Greater Boston’s office market is continuing a very strong streak, closing 2016 and the fourth quarter on a good note. The year saw 1.4 million square feet positively absorbed with 789,000 square feet absorbed in the fourth quarter. The current vacancy rate is 12.7 percent, slightly lower than the market average over the last five years of 13.6 percent. Average Class A asking rents are $43.12 per square foot, which has appreciated 9.1 percent in the last three years. Neither the quarter nor the year are aberrations. The market is on an extended run of positive returns. Office space in the Greater Boston market has now seen positive absorption in 14 of the last 15 quarters, accumulating 12 million square feet positively absorbed over that period. The Boston CBD contributed 59,000 square feet of positive absorption in the fourth quarter, decreasing the vacancy rate 0.1 percentage points to 9.6 percent. The most absorption of the CBD submarkets occurred in the Financial District, which saw 69,000 square feet positively absorbed. Average Class A asking rents are currently $55.09 per square foot in the CBD, led by Back Bay, which has an average asking rate of $62.51 per square foot. Across the …
Investors are attracted to Boston due to its diverse economy, education base and strong market fundamentals. In fact, major corporations like GE, Reebok, New Balance, and most recently Asics have all relocated to the city or are in the planning to relocate or rebrand here. As a result of this heightened interest in Boston as a global headquarters destination, the city is expected to grow, which in turn creates housing demand. Rhythm between Cap Rates and Interest Rates As investors know, there is a direct correlation between cap rates and interest rates. However, while a correlation exists, not all buyer profiles are necessarily affected in the same way in a shifting interest rate environment. Highest impact: Leveraged buyers would be most impacted by rising interest rates since they are typically trying to maximize leverage when pursuing an acquisition. With shifting interest rates, higher rates have a direct impact to potential returns. If leveraged buyers can borrow less at high rates, this has a direct impact to pricing/cap rates. Within the leveraged buyer profile, groups possessing strong balance sheets and banking relationships will be less impacted than groups not necessarily in the same financial position. Moderate impact: Cash and low-leverage buyers …
WESTWOOD, MASS. — American Realty Advisors, an institutional real estate investment manager, has acquired the shops at University Station, a newly constructed, 400,000-square-foot retail asset in the Boston suburb of Westwood. Located within a 130-acre mixed-use development, the purchase price was $206 million. Wegmans, a regional supermarket chain, anchors the retail portion of University Station. Other tenants include Nordstrom Rack, Marshalls and PetSmart. “The average term of in-place leases for the property is approximately 15 years, while 95 percent of the asset’s total income is generated from its national tenant base,” says Shelley. “We believe these characteristics will provide stabilized, risk-adjusted returns for our investors over time.” University Station services a 13-town area with 214,700 residents and an average annual household income in excess of $121,000. The property is situated 15 miles from downtown Boston near I-95 and Route 128, which draw 140,000 vehicles per day. It is located across the street from the area’s sole Amtrak/MBTA commuter rail station, which transports 1.3 million travelers annually. New England Development will continue to serve as the management and leasing agent for the retail center. Robert Griffin Jr., who was with Cushman & Wakefield and is now with Newmark Grubb Knight Frank, …
The last five years have seen a lot of shuffling around for Boston’s mainstay industries, with professional service firms moving to the Seaport and tech companies moving to Kendall Square. Although we’ve seen more new residential and commercial development than ever, there will always be space limitations in Boston, which means there will always be more user demand than there is space on the market. The space left behind from tenants on the move will be easily filled by the next wave of tenants — and the cycle continues. Oxford Properties’ latest announcement of its acquisition of 222 Berkeley St. and 500 Boylston St. in the Back Bay is perhaps the best example of the trajectory model in Boston. And similar to the media and finance switcheroo that Manhattan is experiencing (the media mecca is now downtown and FiDi is now midtown), media companies in Boston are now moving into the financial district and finance firms are moving to the Seaport. Boston Globe Media Partners is close to leasing 75,000 square feet of space at 53 State Street. The publishing company will take some of Goodwin Procter’s block that will be vacated once the company relocates to the Seaport District. …
BOSTON — National Real Estate Advisors and the HYM Investment Group have received final approval from the Boston Redevelopment Authority to build two towers comprising the first phase of a $1.5 billion redevelopment project on Boston’s Congress Street. The project will eventually include housing, offices, a hotel, retail and other public amenities. The new development will be built on the site of the 1960s-era Government Center Garage. The garage will be demolished once construction commences on the new towers. About 1,100 parking spaces of the existing 2,300-car garage will be retained for the new buildings. The residential component of the project will include a 486-unit apartment building that will be the tallest rental housing property in the city, according to the developers. Construction will begin on the 480-foot building during the spring of 2016. It will be situated along New Sudbury Street. The project will also include a 1 million-square-foot office tower. Pelli Clarke Pelli architects will design the 43-story tower. Construction will begin once a major tenant has committed. Transwestern|RBJ is representing the developers in the lease-up. HYM and National are also planning three smaller-scale buildings surrounding a new public plaza on the eastern side of the parcel, which …
Despite the clichés and naysayers, Boston’s apartment fundamentals continue to trend at the top of U.S. cities’ forecasts. For developers, investors and borrowers, Boston truly is that city on a hill. Clichés heard often in the commercial real estate community: Interest rates have no place to go but up. Who is going to pay $4.50-per-square-foot rents? Wait until the next wave of units is delivered. Valuation and yield don’t make sense. The facts: Economists have been predicting interest rate increases for the past five years. Market vacancy has been sub-5 percent for more than five years. Every major apartment player owns or is currently building in Boston, averaging $1.2 billion in product for past three years. Boston is a premier gateway city and buyers want in. The Investor Outlook Simplified When cap rates for the most desired real estate class — in a gateway city, in the safest country for investment in the world — average 4.25 percent, it’s a great time to invest. The 2006 cap rates were just 100 basis points above the 10-year risk-free rate. Today they are 2.0 to 2.25 percent. Half of the deals are cash transactions. Locals can only shake their heads at the …
In what was the most dynamic quarter since the dot-com boom in 2000, tenants in Greater Boston absorbed 2 million square feet of office space in the second quarter of 2015. The activity was driven by a number of high-profile construction completions throughout both the urban and suburban areas of the market. The Boston CBD experienced its ninth straight strong quarter with 861,000 square feet absorbed. Notably the activity occurred mostly outside of the boundaries of the “Big 3” Boston submarkets of Back Bay, Seaport District and Financial District (though the latter did absorb 290,000 square feet in its own right). North Station saw a major bump in occupancy with the completion of Converse’s 230,000-square-foot headquarters, causing the submarket’s largest quarterly absorption number on record. Move-ins by Sonos and Safari Books Online added 200,000 square feet of absorption in Midtown, where vacancy has dropped to nearly half of what it was a year ago after State Street’s departure. And development continues at Boston Landing, where the 245,000-square-foot second phase is currently under construction and is already partially pre-leased to the Boston Bruins. Space continues to be scarce in Cambridge, where vacancy is just 5.8 percent and availability is at an …
All of the property sectors in the Boston area are thriving, thanks to one of the strongest economies in the nation. As of April this year, the unemployment rate in Massachusetts was 4.7 percent and in Boston, it was 3.7 percent, according to the U.S. Bureau of Labor Statistics. Economists generally consider employment to be essentially “full” when unemployment rates dip below 5 percent. By comparison, the unemployment rates in neighboring states were 6.3 percent for Connecticut, 3.8 percent for New Hampshire and 6.1 percent for Rhode Island. The U.S. unemployment rate in April was 5.4 percent. Boston’s overall industrial vacancy rate at the close of the second quarter was 8.1 percent, according to CoStar, and includes warehouse/distribution space, flex space and R&D facilities. It was the fourth consecutive quarter that the vacancy rate has remained in the low 8 percent range. Overall net absorption has been negative this year: -82,364 square feet in the second quarter and -41,089 square feet in the first quarter this year. This compares with positive net absorption of more than 3.1 million square feet in the third and fourth quarters of 2014. However, we believe that the first half of this year is a …
While demand for all types of retail product has been strong over the past few years, investors continue to have a strong appetite for Boston area grocery-anchored shopping centers in 2015 despite meaningful changes to the food distribution industry. The competitive landscape for traditional supermarkets is evolving as value-oriented grocers such as Market Basket, Walmart, Trader Joe’s, Aldi, and Save-A-Lot lure away price-conscious customers, while service-oriented formats such as Wegmans, Whole Foods and Roche Brothers are expanding and gaining market share with more affluent customers. These chains achieve success by targeting the low- and high-end niches of the market. According to IBISWorld, the online grocery sales industry is projected to increase approximately 9.5 percent annually to become a $9.4 billion industry by 2017. Companies such as Amazon and Walmart are increasing their capabilities for selling food and beverages online, and Ahold’s Peapod service continues to expand in an effort to maintain its position as the leading Internet grocer. The food distribution industry has been further saturated by big-box retailers and national pharmacy chains offering a growing selection of packaged goods and dairy products. These non-traditional grocers and e-commerce providers derive much of their profits from non-food items, allowing them to …
Young professionals are flocking to Boston to find higher-paying jobs generated by fruitful healthcare and technology industries. Pharmaceutical companies like GE Healthcare, Amgen and Novartis AG are expanding in Boston and Cambridge. In addition, professional, business services, education, and health services sectors have all surpassed pre-recession employment. In 2015, companies in Boston are projected to create 43,000 new jobs, which is a 1.7 percent annual increase. The increased pace of hiring will support household formation and elevate the area’s housing demand. The Greater Boston region is experiencing one of its largest residential building booms in recent history. Most of the area’s proposed and under-construction residences are apartments and many of them are on the luxury end, including the Ink Block and Troy Boston on the South End, and the Zinc in East Cambridge. Multifamily inventory will expand 1.6 percent this year, resulting in a total delivery of 7,250 new units. Many potential homeowners will choose renting over buying as more and more potential homebuyers prefer short commute times and the lifestyle that renting offers — a growing trend across many of the country’s major metros. Nationwide, apartments outperformed expectations for 2014. The national vacancy rate dipped as low as 4.2 …