News
Construction: Full Steam Ahead
September 27, 2012
| Developers are planning to move on major office developments next year, according to panelists at Bisnow's third annual Boston State of the Market (read previous coverage here). Residential specialists, meanwhile, say the next wave may be wood-frame rentals in the 'burbs and neighborhoods like Allston/Brighton. | |
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| Boston Global Investors CEO John Hynes and Morgan Stanley managing director John Buza are developing the 6.5M SF Seaport Square mixed-use project downtown. Hynes hopes to roll out 2M SF in projects there next year—including a 500k SF office building —since he’s seeing rents rise. Of nearly 2,000 apartments he hopes to start developing in ’13, half will be smaller than 750 SF and rent for around $2,000/month. Buza says that Morgan Stanley has invested $1B downtown and is shopping for more. Seaport Square, he says, is a “huge opportunity to transform the city” in a way that enhances all downtown neighborhoods. International capital wants in. Now, the focus, he adds, is “Don’t blow it.” (Somebody remind the Patriots of that, while we're at it.) | |
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| Panelist and event sponsor Symmes Maini & McKee Associates CEO Ara Krafian says that his design firm sees developer clients aggressively moving on projects to stay ahead of escalating construction costs. In multifamily—especially in Boston and Cambridge where new jobs are being created for young workers—apartment sizes are shrinking to make them more affordable. SMMA is working with Divco West as it seeks to redevelop the East Cambridge courthouse. On the office side, the firm recently completed about 500k SF for EMC, Bose, Shire and VCE and has close to a 1M SF in the pipeline for The Gutierrez Company for Keurig, Red Hat, and others. | |
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| AvalonBay EVP Michael Roberts says the stars were perfectly aligned for multifamily development last year. Rising rents and falling cap rates, he says, "made us look smart." Moving forward, it’s all about construction costs. In Boston, 2,000 apartments are in construction and 4,000 are being planned; that's big, but a supply that eventually will be absorbed, he says. As new residents move into the CBD, it will become more of a live/work/play environment that will benefit all landlords, he says. But he's still a fan of the ‘burbs. (The submarket, not the Tom Hanks movie.) Why? The best value creation comes from wood-frame suburban buildings, low density structures that also may work in outlying urban neighborhoods. | |
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| Leslie Cohen, SVP at Samuels & Associates—which has developed 10M SF of mixed-use projects with a focus on Fenway—says the company will soon break ground there for a Target, Boston’s first. Leslie, whom we snapped with Collaborative Co’s Sue Hawks, says while rentals are still “the thing,” we will see condos reappear at the appropriate time. Given rising construction costs, she’s in a race to buy out jobs and weighing the possibility of building with concrete rather than steel in urban markets and wood rather than steel in the ‘burbs. | |
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| An optimistic New England Development EVP Douglass Karp says that new development will keep coming. In the Seaport at NED's Pier 4 site, infrastructure work is under way for Hanover’s 360-unit apartment building. He expects the groundbreaking in a month. The next building to go up could be offices, which is a good sign for the city's CRE market. Despite the rush into the city, Douglass tells us that his team is still “bullish” on ‘burbs like Northborough where NED built a 650k SF power center and AvalonBay built apartments. In Newton, NED is building Chestnut Hill Square with retail, restaurants, and medical office space. | |
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| A shout out to the Reznick Group, another event sponsor. Principal John Mackey, who moderated our first panel, tells us that as of Oct. 1, the company will merge and become CohnReznick. Best of luck! John himself specializes in tax-advantaged real estate that qualifies for historic, affordable housing or New Market Tax Credits. |
