MEMORANDUM
To: Lee Partners Contacts
From: Bruce Lee
Subject: NAIOP Presentation – Suburban Boston Office Market – Boston Hyatt Hotel
Date: April 29, 2015
Key Take-Away Points:
1.1 Million sq ft. of net absorption in 2014; 400K sq ft. in first quarter 2015 = strong market
15 First Class Office Parks represent 10% of inventory but 50% of the office absorption last year
Average age of office parks = 1994 – all are being repositioned in the marketplace “reshaped for the modern workforce”.
Key trends/items: Mobility, Amenities, Sustainability, Transportation.
Mobility – employees are not staying in cubicles all day.
Sustainability – More folks are interested in this.
Amenities – access to outdoors, fitness centers, food services, free parking, no traveling into city, won’t wait for elevator, more restrooms. High quality food; Conference centers, Fitness centers.
Transportation – Employees want to live close to their workplace
New nomenclature: Huddle rooms; collabotarium, mothering rooms, library
Force people to interact – collaboration areas – WiFi & speakers outside areas
High performance workplace – large floor plates – lots of light to employees
“Hack the building” = re-do and re-skin – 170 Tracer Lane – re skin the exterior – more light into building – bleacher seats (Reservoir Place + Bay Colony) Fire Pit – Bocce Ball court, mini stores.
“Workspace is not a commodity anymore”
Employeer objectives = recruit & retain employees – need modern space to do this
The Lobby can be a big part in creating an employee community – a core area.
Research – employees cost up to $1,900 per sq ft per year – much more than the office space.
You need to create Lobby “Buzz” = because it is the heart of the building
Densification – old was 3 or 4 parking spaces per thousand – now 4 to 6 per thousand,
High quality food was either number 2 or number 3 on employee surveys
“We like open areas” – trying to go to bench type desks or desks on wheels + lots of glass for employees
+ need for collaboration areas for employees – free food?
Suburban Boston office is thriving in the best sub-markets.
Needham to Burlington having the same percentage rent increases as in Boston
Need to build in “community” into projects – want increased energy + placemaking
Xchange – Bedford: 470,000 sq ft; built in 1960; large floor plates; adding 4,700 sf fitness center; purchased the sand and salt facility from Massachusetts; expanded parking to the front of the project vs. rear parking; now have 1/8 mile frontage on Rt. 3; 7,300 sq ft. café; 3,500 sq ft outdoor & fire pit area; added 5,200 sq ft. of green area; increased window line; added new entrances to building – adding community and campus environment to development. Want more of a campus feeling = results included a new façade to the building and a exciting mix of amenities; results = signing tenant multiplan for 75K new lease. “workplace is not a commodity”.
The Centers at Corporate Drive – Burlington: 400,000 sq ft. = 7,800 sq ft. conference center; fitness center; outdoor patio area (large); central open and green space; took oldest building and converted first floor space into an amenity center for the development – took out the rose colored granite lobby;
Future: The Sharing economy will be a factor – using space at off peak periods – singularity – mobile – everybody can work off site – need to make office space very attractive to recruit and retain + collaborate.
Other observations:
Where is the break point with re-do of buildings? Extra dollars being put into buildings/office parks – are the returns there long term? Does a rising lease rate environment allow for the rents to support the building upgrades – for now they do. What will happen in a down market? For now – upgrade the buildings, lease them out, and then in my opinion – sell them while the market is strong. You have to “buy right” to be able to afford the upgrade and re-tenanting expenses. Also, if you have a very low basis for the property – it makes the upgrade decision much easier. In addition, towns are coming around to the idea of allowing multiple uses for certain community zones – adding the ability to have retail and residential components within office parks. This brings in additional tax dollars and new residents that are interested in a more robust work-life environment.