One Congress (Government Center Garage) Office Tower | Developer: HYM Investment Group and National Real Estate Advisors | West parcel: 43 stories, 1 million square feet | Status: Approved
They are striking architectural renderings on websites putting gleams in developers’ eyes, but whether they ever get built depends upon how long Boston can sustain its economic surge.
Three office towers totaling 113 stories and nearly 2.5 million square feet, already bearing the Boston Redevelopment Authority’s stamp of approval, are to be built near the MBTA’s Haymarket, North and South stations.
The transit tower trend ratchets up with Boston Properties’ latest vision of a 1.3-million-square-foot development at Back Bay station, including a 26-story office tower. And the BRA is getting into the high-rise act as it seeks an “iconic” redevelopment up to 700 feet for its defunct Financial District garage at 115 Federal St.
The latest speculation swirls around Houston-based Hines Interests LP’s timing for the start of its 49-story, 970,000-square-foot office tower at South Station. The Pelli Clarke Pelli-designed structure is the first phase of a larger 1.9-million-square-foot mixed-use project that has been in the planning stages since 1977.
Hines now wants to begin the tower construction in 2017, but has notified the BRA that it wants to reduce the office component and add housing, BRA spokesman Nicholas Martin said. It’s expected to submit a notice of project change this month, and seeking to certify a new equity partner, Martin said.
Hines’ designation as the site developer expires in April 2017, MassDOT spokesman Jason Johnson said.
South Station
Air Rights Tower
Developer: Hines
49 stories, 970,000 square feet
Status: Approved
The aggressive scope of the tower projects represents a long-range vote of confidence in a commercial real estate market that has benefited from organic growth, relocations from the suburbs and Boston’s rising global profile (hello, GE).
“When we talk about the amount of development that’s under way, this is not something this market can’t swallow,” said Brendan Carroll, director of intelligence for Boston-based Encompass Real Estate Strategy.
But the glass-half-empty perspective points to continuing consolidation in downtown Boston’s largest office sectors: financial services and law firms.
“If I had to guess, at least half of those projects don’t get delivered in this real estate cycle,” said Matt Harvey, a principal with Boston-based Cresa.
‘Not A Lot Of Large Tenants’
State Street Corp.’s plans to shrink its global headcount by up to 7,000 employees by 2020 was the latest shoe to drop, following BNY Mellon’s recent 112,000-square-foot reduction at One Boston Place and Bank of America’s 137,000-square-foot space reduction at 100 Federal St.
Fewer tenants are in the market for big blocks of space in 2016, Cresa’s Harvey said. The 10 largest tenant requirements in the market total 1.2 million square feet today, compared with 2.5 million a year ago.
Many of the largest leases signed in the past year involved relocations or consolidations by existing Boston companies such as Putnam Investments and Houghton-Mifflin.
“You’re certainly seeing the drive to efficiency for a lot of the financial service companies,” said Will Foley, an executive managing director at Cushman & Wakefield. “Others are getting more efficiencies in how they use space, but they’re still growing. It’s an interesting time in that there are not a lot of large tenants, but a lot of tenants are leasing up.”
Back Bay/South End Gateway Office Tower
Developer: Boston Properties
26 stories, 575,000 square feet
Status: Proposed
On the flip side, there aren’t a lot of big blocks of vacant space either. That bolsters the prospects for new office construction in the next few years, said Hans Nordby, chief economist for CoStar Group. Only seven blocks of office space larger than 100,000 square feet are available in downtown and Back Bay.
“If somebody wants a new building or a new renovation, it’s a pretty short list,” Nordby said. “If you look at GE, some people just want something brand-new. It’s what drives a lot of the market today. There’s enough (demand) for new construction to soak that up over the next few years.”
The glass-half-full viewpoint argues that Boston’s office market is in the midst of a once-in-a-generation shift benefiting coastal cities with strong tech clusters.
Boston landlords in recent years have profited from raiding Cambridge for prized tenants like Vertex Pharmaceuticals and home audio manufacturer Sonos. Suburban tech companies such as Burlington-based Acquia moved their headquarters to the city, eager to impress Millennial employees with the allure of downtown workspaces, and more are in the market.
As the city gains tech at the expense of finance, it has seen organic growth from fast-growing companies like online furniture retailer Wayfair. After leasing 275,000 square feet for its new headquarters at Simon Property Group’s Offices at Copley Place last March, Wayfair is in the market for up to 150,000 square feet of additional office space in Back Bay, according to real estate brokers. A Wayfair spokeswoman declined to comment.
The Hub On Causeway (North Station Redevelopment)
Developer: Boston Properties and Delaware North Cos.
Phase One: 175,000 square feet
Phase Two: 21 stories, 525,000 square feet
Status: Approved
Industry experts say there’s little risk that an overbuilding boom will tank the city’s 63-million-square-foot office market by itself. None of the big tower projects is likely to break ground without a lease for approximately 50 percent of the building, even as a pair of smaller speculative office buildings rise in the Seaport.
Rents continue to rise even in neighborhoods such as Back Bay, which has the highest availability rate of any Boston submarket at close to 20 percent.
And economic development officials and real estate executives are already talking about the search for the next General Electric, hoping to land another corporate big fish and build on the momentum from the industrial giant’s headquarters move from Connecticut.
“When you talk about accelerating demand for urban space, this just the tip of the iceberg,” Carroll said.
