New Look for Offices in old Downtown
Software developer Rapid7’s upcoming move to the Financial District isn’t the biggest office lease--46k SF--but it says a lot about what’s new in this downtown submarket (to misquote Teddy Roosevelt: lease softly, but carry a big implication): fast-growing tech tenants, open plan layouts, smaller leases and reasonable rents. For tenants, opportunities abound; for landlords, it’s a race to fill space.
In seven weeks—on March 7--Rapid7 will double its office size when it moves into 100 Summer St where space is being designed for the way it works, CIO Jay Leader tells us. For years, it sublet other company’s offices. Now, it has a “huge opportunity” to create a frictionless office with no high walls and few closed rooms. The new design will transmit the Rapid7 “culture and energy between groups.” (And make paper airplanes easier to maneuver.) It’s moving from Back Bay to the Financial District because: it wants to stay close to mass transit; it found a large block of space with expansion options; landlords are pushing to find tech tenants and offering good rents, he says.
As a “people company” that develops custom security software, the productivity of its staff--set to grow from 220 to 275—is paramount. Cubicles are banned. (So don't even try to bring your own.) Instead, there will be high-top tables for groups of eight sales people; at Rapid7 they call them “sales buses.” The purpose is to promote a spirited business model that’s transmitted throughout the office, Jay says. Much of the space will be collaborative; banquettes and talk rooms, interspersed with soft seating and drop-in space. For privacy, there will be conference rooms and for quiet sales calls, phone booths. The desired “vibe is about energy and collaboration.”
Although the economy is growing and vacancy rates are declining, the Financial District is still a tenant’s market with landlords battling to keep those they have and sign-up new ones, says McCall & Almy partner and tenant rep Dave Richardson who arranged the Rapid7 lease with partner Neil Schneider. Most downtown tenants, from law firms to high tech companies, are using 15% to 20% less space per person. (That must be why so many companies are sponsoring weight loss programs.) Companies as different as PwC, PayPal and Rapid7, want offices with more “we” space and less “me” space, he tells us. But having 15% to 20% of supply going back on the market creates headwinds for absorption.
Strong job creation could counteract the space givebacks, but it won’t come from big corporations moving into the Financial District from out-of-state to set up HQs, Dave says. Boston has fast-growing startups and tech companies that helped fuel growth at the Seaport. As rents there and in Back Bay rise, some of these tenants want to relocate to the FD where Class-A tower rents range from the low $40s SF on the lower floors to the low $60s on the higher floors; in the Back Bay they range from the low $50s to high $70s. Given these dynamics, Dave doesn’t expect to see Financial District rents rise substantially—or spec office construction—in the near term.
