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It’s not just One Lincoln: A second downtown Boston skyscraper could hit the market and offer another indication of how far high-end office property values have fallen since the pandemic.
According to a Boston Globe report, citing anonymous sources, owners of the 75-101 Federal St. building in the Financial District are preparing to put it on the market, and have hired commercial brokerage Newmark to represent them.
Next-door to the brand-new Winthrop Center skyscraper, the 962,708-square-foot property, per city property records, combines a vintage-1925 Art Deco office block with a much taller, mid-block 1987 addition. According to the Globe’s report, the property is 71 percent occupied.
The owner Rockpoint Group, bought the property in 2015 for $326.5 million, but sold a 50 percent share of the building to Carr Properties in March 2020 for $245 million as part of a tenant-in-common deal, according to Suffolk Registry of Deeds filings. Carr sold its stake back to Rockpoint last April for an unspecified price, with the deed recording a mere $10 consideration.
A $292 million mortgage on the property, from Wells Fargo, matured on March 12, a Suffolk County filing stated.
Only a few well-appointed, class A buildings have sold downtown since the COVID-19 pandemic crashed Boston’s office market, offering few benchmarks for how far office values have fallen.
But substantial amounts of vacant space in any building that comes up for sale realistically mean investors won’t be willing to bite unless they can get substantial discounts.
“You’re going to be paying out the nose for carrying costs, brokerage costs, [tenant improvement] allowances. It becomes eye-watering pretty quickly, and that’s not even talking about what you’re paying to service the debt” used to buy the building, said Mark Fallon, head of research at Boston brokerage Hunneman.
The vacancy rate for class A space in Boston’s financial district is now 26 percent, said Jeffrey Myers, Boston research director for national commercial brokerage Colliers. In the nearby Seaport District, it’s only 10 percent.
“If you look at the amount of tenant demand in the market, it’s about 4 million square feet. That’s not a small number,” Myers said. “But back in 2019, before the pandemic, we were looking at about 6 or 7 million square feet.”
Many tenants are opting to renew leases in place, instead of jumping to a new building, he added.
While a handful of office tenants looking for over 200,000 square feet of space in downtown Boston each, Fallon said, the average tenant Hunneman researchers are tracking today only needs around 12,000 square feet.
That means there are few big fish who can quickly be brought in to improve a tower’s occupancy, and thus keep its value from falling far from what its owners paid for it before the pandemic. And the huge swaths of vacant space at the One Lincoln tower, which is set to be auctioned off by its lender this week, shows just how tough it is for landlords right now, Fallon said: The property is within spitting distance of the South Station transit hub and Interstates 90 and 93, giving it one of the best locations in all of downtown.
“Obviously there’s a problem in the market,” Fallon said.
On top of that, Myers said, the average class A building in Boston’s financial district was built in 1967, and many are in need of renovation to meet potential tenants’ expectations. It’s even possible one or two might get converted to housing, if the stars and government policies align to make such a complicated project pencil out, he added.
Overall, though, the downtown office market stabilized last year. Colliers research showed three of the four quarters in 2024 saw the vacancy rate shrink, Myers said.
“I’d expect us to continue to trend in the right direction this year,” he said. “But a healthy market, one that’s a landlord’s market instead of a tenant’s market, is still a long way off.”
While Fallon said he doesn’t expect “floodgates open,” it’s likely the market will see more towers come up for sale – and maybe a few hit the auction block – in the next year or two.
“All of the excuses – [owners and lenders] are starting to run out of them. The election? Asked and answered. Treasurys? They’re in the [4 percent range] and that’s where they’ve been for a while,” he said. “When you’re looking at the market, and you’re not sure the tide is turning, you’re asking yourself ‘Is it time to get out of this office property that’s 20-30 percent vacant?'”
And the more that sell, the clearer it will become just how far office property values – the bedrock of the city of Boston’s municipal tax revenues – have fallen.
Editor’s Note: This story has been corrected to show that the pre-COVID demand for office space in downtown Boston was 6 million to 7 million square feet.
