Always Looking Forward: NFP Senior Advisor At Boston State Of The Market Event
Boston has prudently been taking steps toward breathing new life into its underused commercial real estate assets. In July, Mayor Michelle Wu announced plans to initiate a pilot program to encourage the transformation of underused downtown Boston offices into housing — a move that would not only provide residents with housing options but also enhance downtown Boston's economy.
While this news may prompt investors to jump in quickly, they should do so with diligence and care. They can find out more about trends and deal-making opportunities in the region by attending Bisnow’s Boston State of the Market event Oct. 19.
Among the CRE professionals in attendance will be Brooks Finnegan, senior advisor at NFP, a leading global property and casualty insurance broker, benefits consultant and provider of wealth and retirement solutions. Finnegan, a cross-disciplined specialist in the delivery of innovative commercial property and casualty insurance solutions, will be moderating the Assessing Capital Challenges and Making Deals Work panel.
The panel offers commercial real estate investors, developers, owners and other industry professionals insights into real estate lending in Boston. Additional panels at the Oct. 19 event will discuss Boston’s most desirable neighborhoods, the revitalization of transportation infrastructure, how the region’s construction projects can meet deadlines despite increasing prices and more.
Click here to register.
Bisnow sat down with Finnegan to discuss the exciting developments in Boston CRE, considerations for obtaining capital and how NFP supports its Boston clients with their insurance needs.
Bisnow: What are some of the trends you’re seeing in Boston’s capital markets?
Finnegan: Regarding macro trends, you can't talk about Boston without talking about the strong demand for life sciences and healthcare. This demand is driving significant growth in the CRE market. Biotech and pharmaceutical companies are seeking and expanding modern laboratory and office spaces in the city and surrounding areas, which are contributing to increased lease activity and the development of specialized properties.
There has been rising interest in Boston’s suburban markets along major transportation corridors like Route 128 and Interstate 495. Many companies are looking to move or expand into the suburbs to access a more affordable and diverse range of real estate options while still maintaining proximity to Boston's talent pool and resources.
Another trend we're seeing is adaptive reuse and redevelopment, especially with older buildings. Investors are repurposing historic and underutilized properties into modern creative office spaces, residential units and mixed-use developments. This trend centers on revitalizing existing structures to meet the demand for unique character-filled spaces.
There are also three micro trends that are more specific to deal-making. There is larger equity participation in deals versus raising debt due to high interest rates. We are also seeing more syndicated deals where multiple parties participate, which diversifies the level of risk to any one party. There is also more selective project targeting and opportunistic deal-making. This involves sorting through what's available and then focusing on those opportunities where the return on investment is more near-sighted.
Bisnow: What are some of the benefits and obstacles around accessing capital for CRE deals in Boston?
Finnegan: I’ll start with the benefits. Boston has historically been a robust real estate market, attracting both domestic and international investors. This market strength can make it easier to find interested capital providers.
We have an incredibly diverse economy in Boston that includes sectors like healthcare, technology, finance and education, all of which create robust opportunities for commercial real estate development.
Boston also has a volume of financial options and is home to numerous financial institutions, including commercial banks, private equity firms, angel investors and real estate investment trusts. This concentration of financial resources can make it more accessible to secure financing for real estate projects.
Finally, Boston’s status as an educational and innovation hub attracts investors looking for long-term stability and potential growth in the real estate market as well as offering opportunities to hire and recruit fantastic resources.
As far as obstacles go, Boston's real estate market can be very expensive, with its high land and construction costs. This can pose a significant challenge for developers looking to finance projects, especially those who are smaller or newer entrants to the market.
Boston developers also face regulatory challenges. Massachusetts, like many states, has strict zoning and permitting laws, which can lead to delays and increased costs for real estate projects. Navigating the regulatory landscape requires meticulous planning and experienced advice.
Boston is a very competitive real estate market, and competition for funding can be intense, especially for prime locations and desirable asset classes.
Then we have the market volatility. Real estate markets can be subject to fluctuations, and Boston is certainly no exception. Economic downturns or shifts in market sentiment can affect the availability and cost of capital.
One challenge that is regionally unique to Boston centers on environmental concerns. Boston's proximity to the ocean and the potential for climate-related issues like the rise in sea level can create concerns for some investors and lenders, particularly for waterfront properties.
Bisnow: How does NFP help CRE professionals navigate the process of procuring capital and understanding and mitigating risks?
Finnegan: NFP is a full-service global broker that can handle real estate transactions at any size and stage of their life cycle. From vacant land coverage to construction liability all the way through the operational placements of the landlord and tenants, there's opportunity for NFP at every stage to provide expert advice.
The biggest concern we're seeing right now is building valuation on all real estate portfolios, especially older buildings, like those in Boston, which are insured with one carrier for multiple years. In recent renewals, all property carriers have been looking to increase their clients’ insured-to-value, or ITV, due to the increased cost of construction and inflation.
ITV is a concern for everyone this year. Carriers are looking for 90%-plus ITV right now, which is skyrocketing premiums, and brokers should be prepping their clients for this expectation. Where NFP has been particularly valuable to its clients is in negotiating both the ITV percentage as well as the underlying rate. Instead of a carrier demanding normalized ITV at a full market rate, we've successfully negotiated a stepped approach over several years to bring ITV and rates to a more consistent market level, which provides better cash flow management and limits dramatic fluctuations in our clients’ insurance costs.
Bisnow: What are you looking forward to most about the Boston State of the Market event?
Finnegan: I was born and raised in Boston and have seen incredible changes to our skyline since I was a small boy. The Seaport was a vacant stretch of lots and harbor refuse, downtown Boston was bisected by an above-ground interstate highway, and Back Bay was nothing but low-rise brownstones.
It's humbling to now be a part of the professionals further transforming the city into a dynamic community, with green spaces, towering masterpieces bordering on artwork and thoughtful work-life elements like bike paths and walking bridges. The Boston State of the Market Event gives me a glimpse of what's to come and how the city continues to evolve.
Learn more about the Boston State of the Market event and register here.
This article was produced in collaboration between NFP and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
