The Smallest Part of Your Building May Have the Biggest Impact
Retail tenants are a small proportion of an office tower, yet they can give a big bump to office rents upstairs, says AEW Core Property Trust fund Senior Portfolio Manager Dan Bradley. We'll find out how at Bisnow’s Boston Retail: The Impact of the Ground Floor and What Tenants Want, July 29, Westin Boston Waterfront, 7:30am. (Sign up today!) Here's a little preview.
At AEW’s 699 Boylston St, creating a new retail format is narrowing the gap between rents for the high-rise and mid-rise sections of the 211k SF building at the corner of Exeter Street in the Back Bay, Dan tells us. Tenants are willing to pay more now that new retailers have moved in—such as the 9k SF flagship AT&T store. Recently, rents have jumped from the $70s/SF to the $80s/SF for high-rise offices and from $40s/SF to the upper $50s/SF in the mid-rise.
With retailers more willing to occupy second floor space, the AEW team realized that its mammoth lobby—good-looking but outdated and oversized—could be more productive. After landing AT&T, the landlord renovated the lobby and created a mezzanine with floor-to-ceiling two-story windows overlooking the street. Days before this spring’s Marathon, AT&T opened one of its largest stores. The interior design encourages customers to discover through play. Round tables have replaced traditional cash registers to cultivate closer interaction with salespeople.
Retailers are also finding new locations: the Financial District, Fenway, Fort Point and the Seaport. Even in old line Back Bay, rents on Newbury Street are now out of reach for many retailers. They see neighboring Boylston Street as an appealing alternative, Dan tells us. As once-secondary locations become primary, rents for store owners have grown substantially, says Dan. His fund also has a stake in the Inkblock, and owns an office building in the Longwood Medical Area as well as properties in New York, DC, Southeast Florida, LA, the Bay Area and Seattle.
Legoland Discovery Center GM David Gilmore says that the financial performance of the nearly 45k SF Assembly Row store in Somerville is exceeding expectations of parent company Merlin Entertainment. It helps that it’s within shopping distance for many New Englanders and near a new T-stop. The UK-based parent corporation will open a new attraction in Istanbul at the end of July and in the Detroit area next year, David tells us. In 2014, Legoland became one of the first tenants in the new $1.3B Assembly Row complex being developed by Federal Realty Trust.
Being in an outdoor outlet mall rather than an enclosed center is a distinguishing feature. As is the 22-foot giraffe that greets customers. The administration of Mayor Joseph Curtatone has been very supportive, David says. He invited the Legoland team into the public schools to entertain the students, an exercise that also elevated Lego brand awareness. One tricky element of visiting Legoland is maneuvering children through the retail store without busting the family food budget. No problem, parents, it’s a skill that can be learned, says David, father of five.
