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Mark Development’s plans for a distinctive flatiron-style hotel in Kenmore Square have been delayed by the COVID-19 pandemic and a conservative climate for hotel financing amid uncertainty about the business travel recovery. Image courtesy of Studio Gang
Entering 2023, many real estate developers face an uphill battle getting projects off the ground including some of Boston’s most closely-watched future building sites.
Higher construction costs and rising interest rates dig into profit margins and threaten the viability of some projects. Declining tenant demand for office and lab space make prospects for speculative development an ever-riskier bet. Cracks are finally appearing in Massachusetts’ once-buoyant residential real estate market, with condominium sales volume dropping 22 percent in November according to The Warren Group, publisher of Banker & Tradesman, as potential buyers feel the pinch of some of the highest mortgage rates in over two decades.
The various factors raise questions about the timelines for the next generation of developments that could reshape the Boston skyline.
Dock Square Condos Delayed
After completing downtown Boston’s newest luxury condo tower, The Parker, and receiving $1 billion to refinance its One Lincoln office tower, Fortis Property Group is behind schedule on a high-visibility residential project.
The Brooklyn, New York developer has approvals to build a vertical addition to the Dock Square Garage next to Faneuil Hall Marketplace containing 131 luxury condos.
The project was scheduled to start with structural work to increase the capacity of the garage to support the addition this year, followed by vertical construction, former CEO Jonathan Landis said last year. Fortis did not respond to questions on the Dock Square project, but this month announced a corporate restructuring following Landis’ departure, including the appointment of Joel Kestenbaum as CEO. In October, the firm agreed to sell a Brooklyn, New York development site to avert foreclosure, New York’s The Real Deal real estate trade publication reported.
Motor Mart Garage
A massive parking garage that occupies an entire downtown block is slated for a partial redevelopment including construction of a 20-story residential tower and conversion of the western side of the garage into condominiums.
In all, the project originally estimated at $525 million at the time of its approval in 2019 would create 231 residences in a partnership between Boston Global Investors and CIM Group.
Boston Global Investors would not comment on the project’s status.
Fortis Property Group’s Dock Square Garage project had been scheduled to start construction work this year, but corporate restructuring and the departure of former CEO Jonathan Landis may be slowing efforts to move forward. Image courtesy of Stantec
Timeout for West End Tower
Newton-based RMR Group floated preliminary plans in July for a 700-foot office tower to replace a block of mid-rise buildings that it owns in Boston’s Bulfinch Triangle.
The potential project generated immediate concern from the North End/Waterfront Residents’ Association and the West End Civic Association, whose members cited potential building height, traffic and safety issues and Mayor Michelle Wu’s campaign promise of a comprehensive, citywide planning approach. The site includes office and apartment buildings at 251 Causeway St. and 100 and 162-132 North Washington St.
RMR Group, a publicly-traded REIT that owns approximately 2,100 properties valued at over $37 billion, did not respond to an inquiry on the status of the project.
Kenmore Square Hotel Hold-ups
Wellesley-based Mark Development also is keeping a low profile about its progress on a new Kenmore Square edifice that could eclipse the Citgo sign as a neighborhood landmark.
In 2015, Mark Development acquired the small bank branch property at the corner of Commonwealth Avenue and Beacon Street, and announced a potential 2021 groundbreaking after receiving approval for a 29-story, 391-room hotel.
Mark Development CEO Robert Korff did not respond to requests for comment about the project status. In a January 2020 interview, just before the outbreak of COVID-19, Korff said his firm was in negotiations with a “lifestyle boutique” hotel brand as operator, and expected that business travelers would generate a substantial portion of bookings.
By fall 2022, Boston and Cambridge hotels’ revenues per available room exceeded pre-pandemic levels, according to Pinnacle Advisory Group research. But for now, lenders remain wary of new construction, according to capital markets brokers, pending more clarity on future business and group travel demand.
Steve Adams
Condo Concerns for Allston Square
Allston’s next big multifamily project has been in the works since 2018, when City Realty started to assemble a group of parcels near the corner of Cambridge Street and Harvard Avenue.
The Allston-based developer received approval in 2021 for 344 apartments and condos on six separate parcels, including adaptive reuse of two buildings and the construction of four new buildings ranging from 3 to 7 stories.
Potential financing for the condo portion of the project has been delayed because of inflation and caution by equity investors and lenders, said City Realty Director of Acquisitions Cliff Kensington. The project is approved for 71 condos at the Jack Young Building and another 20 for-sale units at 20 Braintree St. Developers are engaged in internal discussions about the future of the two parcels, he said.
