Boston Office Pipeline: From Empty to Booming

BOSTON-Industry research puts the office sector in New England's largest city among the biggest success stories of the CRE recovery. CBRE says the city ended the second quarter with a vacancy rate of 12.1%—only New York City, San Francisco and Houston are lower—while Richards Barry Joyce & Partners reported it at 14.1% for Greater Boston, the lowest level in five years.

However, an even more dramatic turnaround has occurred in new construction. At 3.2 million square feet, Greater Boston's office construction pipeline is at its highest level in a decade and looks especially healthy by comparison to 2011, when it stood at just 200,000 square feet.

“The construction pipeline is notable not only for its size but also its diversity,” Brendan Carroll, SVP of research at RBJ&P, says in a release. The firm's “officeSTATus—Summer 2013” report cites both “sustained demand fundamentals” and a diverse industry base in supporting a regional boom in building.

“The extent to which the boom reflects the region's diverse industry base may be surprising for those considering the region's competencies to be solely biotechnology and technology,” the reports states. “Along with technology (Google) and biotechnology (Biogen Idec), office projects are now underway for companies that produce coffee products (Green Mountain), provide insurance (Liberty Mutual), offer financial services (State Street) and make shoes (Converse).” Nearly 20% of the current pipeline, or 597,000 square feet, derives from projects that commenced during Q2, the report states.

As impressive as the current pipeline may be, it's likely to get much busier. RBJ&P notes that Pricewaterhousecoopers is the latest to consider a build-to-suit office building in Boston's Seaport District, where it would occupy 360,000 of a planned 500,000 square feet that could kick off development of the 23-acre Seaport Square project in 2016.

Closer on the horizon, RBJ&P cites four Greater Boston projects totaling more than 11 million square feet of mixed-use space that are expected to begin construction later this year, with office space comprising about one third of the total. The largest of these is HYM Development Corp.'s Northpoint MXD in Cambridge at five million square feet and a projected cost of $2 billion. It will include two million square feet of office and lab space, 200,000 square feet of retail and 2,900 apartment units. RBJ&P notes that construction is now under way for a 300,000-square-foot EF Education headquarters, and site work has begun for the first 355 units of housing at Northpoint.

Beal Cos. and Street-Works LLC have begun demolition for their 3.5-million-square-foot Quincy Center redevelopment of 20 blocks in suburban Quincy, which includes 700,000 square feet of office and 500,000 square feet of retail along with residential. The 1.5-million-square-foot Boston Landing project, spearheaded by New Balance Athletic Shoe, will be anchored by a new headquarters for the athletic footwear maker.

Then there's Meredith Management's 1.3-million-square-foot Fenway Center project, which will locate approximately 500 residences, offices and neighborhood-oriented retail space directly adjacent to a new Yawkey Commuter Rail Station, one block from the Massachusetts Bay Transportation Authority's Kenmore Square and Fenway Green Line Stations. In fact, ready access to public transit is “the common link” to all four projects, RBJ&P says.