News
A LOOK AHEAD IS A LOOK AT BACK BAY
January 27, 2011
| Yesterday, neither snow nor hail nor a property market with mixed 2010 results could delay Colliers Meredith & Grew?s annual CRE market seminar at the Seaport Convention Center, where about 800 of you heard that last year was rocky for the Financial Districtbut activity in the Back Bay, Cambridge, and the capital markets was positive and provide optimism for 2011. |
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| We snapped CMG CEO and co-chairman Tom Hynes (right) who welcomed the crowd that braved frantic blizzard forecasts for what is customarily the best-attended CRE market trends event of the year. Tom announced that the 135-year-old firm had officiallyadopted the Colliers International market position, name, andlogo in the colors displayed on top of the Pru in the visual behind him. |
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| Colliers Boston president Ron Perry says the center of CBD gravity activity has shifted from the Financial District to the Back Bay, which has become Boston's downtown. By year end, the vacancyrate in the Financial District rose to 19.5% compared to the Back Bay at 8.7%, the largest spread in memory. In ?11, Ron says Boston's negative absorption will turn positive if job creationcontinues. He expects development to re-start at Downtown Crossing?s yawning chasm known as One Franklin, the site abandoned by Gale International and Vornado after they demolished Filene?s to build a mixed-use project. Also, in a coup for the city, Vertex has agreed to abandon Cambridge to lease 1.1M SF at Fan Pier contingent on FDA approval of a new product. |
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| Joe Flaherty had a happier tale to tell about Cambridge, which ended '10 with nearly 400k SF of net absorption and a vacancyrate of 13.1%, down from 16% a year earlier. While overall demand is modest, leasing around MIT has been strong and supply is tightening. Joe says a Vertex move would be a loss, but in ?11 he expects vacancies to decline, rents to rise, and some build-to-suits to start. Targeting investment sales, Lisa Campoli says Boston is on everyone's buy-and-hold list, which means thatcompetition is still fierce for core assets. While some mocked lenders' pretend and extend strategy to get through the recession, they did the right thing since values rose last year. In ?11, she sayssellers and lenders with problems to work out will come off thesidelines. |
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| Putting the market in perspective, Boston Properties presidentDoug Linde (who gave the keynote) reminded us that his REIT, which has $15B in equity value ($9.3B in debt), started here 35 years ago with one property. While dependent on job growth, he says ?things are looking up? in BP?s core markets: Boston, NYC, and DC. But San Francisco is volatile. Meanwhile, for his college-educated tenant base in Boston, unemployment is 4.8%compared to 7.5% for the metro area. In ?11, he says look for something to happen with the Blackstone/EOP portfolio, perhaps asset sales or JVs. He says NYC and DC are ?clearly the most sought after? markets, with Boston way behind. He expects DC to step out first with new construction. |
