- May 3, 2013
- BRA Tabbed to Market, Net leased NH Staples, featured in the Real Reporter
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- May 3, 2013
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- Sanford Buys Prime 27,000-SF Retail Site; BRA Brokers Deal Funded by Belmont Savings, featured in the Real Reporter
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- April 26, 2013
- Gateway to LMA Up for Sale With Parcel 135 Listed Via Boston Realty, featured in the Real Reporter
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Jason S. Weissman
High Rise Office Rents
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
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.
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!