Excessive regulation in Boston? Say it ain’t so. Despite repeated pledges by Mayor Thomas M. Menino’s administration to streamline the city’s development process, telecommunications providers are railing over a new zoning change that makes so-called switch hotels and data centers nonconforming uses, requiring them to first gain approval from the Boston Board of Appeal. One consultant who is helping guide a prospective tenant for 451 D St. in South Boston through the development process estimated last week that it will hold up the move-in date by up to five months.
“We were very much blindsided by this change,” said Vernon Woodworth of the Sullivan Code Group. Sullivan works with clients to gain necessary approvals for development activity. Ironically, it filed permits for Arbrose Communications on Sept. 21, the same day the Boston Redevelopment Authority began efforts to change the zoning rules. Arbrose is aiming to move into about 6,000 square feet of space at 451 D St., a former warehouse that has been converted into a mix of office and switch hotel functions. The 480,000-square-foot building is owned by Yale Properties, which declined comment on the zoning situation.
Woodworth said he believes Arbrose is the first case in which a telecommunications firm is being required to seek a variance in Boston, adding that Sullivan was not informed of the new rules until they were more than 70 percent through the process. “It’s possible many other people still aren’t aware of this,” Woodworth said, maintaining that the city has done little to alert the industry about its actions.
Among those who are familiar with the changes is broker David Martel of Spaulding & Slye Colliers. Martel questioned the need for such a regulation, especially for tenants such as Ambrose that are merely trying to move into a building that already houses similar operations. As with Woodworth, Martel said he only heard about the new stipulation through working with a client, in his instance a property owner who was evaluating whether to reposition a building for telecommunications functions.
“For landlords who were thinking about converting their building [for telecom use], this will give them pause on whether to do that,” said Martel, although he added that his client has not ruled out pursuing such a path. Still, while it might not seem an eternity to some, most telecommunications providers are in an Internet arms race with their competition to get such operations running. “Timing has always been a major issue with these guys,” said Martel.
“They don’t really care how much it costs,” Woodworth concurred. “The real concern is how long will it take them to get in.”
Suburban Competition
Martel said that, in some respects, he does not believe the impact of the zoning change will be as widespread as it would be in other communities, given that Boston does not have as many properties available for telecommunications purposes as might be found elsewhere. To date, the majority of the activity in Boston has occurred at 451 D St., One Summer St. and 230 Congress St., all buildings that sported the needed fundamentals to convert a building to a switch hotel. Qualities such as strong load-bearing floors, high ceilings and accessibility to fiber optic lines all are needed for such an endeavor. Even though an experienced telecom developer recently bought the former Agar Supply Co. building in Roxbury, Martel said most of the growth this year has been taking place in the inner suburbs, including Waltham, Watertown and Somerville.
At this point, it seems that competition will only increase for the city. Conroy Development is pushing a switch hotel in Quincy, for example, while Berkeley Investments last week filed plans with the state to develop a 220,000-square-foot telecommunications building at the Wellington Business Center in Medford. In Somerville, three new buildings that will add hundreds of thousands of square feet of switch space are under construction.
As for motivation, it is unclear why Boston opted for the new regulations, with calls to the BRA not returned by Banker & Tradesman’s press deadline. One of Menino’s tenets as mayor has been to make the permitting process less onerous for developers, leading to the implementation of the Article 80 review process several years ago. Although that system has been credited with making approvals easier to gain, Woodworth said he believes the new zoning requirement will have a chilling effect on telecommunications expansion in the city.
Woodworth said he was told by a BRA official that the planning agency felt the zoning change would increase linkage payments from telecommunications operations, although there was no explanation as to how that would happen. The official also said the city wanted greater control over that industry due to concerns in some neighborhoods that the projects were getting too large, according to Woodworth.
“I indicated to [the BRA official] that surrounding towns such as Somerville, which are aggressively courting this activity, would be the beneficiaries of this move by the BRA,” Woodworth said. “This almost guarantees that a stream of these tenants who might have relocated into Boston will now be looking elsewhere.”
