Boston’s Exceptional Fundamentals Continue to Fuel Higher Land Values
With a large influx of some of the world’s best and brightest residents, Boston has evolved from a regional powerhouse into one of the world’s foremost innovative cities in less than 10 years.
Boston is both the second-oldest and the third-densest major city in the
United States, and since its founding 389 years ago, the city has experienced super-charged growth, urbanizing faster than almost all its peers.
Because of that unprecedented growth, undeveloped parcels in desirable areas across the city are scarce, and developers are being forced to use creative ways to build through urban infill, reclamation and placemaking.
Seaport: A New Hotbed
The Seaport has become Boston’s designated area for office market growth. The Fallon Company, WS Development, Skanska, Tishman Speyer and Pembroke have all made their marks in this neighborhood by transforming surface parking lots into gleaming towers filled with office workers, residents and retailers.
Companies like Alexion Pharmaceuticals, Foundations Medicine, Goodwin, PTC, PwC, Reebok, State Street and Vertex have responded by moving significant operations to this highly dynamic neighborhood.
Not surprisingly, when Gillette decided to put 6.5 acres of excess waterfront land on the market, developers recognized the opportunity and responded accordingly. Related Beal purchased the site for $218 million and will soon embark on a master plan that is likely to include commercial (office and life sciences) and residential space.
Back Bay: Cultural Hub
One of Boston’s oldest neighborhoods, Back Bay is also the city’s cultural hub. Back Bay embodies the best of everything and is home to Boston’s finest hotels — The Four Seasons, The Mandarin Oriental, The Taj — as well as shopping, dining, entertainment, business and residential destinations. Old-line insurance companies such as John Hancock and Liberty Mutual, as well as new-economy tenants such as Wayfair and Draft Kings, all call this neighborhood home.
Throughout it all, Newbury Street has remained the neighborhood’s heart and soul. When the family that owned the parking lot at the corner of Newbury and Dartmouth streets decided to sell the property, investors from around the world showed up en masse. The beauty of this location is that a wide variety of uses could be economically viable, including ground-floor retail, office, residential and hotel uses. At the end of the day, L3 Capital purchased the site for $40 million.
South End: Best of All Worlds
Boston’s South End is a predominately residential neighborhood that is proximate to Back Bay, Chinatown and Downtown. Comprising more than 300 acres, the South End also represents the largest intact Victorian row house district in the country.
Driven by excessive growth, the Benjamin Franklin Institute of Technology (BFIT) has outgrown its 111-year-old campus, which is situated on slightly more than an acre. BFIT has marketed this site for sale, which will likely further transform this thriving residential neighborhood.
Boston’s Urban Edge
While Boston’s urban core has garnered headlines for its “live-work-play” dynamic, other parts of the city are experiencing similar growth. Perhaps the boldest of these areas is Suffolk Downs, the 161-acre former horseracing track that was purchased by HYM Investment Group for $155 million. At one point, this site was the cornerstone of Boston’s “HQ2” proposal for Amazon.
With immediate access to two of the MBTA’s Blue Line stations, Suffolk Downs is slated to become an entirely new area to live, work, dine and shop in Boston. In total, HYM plans on developing up to 10.5 million square feet over multiple phases, the scale of which has no precedent in Boston.
Suburb Spotlight: Watertown
Boston’s renaissance is not confined by its city limits. Neighboring Watertown has emerged as a booming life sciences submarket driven by its urban fabric, easily accessible location and ever-increasing amenity base. Perhaps the most significant development underway right now in this area is Boylston Properties’ redevelopment of Arsenal Mall.
Taking advantage of current market dynamics, Mount Auburn Cemetery is currently seeking to monetize more than six acres of land in Watertown, a site primarily designated by the town for commercial development.
Without question, Boston is one of the most exciting markets in the country due to its natural and regulatory barriers to entry, highly educated workforce and culture of innovation. As Boston’s economy continues to grow by attracting residents and jobs, there will continue to be upward pressure on land prices as developers seek to deliver product in response to overwhelming demand.
— By Ben Sayles, senior director, JLL. This article first appeared in the October 2019 issue of Northeast Real Estate Business magazine.