The SouthField property in South Weymouth contains hundreds of shovel-ready acres just 17 miles from downtown Boston but has failed to attract any commercial development through a pair of real estate bull markets spanning back to the late 1990s.
LStar Communities, the fourth company to assume the role of lead developer, is setting the bar high as it negotiates with commercial tenants looking to move to Massachusetts or squeezed out of hotter submarkets closer to Boston.
“It’s the most efficient land in the commonwealth,” said Matthew Barry, a vice president for LStar. “We offer up to 120 acres of contiguous land that has no wetlands, no (endangered species) habitats, no topology issues. We think there’s a very limited list of sites with the kind of land we provide.”
But some commercial real estate executives say LStar runs the risk of missing another real estate cycle by holding out for high-end office and lab tenants at a time when big parcels like SouthField are in demand by industrial users.
LStar executives are counting on the Massachusetts Department of Transportation to complete a 2.7-mile connector road that could put SouthField on the map for retail, office, lab and R&D users. The Bill Delahunt Parkway would run from Route 18 on the western edge of the property to Rockland near Route 3. Route 18 and an MBTA commuter rail station are the only current access to the site.
“The connection from Route 18 to Route 3 and the suburbs east of us really will create retail demand, and we’ve heard that from multiple retail developers,” Barry said.
Another Redevelopment Plan Takes Hold
Weymouth town councilors bought LStar’s reasoning in November when they approved a zone change increasing commercial development from 2 million to 3 million square feet. The new “Discovery District” located alongside the western end of the parkway would allow up to 1 million square feet of office and lab space.
“We have a broad range of commercial prospects, from 30,000-square-foot users up to 250,000-square-foot users,” Barry said. “There’s a large number of them we talk to every day. We think the opportunity at SouthField is really a large user who’s looking for a large tract of land, and that could be R&D, life science, industrial or others.”
The new zoning creates a mixed-use district and adds 1,000 housing units that would be restricted to people 55 and over. A 12,000-seat professional sports stadium also is planned as a new draw, with LStar negotiating with soccer and lacrosse franchises.
Fourth Time A Charm?
LStar is the fourth company to assume the role of master developer at the property, which covers parts of Abington, Rockland and Weymouth, since the 1,450-acre South Weymouth Naval Air Station closed in 1997. Mills Corp., a now-defunct retail developer, proposed a regional outlet mall plan that was dropped in 2000 amid local opposition.
Next in line was Miami-based LNR Properties, which pushed through a new reuse plan that dropped the megamall and added 2,855 apartments, townhouses and single-family homes. By the time the U.S. Navy deeded the bulk of the buildable land to LNR in 2011, however, commercial and residential real estate markets were close to bottoming out.
The LNR plan has served as a template for most of the residential development that has taken place in recent years, even as LNR was acquired by Starwood Property Trust in 2013 and LStar in turn bought Starwood’s stake in the project last May.
Residential development was the first to rebound in the form of two apartment complexes, a senior living community and 100 single-family homes. In a deal that closed in July but involved Starwood as the seller, Pulte Homes paid $2.1 million for the 24-acre Brookfield Village complex which will include 81 single-family homes and 27 townhouses. That leaves roughly 2,800 home lots for LStar to sell to residential developers.
Along with bad market timing, critics blamed the delays and false starts on mismanagement by the property’s government overseer, the South Shore Tri-Town Development Corp. The state Legislature abolished the agency in 2014 and created a new oversight board, the SouthField Redevelopment Authority.
Upon taking control last spring, LStar sought to put its own stamp on the property. Attleboro native Kyle Corkum founded LStar in 2007, and top executives are Massachusetts natives. LStar hired Barry, who had overseen SouthField for Starwood, to bring continuity to the project.
Another Missed Opportunity?
But some local commercial real estate brokers say LStar could be missing an opportunity by focusing on office and lab space while ruling out industrial uses such as warehouse and distribution.
Austin Smith, a senior vice president with Colliers International in Boston, said he represents two industrial users who approached LStar in early summer about building facilities at the Weymouth property. By September, LStar executives responded that they were not considering industrial uses.
“They said, ‘Absolutely not. We believe our land is worth multistory office or mixed-use residential land prices,’” Smith said. “I think it’s a mistake.”
New office space in the suburbs costs up to $250 per square foot to build, Smith estimated, which requires tenants to pay over $30 per foot in rents to break even. That’s well above the going rate for office space in the 12.6-million-square-foot south suburban market. Direct average asking rents for Class A office space in the south market were $23.05 in the third quarter, according to JLL research. The submarket had a 17 percent availability rate.
Barry confirmed that LStar has received several proposals for warehouse distribution, and said industrial will be part of the development strategy “once we have established a strong presence on-site with R&D, biotech, office, office medical.”
“We’re ready to be patient,” he said. “We’ll take whatever time it takes to build out. We have no debt on the project. We’re privately held. If it takes 10 to 20 years, we’re young enough to see it through.”
Robert Gibson Jr., a partner with CBRE New England, said SouthField’s vast acreage is its biggest advantage, and one that could be ideal for a large office and manufacturing user. While industrial real estate fetches significantly lower prices, demand for combination office and industrial sites remains strong south of Boston.
“It could be very interesting if there was a large entity that was looking to do office and manufacturing. There’s not a lot of those sites left,” Gibson said.
A shortage of large industrial sites in the Boston suburbs factored into liquor distributor Martignetti’s April decision to buy 115 acres in Taunton’s Myles Standish Industrial Park as it consolidates operations currently based in Braintree and Norwood, Gibson said.
Likewise, The Boston Globe searched without success for a printing plant site closer to Boston before buying a site in the same Taunton business park in May.
In the current market, a combination office and industrial project could draw the most interest, Gibson said.
“Like any real estate developer, you have a (financial) target you’re trying to get but you have to be reactive to the market,” he said. “The market has opportunities but it’s not going to last forever. You’d like to have biotech because those jobs are the best. But that project has been through more than one real estate cycle, and you’ve got to make the best decision at the time you’re required to make it.”
Email: sadams@thewarrengroup.com
