Downtown Boston is one of the hottest commercial real estate markets in the country. Ten years ago, you’d leave your office around 6:00 p.m. and see tumbleweeds rolling by. Today, the city is buzzing with an influx of new residents, an in-migration of tenants and an amenity base that gets stronger every day. So, what’s the secret sauce behind this boom and what does the future hold?
Downtown is the heart and soul of Boston and the hub of its transportation network. The MBTA is the oldest subway system in the country and it is not an exaggeration to say that modern Boston was formed around it. Today, every single subway line runs through Downtown, each with multiple stops and connections. Not surprisingly, the Red Line (also known as the “Brain Train”) has emerged as a vital link between the intellectual capital being generated at Harvard and MIT in Cambridge and the business center of Downtown.
Perhaps the biggest catalyst is the recent delivery of nearly 2,300 residential units, which represents the largest component of the nearly $4 billion of real estate development in Downtown over the past 15 years. The development boom has been punctuated by the recent sale of a 13,000-square-foot penthouse at Millennium Tower for $33 million. This massive influx of city dwellers (both renters and owners) has changed the atmosphere as both millennials and baby boomers demand a new level of amenities that were previously unsustainable by catering solely to the 9 to 5 office workers.
Since its founding in 1640, Bostonians have converged on Downtown to gather, shop and be entertained, and the pivotal intersection of Washington, Summer and Winter Street has been ground zero. Today, that same geography is playing host to some of today’s more exciting retailers. Healthy restaurant chain sweetgreen recently opened its newest location at 87 Summer Street. Barry’s Bootcamp (home of “The Best Celebrity Workout”) is thriving on Chauncey Street. Roche Brothers has enjoyed incredible success with its urban grocery store with a large selection of prepared foods. For those seeking a new wardrobe, Primark used Downtown Boston as a beachhead to expand this global concept across the United States.
Under the overlay of urbanization, Boston’s office market is thriving. While vacancy rates have tightened across the board thanks in part to traditional financial and professional service businesses, the surge in leasing activity is most noticeable among the Class B subset. Here, the vacancy rate is a mere 7.2 percent, having tightened 350 basis points since the first quarter of 2015. TAMI tenants (those engaging in the fields of technology, advertising, media and information) are the driving force behind Boston’s meteoric growth. Companies such as Threat Stack, Sonos, Arnold Worldwide, Quantopian, Datadog, Salsify, Carbonite, LevelUp and Cambridge Innovation Center have leased a combined 1.8 million square feet during this market cycle. These innovative and energetic employees that changing the face of Downtown Boston.
The last 15 years have been nothing but transformative for Boston, largely driven by the development of new condominiums, apartments, hotel and office buildings. But what’s next? Savvy investors are taking older assets that were previously occupied by traditional users and creating the work spaces and on-site amenities required by today’s workforce; the HIVE, which is a collection of five separate buildings that have been combined into one cohesive urban campus with best-in-class ground-floor retail spaces and unmatched on-site amenities, is a prime example.
As Boston continues its history of innovation, and the daytime and nighttime population continues to increase, its vitality and dynamic nature will only continue to evolve.
Ben Sayles is a Director in the Boston office of HFF with more than 15 years of experience in commercial real estate. He is primarily responsible for investment sales transactions focusing on office, multi-housing and retail properties.
A graduate of Trinity College in Hartford, Connecticut, Mr. Sayles is the Director of the Commercial Brokers Association and an Executive Committee member of NAIOP Massachusetts. Additionally, he is active in several other notable commercial real estate professional groups, including Urban Land Institute and International Council of Shopping Centers.
Tucker Burleigh is a Real Estate Analyst in HFF's Boston office. He is primarily responsible for performing financial and market analysis, preparing offering documents and coordinating the due diligence process for both the investment sales and debt placement groups.
Mr. Burleigh joined the firm in October 2016. Prior to joining HFF, he interned in preconstruction management at CH Newton Builders while attending Williams College for his undergraduate degree.