are working extremely hard to preserve market rents on renewals and new leases. Yes, those numbers have come down significantly, but more so then that, tenant improvement allowance (T/I) and rental concessions are two buckets that deserve far more play. When one thinks about cost of space PSF, it should be that of net effective basis. Meaning the asking price less the free rent, example a 60 month lease @ $35.00 PSF with 6 months free is $32.50. Rent abatement was not an available option for tenants 24 months ago, now it has become main stream. The amount depends on the financial viability of the tenant to perform as well the landlord’s competitiveness in the marketplace.

Tenant improvement allowance in the recent past never moved above 50% of the first years rent on a standard lease term. Now, we are seeing that number grow from 65% to 110% of the first years rent. In many cases in times past tenants would have to pay to move into their new space. Nowadays tenants are getting the benefit of turnkey deals, thus no out of pocket expense.

Why hire a broker if I plan to renew my lease? My landlord and I have a workable relationship. Your landlord profits by getting the highest rent possible from you. Until your broker creates competition with your landlord, you’re a captive Tenant exposed to paying above market.

The call to action is to seek out professional advice to assist you in these tumultuous times. To learn more about how the Boston Realty Advisors commercial leasing team can help your business, please do not hesitate to contact us.

Sincerely,

William H. Catlin, Jr. • Principal   
Boston Realty Advisors
715 Boylston Street • Boston MA 02116    
T 617.850.9606 • F 877.868.1672
www.bradvisors.com • wcatlin@bradvisors.com
Boston • New York

¹ Boston Business Journal – 12.1.2009

http://boston.bizjournals.com/boston/stories/2009/11/30/daily26.html

² Emerging Trends in Real Estate 2020 – PricewaterhouseCoopers

http://www.pwc.com/us/en/asset-management/real-estate/assets/2010-emerging-trends-us.pdf

Top 100: JOHN ROSENTHAL DEVELOPER/CRUSADER

Meredith Management’s John Rosenthal is preparing to start construction on the first piece of Fenway Center, a $450M, 1.3M SF project that includes a new commuter rail stop, residences, retail, offices, and parking adjacent to Fenway Park. He’s partnering with Sox owners on what will be one of the most ambitious projects to get started since the economic meltdown.

John, with Monika Butkiewicz and his wife Maureen Berkley, director of property management, look over a model and rendering of Fenway Center. It will have 1300 parking spaces, 330 residences, 370k SF of offices, 100k SF of retail, 30K SF of park and green space, bike storage, a day care center, and community space. “We are fully permitted and shovel ready,” he says. In this credit constrained economy, John has been securing debt financing from city, state and federal sources (including stimulus funds).

John also has a one-of-a-kind office in a converted 1700’s mill and some top office personnel who walk on four legs. We snapped him with Jon Hickok and Laura Hyer, with advisors Wiley and Tazzie. John has always brought a dog to work, so when Laura came on board to run STOP Handgun Violence (an advocacy group John started), Tazzie was part of the package. As a gun owning skeet shooter, John started SHV in ‘95 with the late Michael Kennedy (son of RFK). After Michael’s death, Vickie (wife of the late Ted Kennedy) asked to take his place. John says Mass. has the most comprehensive gun violence protection and the fewest gun fatalities after Hawaii.

John (center) and his in-house counsel Jerry Belair (on his left) met last week with a URS team seeking to manage construction for Fenway Center. Work on the $12M MBTA commuter rail stop is slated to start this fall. We snapped Thalia Schlesinger, Scott Bini, and standing Steve Moore, David Tremblay, Chris Watson, and Mathew King. The Architectural Team, and Carlos Zapata Studio, the design architects, are preparing construction drawings. Suffolk Construction is the design/build GC, while J.F. White is the civil contractor. John plans to get a guaranteed construction price for Phase I this summer. Including all the planning on the mixed-use project, he says “It took seven years to get into the batter’s box.”

Jerry is Meredith’s point man for solar energy projects. Here they’re holding pics of solar arrays installed in December atop Meredith’s HQ and some of its other properties: an office building in Springfield and rental apartments in Clinton and Ware. The Fenway Center MBTA station and garage will also have solar arrays enabling them to produce more energy than they use. John has championed solar power since the ‘70s, when he also campaigned against nuclear power, an effort he continued on Saturday with an anti-nuke editorial in The Boston Globe.

 Sourced:  http://www.bisnow.com/boston_commercial_real_estate_news_story.php?p=7379

Where will the prices end up at some of the best office addresses in the Class “A” market? 

Hub's Historic High-Rises In 'Fight To The Finish'

Prime Addresses Pitted Against Upstarts

By Scott Van Voorhis

Banker & Tradesman Columnist

Yesterday

The overall vacancy rate for the Boston office market hovers around 13.5 percent, Colliers Meredith & Grew reports. But some of our best-known skyscrapers, like the Hancock, are struggling to fill much larger blocks of space, a trend likely to have a profound impact on the city’s economy for years to come.

With so much top shelf office space available, why would a major law firm or financial company take a chance on what could very well turn out to be a developer’s pipedream? Indeed, for companies that have long dreamed of setting up shop in one of the city’s elite towers, this is the time to make a move to an established property.

Developers hoping to start construction on a range of new skyscrapers, from the ill-fated Filene’s project to a pair of new towers next to the Rose Kennedy Greenway, can kiss these grandiose plans goodbye for the foreseeable future.

“It is going to be a tough sell for some of them, it really is,” said Vivien Li, head of the Boston Harbor Association and an astute office market observer, of developers pushing plans for yet-to-be-built towers.

Instead, in the midst of one of the worst downturns in generations, we have a fight to the finish between some of Boston’s best-established corporate addresses, like the Hancock, and a pair of relatively new upstarts on the city’s waterfront.

Established, Vacant

On the surface, the vacancy rate for downtown towers, at 13.3 percent, would appear to be closely tracking that of the overall market, if not a little below, according to Colliers Meredith & Grew.

But look more closely and you see some big blocks at some very well known addresses.

For starters, there’s the Hancock Tower, which, after being sold at a foreclosure auction last year, sports a vacancy rate that now hovers in the low 20s. Along with the 60th floor, there’s space available on the 20th, 21st and 22nd floors, as well as the 19th and 10th floors.

Just down the street, the vacancy rate at 500 Boylston St. puts the Hancock to shame. Nearly half the 1980s tower is available, including a huge, 150,000-square-foot block of space being sublet by publisher Houghton Mifflin.

Over in the Financial District, prominent towers also have gaping holes to fill.

There’s 200,000 square feet of empty offices over at 100 Federal St., where Bank of America has its regional operations. A couple hundred thousand square feet is also available at both 99 and 100 High St.

And if Don Chiofaro’s International Place towers seem to be doing a little better than most right now, sporting a 14.2 percent vacancy rate at One International Place, just wait a few months. Ropes & Gray is slated to vacate 350,000 square feet in the tower, moving over to the top floors of the Prudential building.

And as if the competition for tenants weren’t already fierce enough, two upstart high-rises on Boston’s waterfront are now entering the fray.

New Kids On The Block

Waterfront builder Joe Fallon is rolling out the first high-rise at the long-delayed Fan Pier project, with anchor law firm Fish & Richardson committed to 124,000 square feet. Not bad in a down market.

But that leaves another 376,000 square feet of space to fill in the 18-story building at One Marina Park Drive.

For its part, Boston Properties has managed to get the new Russia Wharf tower financed and built amid the worst downturn in generations.

But even after a lease to anchor tenant Wellington Management that will fill more than half the new tower, our vaunted hometown real estate giant still has another 300,000 square feet to rent.

Fan Pier and Russia Wharf bring to the market a pair of ultra modern high-rises in a city where most of the skyline is decades old. There’s the additional attraction of breathtaking harbor views, and, in the case of Fan Pier, plans for a new neighborhood of shops, restaurants and homes.

But there’s a price to be paid for new construction as well, a cost that may be hard for some firms to justify right now. Towers that are already established are going to have more price flexibility than a brand new tower with an expensive debt load to service and even more space to fill.

Say Hello To 2020

So where does that leave all those developers still hoping to make a big mark on the city’s skyline?

Well, to be blunt, it leaves them looking at a construction launch of 2020 – if that.

Tough times have never deterred Chiofaro, who opened up his twin tower International Place complex amid the brutal real estate downturn of the early 1990s.

But it’s not clear where Chiofaro will find the tenants to fill the new pair of twin towers he would like to a build a few blocks away on the site of the current Harbor Garage, overlooking the Greenway. And he will soon be scrambling to fill a huge hole in One International Place after Ropes and Gray waltzes away this year.

And what of poor John Hynes and his beleaguered drive to salvage the Filene’s fiasco and fill in the block he gutted in Downtown Crossing with a new tower?

All that needs to be said is that Fish & Richardson was once slated to go into his Filene’s tower, but is now headed for Fan Pier.

No, there is simply too much space to fill – and top shelf space at that – for any towers still sitting on the drawing boards to have a fighting chance right now.

“Who is going to go into these offices and all these fancy condos they are talking about?” Li asks. “Where is the absorption going to come from?”

But the emerging duel between establish, marquee addresses and new, chic upstarts will be interesting. Let the office market wars begin!

http://www.bankerandtradesman.com/news137009.html

Let's go shopping for for new office space.  Accordning the the B & T, it is a great time to be a tenat in the marketplace.  Don't be caught standing on the sidelines.

"The year ahead is looking brighter for tenants looking for office space in Greater Boston, according to new report.

Boston's total office vacancy rose to 17.4 percent in 2009 from 13.9 percent a year ago, according to Jones Lang LaSalle's recent analysis. Occupancy declined steadily in the Cambridge office market through the first half of 2009, ending the year with 534,423 square feet of negative net absorption. For the year, the suburban office market recorded 1.3 million square feet of negative absorption.

The only submarket to record occupancy gains for the year was the Northwest submarket. A recovery in the Boston Suburban market will lag Downtown Boston and Cambridge, JLL predicted.

Greater Boston recorded 3.7 million square feet of negative net absorption in 2009. The second half of the year showed the first signs of the recession easing its grip on the global economy, and the rate of decline eased, according to a report.

"A return to economic growth and an eventual recovery in the job market will slowly work to stabilize the office market, but conditions will remain tenant favorable throughout 2010," the report found."

http://www.bankerandtradesman.com/news136888.html

Boston’s central business district has earned the unfortunate distinction as the most deflated rental market in all of the Americas¹. Combine that with a lackluster economic recovery characterized by problematic job growth will hamper the pace of any real estate market resurgence, which probably cannot gain much traction until late 2011 or 2012².

What does this mean for you and how do you capitalize on it? Landlords are working extremely hard to preserve market rents on renewals and new leases. Yes, those numbers have come down significantly, but more so then that, tenant improvement allowance (T/I) and rental concessions are two buckets that deserve far more play. When one thinks about cost of space PSF, it should be that of net effective basis. Meaning the asking price less the free rent, example a 60 month lease @ $35.00 PSF with 6 months free is $32.50. Rent abatement was not an available option for tenants 24 months ago, now it has become main stream. The amount depends on the financial viability of the tenant to perform as well the landlord’s competitiveness in the marketplace.

Tenant improvement allowance in the recent past never moved above 50% of the first years rent on a standard lease term. Now, we are seeing that number grow from 65% to 110% of the first years rent. In many cases in times past tenants would have to pay to move into their new space. Nowadays tenants are getting the benefit of turnkey deals, thus no out of pocket expense.

Why hire a broker if I plan to renew my lease? My landlord and I have a workable relationship. Your landlord profits by getting the highest rent possible from you. Until your broker creates competition with your landlord, you’re a captive Tenant exposed to paying above market.

The call to action is to seek out professional advice to assist you in these tumultuous times. To learn more about how the Boston Realty Advisors commercial leasing team can help your business, please do not hesitate to contact us. 

William H. Catlin, Jr. • Principal   
Boston Realty Advisors
715 Boylston Street • Boston MA 02116    
T 617.850.9606 • F 877.868.1672
www.bradvisors.com • wcatlin@bradvisors.com
Boston • New York

¹ Boston Business Journal – 12.1.2009

http://boston.bizjournals.com/boston/stories/2009/11/30/daily26.html

² Emerging Trends in Real Estate 2020 – PricewaterhouseCoopers

http://www.pwc.com/us/en/asset-management/real-estate/assets/2010-emerging-trends-us.pdf

How many office spaces are for lease in Boston's Financial District between 5,000 SF - 10,000 SF?

128 Spaces in 58 Properties as defined by the following criteria:

space criteria

property criteria

Office Space Building Addresses

 Please inquire to learn more about these buildings.

As of today according to www.CoStar.com there are 53 spaces in 30 buildings based on the following criteria:

Location

space criteria

property criteria

Rents are from the high teen's for a sublet mid $50's for a class A tower.  Some of the buildings are as follows:

Wait ’Til Next Year?

Tight pre-leasing requirements and a dramatic slide in rents and commercial values all but iced new construction in 2009, and at a recent NAIOP Massachusetts roundtable, Portfolio & Property Research CEO Bret Wilkerson predicted that office incomes would not trend upward again until 2011. That presumption, on its face, would seem to preclude all construction but build-to-suits (a quietly strong category in 2009).

However, Wilkerson and others have predicted a sharp swing upward in rents from 2011 to 2013. Wilkerson predicted a “phenomenally interesting and exciting cycle” beginning in 2011, and said Boston is PPR’s top market nationally for forecast rent growth until 2013. But unless the commercial financing environment evolves dramatically, and quickly, few new developments will be in a position to take advantage of that upswing. Eighty-five percent of Banker & Tradesman readers said they believe it is either not very likely or not at all likely that lenders will make commercial development loans available at reasonable terms in 2010.

In addition to the stalled Filene’s tower, two other high-profile Hub developments illustrate the harsh lending terms developers will have to navigate in 2010. Boston Properties had to swallow a tough recourse provision to get a club of five lenders to issue a $215 million construction loan for its Russia Wharf office tower in Boston – a project substantially pre-leased to Wellington Management. The loan amounts to less than half the tower’s $550 million construction tab. And when a group of three lenders refinanced the new Center for Life Sciences Boston, Biomed Realty Trust’s Longwood research tower, the San Diego-based REIT had to increase its equity position by $150 million, replacing a $500 million construction loan with a $350 million mortgage.

Now is a great time to discuss office leasing and renewal options for the Boston Office Market.  The aggressive decline in pricing has created buying opportunity for office tenants in the marketsplace. 

Tuesday, December 1, 2009, 2:20pm EST | Modified: Wednesday, December 2, 2009, 5:33am Report: Boston is most deflated office market in AmericasBoston Business Journal - by Jeff Clabaugh and Craig M. Douglas Washington Business Journal and Boston Business Journal Boston’s central business district has earned the unfortunate distinction as the most deflated rental market in all of the Americas, according to a recent report by CB Richard Ellis Group Inc. The city’s 33.9 percent year-over-year decline in average rental rates ranked as the seventh worst globally and rivaled the precipitous falls seen in other once-overheated markets such as Moscow, Hong Kong and Abu Dhabi, according to the report. Among other U.S. cities, only New York City’s 30 percent year-over-year decline came close to the cratering seen in Boston’s downtown office market, according to the report. “As renewals offer the best option for immediate savings for many tenants, landlords are relying on reduced construction costs to offer ‘turnkey’ build-outs and rent abatements to encourage relocations,” according to the report’s outline of trends affecting the Boston market. As of Sept. 30, the average rent for downtown Boston office space was $36.45 per square foot. To be sure, the world’s most expensive office markets have become significantly less expensive in the last year. Average office rents worldwide declined 7.7 percent in the fiscal year ended Sept. 30, according to the report, with rents down in 131 of the 179 major cities CB Richard Ellis tracks. Nearly 50 markets have seen double-digit declines. Tops among cities seeing declines was Kiev (down 64.6 percent) and Singapore (53.4 percent). Boston’s year-over-year decline ranked seventh globally. Other large drops include a 41 percent decline in Hong Kong, a 39 percent decline in Abu Dhabi and a 35 percent decline in Moscow. New York retained its rank as the most expensive North American market, with Midtown rents of $68.93 per square foot. New York’s rents rank 24th globally. London’s West End, where rents declined 17.8 percent during the period studied, is the world’s most expensive market, at an average of $184.85 per square foot. Tokyo, Hong Kong, Moscow and Paris follow London among the world’s most expensive office rental markets.

http://boston.bizjournals.com/boston/stories/2009/11/30/daily26.html

Fantastic unit at even better address!

This unit is offered by Rob Cohen for $349,900. The unit includes 550 square feet of well appointed living space. the building was built in Boston's Back Bay in 1880 and is located in the heart of downtown, closte to the T, and steps to shopping and great entertainment.

For more information please click here: back bay condo

To schedule a showing, please contact Rob Cohen.

Boston Realty Advisors provides residentil and commercial real estate services in Boston and New York. This exclusive listing is a fine example of our residential sales practice here in Boston. Work with the Boston Real Estate market's leading team, call us today.