Construction has begun on the 42-unit Sphere apartment complex at 460 Boston Ave. in Medford, next to the planned Ball Square station on the MBTA Green Line Extension.
It’s been a relentless force in the inner suburbs’ real estate market: developers acquiring time-worn industrial parcels to redevelop as upscale apartment complexes and tap into strong demand for multifamily housing.
Construction delays and uncertainty about the future of the MBTA’s $2.3 billion Green Line Extension haven’t dampened speculation in properties near the 4.3-mile planned trolley route from Cambridge’s Lechmere station through Somerville to Medford.
“The luxury market is under pressure,” said Young Park, president of Boston-based developer Berkeley Investments. “The people who can afford the $4 to $5 (per square foot) rents, that’s a limited pool. Where the market is really attractive from a development standpoint is the middle market, the $3.50 to $4.50 range.”
Case in point: Berkeley’s recently-completed Millbrook Lofts complex in Somerville, where 100 luxury apartments were built in a converted cold storage warehouse at 9 Medford St. Since April 1, the complex is 66 percent leased with average rents of $3.65 per foot – with studios starting at $2,400 per month and penthouses listed at nearly $5,800.
Park is banking on Millbrook’s performance being replicated in Sullivan Square, where Berkeley has filed development plans for 171 apartments at 572 Rutherford Ave. And the company has preliminary plans for approximately 400 apartments at a site near Somerville’s Union Square, where master developer US2 was selected in 2014 to lead a 2.3-million-square-foot redevelopment. Park declined to give specifics on the location.
In Medford, ground was broken last week on Sphere, a 42-unit apartment complex next door to the Green Line’s planned Ball Square station site on the Somerville line. Developer Dark Horse Partners expects to start leasing one-bedroom units at $2,300 per month, partner Peter Miller said.
Developers, Cities Subsidize New Cost Structure
Plans for the Green Line Extension emerged from the environmental mitigation for construction of the Central Artery Tunnel. In 2005, the Conservation Law Foundation sued the state to ensure completion of the project.
Construction of the line including new railroad bridges in Somerville and Medford began in 2012. But news of a $1 billion cost overrun brought the project to a halt in August 2015. In April, state transportation officials cut $400 million in project spending by scaling back plans for stations and paths, and received funding commitments from Cambridge and Somerville for $75 million. Cambridge is receiving half of its $25 million share from DivcoWest, developer of the 45-acre, 4.5-million-square foot NorthPoint mixed-use project near Lechmere station.
With or without the GLX, Somerville offers the sort of dense and walkable environment that appeals to an increasingly wide swath of the population. In the last five years, average apartment rents have risen 30 percent to $2,428 per month in Somerville, according to data compiled by Zillow. During the same period, Medford rents have risen nearly 38 percent to $2,287.
Employment is growing at new clusters such as Assembly Row, with more than 4,000 jobs moving to Partners HealthCare’s new headquarters by early 2017. Somerville officials hope to attract companies to fill new office and lab buildings in Union Square, where master developer Union Square Assoc. (US2) is leading a 2.3-million-square-foot redevelopment effort that was largely driven by plans for a Green Line station.
US2 had hoped to break ground on 500 apartments last year but hit a roadblock after public controversy over the phasing of residential and commercial components.
A proposed overlay district, recently submitted to the board of aldermen, requires a 60-40 split in favor of commercial development over residential. Most building heights would be capped at 10 stories, with the exception of one building on Prospect Street with a 6-story podium topped by a 14-floor residential tower with 10,000-square-foot maximum floorplates. Meanwhile, discussions between community groups and US2 are continuing on a community benefits agreement.
The focus on Union Square comes as interest in commercial properties expands throughout the city, said Dan Bartman, a senior planner for the city of Somerville.
“There’s a lot of interest on the eastern side of Somerville by multiple (developers),” Bartman said. “Interest has been creeping east from NorthPoint all along Monsignor O’Brien Highway. People are looking at existing strip centers and industrial uses (for redevelopment), parking lots in Brickbottom south of Washington Street and the Inner Belt.”
Industrial Conversions In Demand
Finding good sites in Somerville, New England’s most densely populated city, and largely built-out Medford is one of the biggest challenges, according to developers. In the case of Sphere, local connections led to an off-market transaction.
The site formerly housed a taxi company and auto repair shop. The longtime owner, Ronald Bonney Jr., approached Miller, a former chairman of the Somerville zoning board of appeals, about his interest in the property.
Dark Horse Capital Partners, a development firm founded by Miller and Managing Partner Biff Shea, acquired the site in December for $1.6 million. Berkshire Bank provided $10.3 million in construction financing May 27. James Curran, executive vice president at Berkshire Bank, said the Green Line Extension didn’t factor into the initial decision to back the project. The location, development team’s experience and neighborhood demographics were attractive given the rising multifamily rent structure in Boston, Curran said in an emailed statement.
Designed by Boston-based ICON Architecture, the project is managed by NEI General Contracting with a target completion date of June 2017. The developers have already received inquiries from companies working on the Wynn Everett casino looking to lease multiple units for temporary housing, Miller said. And they expect long-term residents to be a mix of young professionals, Tufts University students and empty-nesters, he said.
“Even if they’d terminated their intent to build the GLX, we were very confident in this location,” Miller said. “I still hold out hope that with the scaled-down version of the station, it’ll be operating in late 2019.”
