ULI Boston/New England Update
ULI's Spring Summit Recap: Capital Markets and a Speakeasy in your Office
It was standing room only for ULI’s Spring Summit as hundreds turned out on April 4, 2019, for expert views on “what’s next” in the Boston market along with a keynote address from U.S. Representative Ayanna Pressley. Pressley, who made it to the event despite a knee injury, spoke of the inequities she has seen in the Mass. 7th District, and the importance of challenging ourselves to create real and lasting equity. Pressley is currently working with U.S. Senators Elizabeth Warren and Ed Markey on The American Housing and Economic Mobility Act, legislation which aims to bring down costs for renters and buyers, level the playing field so working families everywhere can find a decent place to live at a decent price, and takes the first step to address the effects of decades of housing discrimination on communities of color. Pressley urged that Massachusetts should be a leader in this fight.
In the warmup to Rep. Pressley’s speech, ULI convened two expert panels to examine capital markets and the trends which are bringing major tenants to the Boston Market. The first panel – Oliver Carr, CEO of Carr Properties; Anne Cole, Managing Director JP Morgan; and Raphael Fishbach, Principal of Mesa West Capital – brought their expertise to discuss capital markets. While no one could pinpoint an exact answer to the big question of “where we are in this cycle”, the panel generally agreed that growth is slowing, but deals will still be done, albeit with caveats. As Cole pointed out, JP Morgan operates from a point of quality bias and is very careful when taking risks. Fishbach's group operates similarly with a people-first mentality and looks to finance people/organizations with sustainable track records. Carr Properties looks for deals with a differentiator, either location or amenities.
Panelists agreed that creating a sense of place is crucial to driving demand, and pointed out how hospitality has become key to the office market. As an example, Carr cited bringing their focus on hospitality to their partnership with HYM at the upcoming One Congress. Their aim to create a hotel feel and offer unique amenities, like the 1-acre park that will be on the 11th floor of the building extending out over the existing garage. That, he said, was one of the driving factors behind State Street’s decision to bring its headquarters to the building. In their wrap up, the panelists all agreed the Boston market was very strong, due to its diverse economic drivers.
The second panel included Tom O'Brien, founding partner of HYM; Kristin Blount (our friend from the very first Big Dig Podcast) and Executive VP at Colliers; and Michael Keiming, Global Real Estate Project Manager from Rapid7. This group examined the factors driving the market, such as the growth of TAMI tenants and the impact of tenant-driven demand for space, talent, and location. As Blount pointed out there is a fundamental shift in how companies are using real estate. Instead of just seeing how many people they can stuff into a space, companies are now using this asset to retain and recruit talent. Keiming agreed on this point and listed some of the many amenities that are being included in their upcoming new office at the Hub on Causeway. They include a genius bar, games floor, 4-story atrium for full team meetings, mother’s rooms, and speakeasy floor. At One Congress these amenities, so thoughtfully designed into the project are a key differentiating factor.
Panelists said extras like these help make tenants feel comfortable in their new surroundings, especially because many of the market’s new developments - Hub on Causeway and Bulfinch Crossing –are in places that had not been a top choice for building in the past, but are now creating entirely new neighborhoods, largely because of their proximity to public transit and lifestyle amenities. The panel also talked about how WeWork has disrupted the office market, forcing landlords to consider flexible lease terms and of course bringing these “cool office” amenities into focus.
Even as Boston remains one of the nation’s top real estate markets, there remain several important issues that need to be addressed. Speakers at the ULI Spring Summit said addressing the need for affordable and middle housing is crucial to correct past inequities and ensure young professionals are not priced out of the city where they work and want to live. They also agreed on the need to invest in public transit to ensure service can meet the demands of the region’s new and upcoming transit-oriented developments.