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New England Development expects to begin conversion this summer of the former Macy’s anchor space at its CambridgeSide property into a 10-story office-lab building. Image courtesy of Elkus Manfredi Architects
Outdoor dining, art exhibits and public transit shuttles were some of the unusual wrinkles that New England Development brought to its newly-opened CambridgeSide Galleria in 1990 as it positioned the 800,000-square-foot retail property as a hip alternative to suburban shopping malls.
Contemporary media coverage described the project as a $100 million gamble because of its opening during a steep regional recession and its lack of free on-site parking. But over three decades, the East Cambridge property largely thrived even after losing a succession of anchor tenants.
“It really is one of the success stories of regional shopping centers,” said John Twohig, executive vice president at New England Development. “We did a very significant renovation to this center in 2015 and 2016. You have to continue to invest in facilities.”
This summer, New England Development is scheduled to begin the most dramatic updates to the property to date. The 3-story former Sears building at 60 First St. will be expanded into five stories of office and lab space with ground-floor retail. The 3-story former Macy’s building at 20 CambridgeSide will be redeveloped as a 10-story office-lab building, joining the expanding life science cluster in East Cambridge.
The construction is part of a master-planned redevelopment that will expand the 1.1 million-square-foot CambridgeSide property by 575,000 square feet. Future elements including redevelopment of the Best Buy and Upper Garage space, are subject to further approvals from Cambridge officials. The project also will add 175,000 square feet of multifamily housing, of which 65 percent will be income-restricted.
New England Development is leading the permitting for the project, although Denver-based Northwood Investors acquired the Sears building in 2017 for $55 million.
The redevelopment comes just five years after New England Development spent $40 million on renovations to the property, a reflection of the accelerating life cycles of retail real estate. Plans for the latest changes were under way before the COVID-19 pandemic added even more uncertainty to the future of traditional retail models.
The former Sears building at CambridgeSide has been approved for conversion into a five-story office-lab building with street-level retail storefronts. Image courtesy of Elkus Manfredi Architects
A History of Reinventing Retail
An outgrowth of the city of Cambridge’s redevelopment efforts for a once-rundown industrial district, CambridgeSide broke some of the accepted rules of the enclosed mall industry. Suburbanites accustomed to acres of free parking had to pay $2 an hour to park on-site, and developers sponsored shuttles to nearby MBTA stations years before transit-oriented development became a catchphrase.
But the impetus for the mall’s recent makeover is similar to those being felt throughout the mall industry, regardless of location: retrenchment and departures of traditional anchor tenants.
Discount chain Lechmere was the first to depart in 1997. Filene’s was acquired by Macy’s parent and absorbed into the sibling brand, and the Sears location shuttered in 2018. Finally, Macy’s departed just after Christmas in 2018.
The CambridgeSide property is unusually well-positioned to reinvent itself as a mixed-use development. The nearby Kendall Square tech cluster was just a fraction of today’s 8 million-square-foot global life science hub. Across Monsignor O’Brien Highway, a railyard occupied the parcels where pharma and tech companies are steadily leasing 2.1 million square feet of new office and lab space at the Cambridge Crossing development.
Asking rents for East Cambridge lab space now average a whopping $110 per square foot, according to a report last week by brokerage Newmark, by far the region’s priciest commercial real estate. The 1.8 million-square-foot East Cambridge lab market has just a 0.5 percent vacancy rate, while new developments such as Cambridge Crossing’s 250 Water St. hit the 100 percent leasing mark well ahead of completion.
“East Cambridge is all about lab and biotech, so that’s an easy transition and that’s smart of them to switch over,” said Ted Chryssicas, executive managing director of Newmark’s retail group in Boston.
Suburban Options More Limited
Redevelopment plays for suburban mall properties – even those located at prime highway locations such as the Burlington Mall – have a more limited set of options.
Indianapolis-based owner Simon Property Group is converting the Burlington Mall’s former Sears space into multitenant retail with a heavy emphasis on restaurant tenants, a changeover that’s been complicated by the pandemic’s recently-lifted dining restrictions. The mall also has another anchor space to fill following last year’s demise of the Lord & Taylor chain, which could attract interest from flexible office space providers.
Steve Adams
“Could we see a WeWork take over a closed Lord & Taylor and convert that to flex office space?” Chryssicas said. “Yes. A lot of these malls have great infrastructure, so the ground is worth something, and you can go with a different use.”
Representatives of the Burlington Mall and Simon Property Group did not respond to requests for comment.
Redeveloping the Sears space into a lifestyle center-type format, including additional direct-entry storefronts, gives mall operators new opportunities to recruit tenants, said Stephen Pleines, founder and principal of Boston-based retail brokerage Eastern Land Co. But many properties will need to consider other property types entirely.
“It’s easy in Cambridge to envision what’s next,” Pleines said. “But when you go out in the suburbs and the less desirable tertiary markets, somebody’s got to build a hotel or a residential component.”
