Whether it’s a coincidence or the culmination of many economic factors, Boston is seeing what appears to be an unprecedented number of redevelopment projects that involve the expensive tearing down – or even building on top of – decades-old, hulking parking garages to make way for new offices, residential units, retail and other uses.
At latest count, there are now five redevelopment projects either approved or under consideration involving old above-ground or below-ground parking garages in downtown Boston. They include properties in Government Center, the Financial District, West End and Fort Point and on the central waterfront.
For Riaz Cassum, senior managing director at HFF, a commercial real estate services company, the flurry of garage projects today in Boston is not a mere coincidence. It all has to do with a hot real estate market, higher property values and the now-positive economic conditions for developers. That gives them the confidence to take on the expensive effort of tearing down or reconfiguring these hulking cash cows and replacing them with speculative but potentially more lucrative alternatives.
“You can now economically justify tearing down these income-producing properties,” said Cassum. “It’s pure economics.”
Thomas O’Brien, managing director of HYM Investment Group, agreed that economic trends, as well as demographics, are the main drivers of the sudden surge in garage-related projects.
In particular, O’Brien – whose company is moving forward with a major redevelopment of the mammoth Government Center Garage that spans Congress Street near the MBTA’s Haymarket station – noted that younger people increasingly want to both live and work in urban settings and don’t need cars as much.
“Every garage is different; it all comes down to best use of a property,” said O’Brien, whose company is also vying with seven other developers to redevelop the now-shuttered Winthrop Garage in the Financial District.
The current Government Center garage has about 2,300 parking spaces within 11 stories, topped off by two floors of office space. HYM ultimately plans to construct six buildings at the sprawling site – including 850 residential units and 1 million square feet of new office space. In the end, it expects to eliminate about 1,200 of today’s existing parking spaces.
Normally, that would entail taking a huge financial hit due to the loss of tens of thousands of dollars in parking fees per day, while construction is underway and with the loss of so much cash-producing spaces by the end of a project.
But O’Brien noted that the Government Center facility now fills only 1,000 parking spaces on an average day, generating about $20,000 per day in revenue. And HYM intends to keep those spaces open during the 10-year redevelopment project, thus avoiding the loss of parking revenue during and after construction.
The economic and engineering dynamics are different for other proposed garage projects.
A complete teardown is planned for the Boston Harbor Garage under plans from developer Donald Chiofaro.
In the case of the Winthrop Square and Boston Harbor garages, developers envision completely tearing down the structures, often an expensive proposition due to demolition expenses, not just due to the potential loss of parking revenue.
The 300-space Winthrop Square Garage, owned by the city of Boston, is unique: It’s been closed since 2014 due to serious structural deterioration over the decades. The city of Boston is currently reviewing all eight proposals for redeveloping the site.
Chiofaro’s Risk On Harbor Skyscrapers
Meanwhile, Donald Chiofaro, a Boston developer best known for constructing International Place in the Financial District, plans to completely demolish the hulking, 1,400-space Boston Harbor Garage near the New England Aquarium. Unlike the Winthrop Garage, Chiofaro’s garage is currently operational and generating revenue, meaning he’d take a major cash-flow hit while construction of a pair of proposed 615- and 538-foot-tall towers is underway.
Without giving financial details, Chiofaro said in a statement that tearing down an operating garage is more costly than starting from scratch or keeping some spaces open during construction.
“Setting aside any structural engineering limitations, redevelopment that preserves an existing, operating garage is a less risky means by which to achieve a solid return,” he said.
But it’s worth demolishing a garage if the end result is a new development that can more than make up for the parking-fee losses, he said.
“The resulting project must be substantial in order to generate the risk-adjusted returns necessary to forego an increasing revenue stream and incur the substantial
The Government Center garage, where HYM plans to construct six buildings, eliminating 1,200 of the current 2,300 parking spaces.
costs of rebuilding parking below-grade,” he said.
John Karoff, a senior vice president at Berkeley Management, a unit of Berkeley Investments, said his company is taking a different tack than other developers. Built early last decade, Berkeley’s 22 Boston Wharf Road has 583 parking spaces within its first six floors, topped off by two floors of office space. Though the majority of the parking spaces lease for about $370 a month, the garage doesn’t sell out every day.
So Berkeley is in an enviable position: It’s now mulling building two additional floors of office space on top of the existing 22 Boston Wharf, taking advantage of the red-hot office market in the Seaport area, while keeping open an income-producing garage. Indeed, new tenants could end up boosting the garage’s cash flow after new office space is added, he said.
“It’s all about economics,” Karoff said.
