What We Heard: Boston's State of the Office

On their recent Boston trip, the RDM team attended Bisnow’s State of the Office; where experts discussed the leasing, capital markets, and development activity in the Boston region.

The panel included experts from Synergy Investments, ADD Inc., CV Properties, Tishman Speyer, Goulston & Storrs and McGladrey.

This is some of what we heard:

Sam Schaefer (Tishman) - has seen rent growth in low and mid-rise buildings, but not as much in high-rises.

Frank Litwin (Goulston) - says the cost of construction in Boston is limiting supply.

Schaefer - political constraints are hindering growth as well; however, tenant growth is good.

Fred Kramer (ADD Inc.) - tenants are looking for office space in areas favorable to their employees because this will help retain employees in the long run.

David Greaney (Synergy Investments) - businesses are moving from the suburbs to the downtown area because they’re able to attract better talent downtown.

Greaney - says urban areas are better for attracting startups or companies that require “younger talent”. 

Dick Galvin (CV Properties) - growth of startups in Boston is in large part due to the proximity to great schools like MIT. 

Greaney - startups have “organic growth” - they begin a lease wanting a small floor plate but three years into the lease they want to move to a 20,000 sf floor plate. 

Litwin - growth in Boston is also coming from expansion of education and medical industry in the region. 

Kramer - new development occurs when a tenant explicitly voices a need.

Schaefer - building amenities are key in the market. At 125 High Street, Tishman installed a gym and conference center for their tenants.

Galvin - says buildings need to foster a collaborative work environment, provide sustainability/green initiatives, and accommodate unusual work hours to attract tenants.

Kramer - amenities in the suburbs are also important, however, the types of amenities needed are different (i.e., bringing in retail and food options at a suburban office park). 

• People want to live in downtown Boston but more housing is needed for the middle class.

Galvin - the city needs to find a way to retain talent from area colleges. For example, Mark Zuckerberg left Boston for San Francisco.

Greaney - it’s tough to put leases together as companies increasingly want flexibility; for example, a five year lease might not fit into a startup’s business plan. 

Schaefer - finding well-leased assets with good cash flow is very challenging in today’s market.

Greaney - lending in Boston is very strong right now, this is good for both the landlord and the tenant. 

• The price per square foot of Boston office space is still relatively cheap compared to other global cities. 

Greaney - the general profile of a Boston landlord has changed from what it used to be; there are more large institutional players and foreign investors.