Just as the Big Dig opened up new areas of downtown Boston to development and the Silver Line improved access to the eastern end of the Seaport District, Boston’s Hubway bike-share program is the latest example of how public infrastructure can influence commercial real estate values.
Office landlords now tout the proximity of Hubway stations in the same breath as open floor plans, roof decks and yoga studios.
“If it’s not brought up by the tenant, we usually highlight it,” said Ben Sutton, a senior associate at NAI Hunneman. “It’s important for these companies coming down here. As parking spaces become less important, it’s the Hubway stations that really fill the gap. To have one within a block is very important.”
The city and private sponsors partner with Portland, Ore.-based Alta Bicycle Share, which maintains the local bicycle fleet and stations. The bike-sharing program has been enthusiastically adopted in Boston, which is fertile territory for car-free commuting.
Boston has the highest percentage of residents who walk to work of any major U.S. city at 15.1 percent, according to the U.S. Census Bureau’s American Community Survey. Bike commuting is a small but rapidly growing niche, rising from 1 percent in the 2000 census to 1.7 percent in the community survey, which spanned the years from 2008 to 2012.
Hubway has a variety of payment plans designed to appeal to everyone from tourists to everyday commuters, ranging from $85 for an annual membership to a $6 pass for 24-hour access. Ridership has topped 500,000 trips since this year’s program began April 2, with a fleet of 1,300 bikes at 139 stations in Boston, Brookline, Cambridge and Somerville, according to Alta spokeswoman Emily Stapleton.
Hubway’s success has not gone unnoticed by the real estate industry. Approximately 30 private companies have paid $50,000 for three-year sponsorships of new stations. Developer Jamestown sponsored the two new Hubway stations that opened this spring on Drydock Avenue, aiming to improve commuting options to the 1.4-million-square-foot Innovation and Design Building in the Boston Marine Industrial Park.
A review of rent trends at seven large office buildings located in close proximity to Hubway stations in Boston and Cambridge shows gains from 7 to 19 percent in the 24 months ending June 30. By comparison, average rents in submarkets such as the Financial District rose just 5 percent over the same period, according to Cassidy Turley data.
New Financial Model
During the first three years of the program, Boston split the operational costs and profits with Alta as part of a risk-revenue sharing model reflecting the uncertain market for the startup, said Nicole Freedman, director of Boston Bikes.
Under the current three-year contract that began in April, Boston pays Alta a flat fee of $61 per bicycle docking station, while private parties can sponsor a station for $50,000 over three years.
The operations fee paid to Alta includes costs for customer service and marketing, and the city keeps 100 percent of the revenue from member fees and user fees.
The current contract is designed to operate on a break-even basis for the city, Freedman said, but that could change depending upon how aggressively Mayor Martin Walsh wants to expand the network.
“Right now the city hasn’t had to put any money into the system. As you get into the less dense neighborhoods, the finances start to swing a bit,” Freedman said. “Bike sharing is still in its infancy and at some point, we’ll be looking at those decisions as far as what’s best for the city.”
Brookline, Cambridge and Somerville participate in the Hubway program through separate contracts with Alta.
Results May Vary
The Greater Boston program is the fastest growing of any major city in Alta’s network, which includes six U.S. metros and programs in Toronto and Melbourne, Australia. According to published reports, Alta is in negotiations to be acquired by an affiliate of New York-based real estate firm Related Cos. in a deal that would expand its Citi Bike program in New York.
New York has fought Alta’s attempts to raise the $95 annual membership fee there, and Mayor Bill de Blasio has resisted public investment in the system. As part of the potential deal, Related Cos. affiliate REQX Ventures would invest $40 million to expand the Citi Bike program into upper Manhattan, Queens and additional parts of Brooklyn, The Wall Street Journal reported.
If Alta is acquired, there would be no effect on fees in Boston, said Stapleton, the Hubway spokeswoman.
Email: sadams@thewarrengroup.com
