Why Downtown Boston Still Amazes People

Real Estate Bisnow | August 19, 2015

Arriving at the Hyatt Regency in Downtown Crossing for Bisnow's Future of Downtown event underscored the area's incredible transformation: On a 90-degree day in the height of summer, the street was packed with office workers in shorts; shoppers; cyclists; and residents pushing baby carriages.

The panelists and 350 guests were awed by the warp speed at which the city seems to be changing. Nixon Peabody partner Larry DiCara (below), whose firm has had an office downtown for 25 years, kicked off the event by saying that decades ago, the most popular hotel in the neighborhood rented rooms by the hour and city residents were fleeing to the ‘burbs. Now, there’s the Hyatt, a Ritz-Carlton, and the boutique Godfrey Hotel due to open later this year.

The population is the largest it’s been in 50 years and Boston has changed from a city of brawn to one of brains. When Larry rides the T in, he’s the only one reading a newspaper, wearing a suit and checking his BlackBerry.

The first panel on offices was moderated by Vidaris’ Walter Hartnett (also an event sponsor) and featured EOP’s John Conley, Arrowstreet’s David Bois and Sonos’ Chad Lundeen. In the 18 months that Walter’s been in Boston, he’s already seen a “radical change.”

Chad, global real estate manager for the wireless, multi-room music system maker Sonos, says he’s sold on a February relo from Cambridge. At a time when it’s difficult to hire great people, the move into 170k SF in Lafayette City Center with an expansion option will give employees a great amenity package outside its four walls. After researching staff commutes, Sonos found Boston to be an “equalizer” location. In planning the new layout, Chad figures 150 SF/person to 175 SF/person plus ample space for R&D. On his wish list: upgrade the T and keep adding restaurants, clubs and theaters that extend the workday.

In his 20 years here, John never thought he’d take space off-line to build game rooms for X-Box tournaments. But the new wave of tenants that attracts are pushing up rents at a more moderate and steady rate than during the two prior booms—2000 and 2007. He’s optimistic that Boston’s growth will continue since few city office users do the reverse migration. EOP is capturing the new demand by repositioning properties: renovating lobbies to create more contemporary, collaborative space, reconfiguring office space for open layouts and providing the latest technology. One gap: a lack of sufficient affordable housing.

Given Boston’s constrained supply of land, adaptive reuse and infill development are effective strategies for expanding the office supply, says David. Arrowstreet (an event sponsor) is working with Related Beal on redeveloping the former Fidelity Block into Congress Square, a mix of 350k SF of office and retail. Quaker Lane, an underused alley, is being converted into a pedestrian way with restaurants. While Related Beal originally marketed the project as a facadectomy, it took a more measured approach. That allows retention of its unique historic features, is less costly and faster. With the new Walsh Administration, permitting was faster than expected, David tells us.

CohnReznick’s Nick Ratti, (an event sponsor) moderated panel two: Live, Work, Play—The Evolution of Downtown into a Destination. The panelists explored why downtown is changing and how it attracted Roche Bros market, a 25k SF retailer in Millennium Tower/Burnham Building that’s been a game changer.

Roche Bros CEO Rick Roche (whom we snapped after the crowd left, probably to go shopping in all the stores they heard about) says the motivation for the largely suburban grocer to venture in town this spring was intense competition in the ‘burbs and the opportunity to focus on its strength of providing locally sourced perishables. The move’s been filled with surprises: more residents than expected and customers keeping the store busy later in the day. Rick, who claims to be shy, says he was grateful to be on a panel with the decidedly not shy Rosemarie and Justin.

The old trouble spots have been disappearing, says The Downtown Boston Business Improvement District President Rosemarie Sansone. When EOP and other landlords overhaul their lobbies, the BID’s been programming events and entertainment. She’d like to see the Downtown Crossing T-stop, the gateway to the district, get a thorough renovation. It could be much easier to open a new business in the neighborhood and she has great hopes that Mayor Walsh will advance that goal.

The focus on live/work/play reflects a “global shift” in corporate priorities, says Trans National Properties' Justin Krebs. More than 75% of some company budgets go to recruitment and retention of people (and only 10% to real estate), which makes the work environment a top priority, says Justin, whose firm is proposing a new $900M tower in Winthrop Square. As the center of the region's mass transit system, Downtown—compared to the Seaport and Cambridge—answers a major employer need: getting staff to work efficiently. To further Mayor Walsh’s vision of the CBD as an innovation center, Trans National is planning an Entrepreneur Innovation Center in its proposed 1.4M SF mixed-use tower. Recent CBD building sales for $1k/SF illustrate that markets like Cambridge and Somerville are important economic drivers, but that Boston is still The Hub.

A huge thank you to our sponsors: Control Point Associates (Sean O’Donnell, above), Arrowstreet, CohnReznick, Nixon Peabody, Ocean Steel & Strescon, Unispace and Vidaris.