Lee Partners of New England

These are Green Buildings, so come on down! (This is the entrance to LEED EB Gold “One Boston Place” at 201 Washington St, Boston)…you may have noticed a few marquee properties “going green” in Boston. Well, it’s the right thing to do, high end tenant clients expect it, and if you don’t transition your old building with a serious green operating plan (like LEED EB) you are going to be missing the market in the future.

From Rick Fedrizzi, president of the US Green Building Council: “As of this month, cumulative square footage of LEED-certified existing buildings surpassed LEED-certified new construction for the first time. As the U.S. is home to more than 60 billion square feet of existing commercial buildings, most of which are energy guzzlers and water sieves, this trend serves as a promising indicator of our progress.”

This is a the continuation of a logical process to make buildings better, and is understandable considering the size of the existing building stock in the country. Heidi Schwartz at Today’s Facility Manager has a great post about the success of LEED-EB. Here’s another green building I’ve been to a few times recently: the Federal Reserve Building of Boston (Bostong Globe pic)

It was another busy week for Lee Partners. We scheduled and participated in a second New Hampshire tour of “flex” manufacturing and office space for a defense contractor currently located in Southern New Hampshire with a second office in South East Massachusetts. The CEO indicated that the company needs to expand and consolidate the two offices plus a third company office – to be acquired – into a new facility in the Nashua market area of New Hampshire.

Part of the requirement is to build out some specialty manufacturing rooms and also have direct access to a shipping area loading dock. Above standard HVAC and power is part of the requirement. We toured alternatives in Nashua and Hudson – with additional sites to be investigated
in the next two weeks before the end of the year. For this project we have teamed up with a very professional New Hampshire commercial real estate broker – Mike Monks. Mike’s knowledge of the southern New Hampshire commercial market is without parallel. It is a real pleasure to be working with Mike on this assignment. We will be able to report more on this effort over the next many months.

We ended the week with another client visit/tour of a site near the Needham – Dedham boundary line off of Rt 128. The location will be part of a newly permitted medical campus within the town of Dedham. This is a very exciting project that has significant large institutional interest within the expansion plans of Boston hospitals and medical institutions. The tour started with a meeting with the developer’s office and then proceeded to the site. In this case our developer/owner is a very experienced general contractor familiar with the organization’s needs. I have high hopes for this build to suit opportunity – although it will also require many months and possibly a year or two to obtain all approvals to build a new facility. This time-frame is not unusual for commercial real estate projects in Eastern Massachusetts that require build-to-suit buildings. One retail site I worked on in the town of Westford, MA took over eight years to market/sell and re-develop into a McDonald’s outlet – from its original listing for sale. Let’s hope this potential build-to-suit will not take that long – for the sake of all parties!

Check this out: this office has space for only 60-70% of the firm’s employees. Fast Company Exist – their channel devoted to tech innovation – recently reported on an office of the future. Plantronics is based in europe and their new office in Santa Cruz is designed for employees to work from elsewhere.“There’s an expectation that you can work anywhere and be highly productive and engaged,” says Patricia Wadors, HR SVP at Plantronics. The office has flatscreens everywhere so people can skype in to conferences. Young professionals are totally accustomed to ubiquitous, mobile connectivity. The rest of use are going to have to get up to speed.This is the way of the future. How will CRE respond, how will owners secure the value of their property as organizations continue to require less physical space per unit of their productivity? The evolution of offices and work continues!

A Tour this week with an organization looking to re-locate from the Suburban market into Cambridge included a visit to two buildings being redeveloped by Equity Office in Cambridge. Both 125 and 150 Cambridge Park Drive, Cambridge, MA are going under extensive renovations to include new lobby areas and an exciting new amenity complex within the first floor of 150 Cambridge Street.

Equity is going all out to upgrade these buildings and it showed. Both are located a short walk from the Alewife “T” station and they both have ample free parking available for new tenants. In three short months these neglected class A office buildings with an outstanding location have been re-vitalized.

In addition to the new lobby areas, the amenity center will include an expanded Fitness Center and Yoga Studio, a Conference Center, Game Room, Genius Bar, Inside Bike Storage, Outside Fire Pit & Bocce Court with viewing areas, and an exciting new – first in the nation Whole Foods Café – that will even have take-out dinners for those in a hurry to get home without time to cook dinner!

150 Cambridge Park Drive is being offered to larger tenants with full floors available and 125 Cambridge Park Drive is available for smaller tenants. The Park buildings have on-site security at all times and a Tenant Coordinator to help smooth out any building operational issues.
Equity is even building out new office space on speculation to meet the needs of prospective tenants that must occupy very quickly. Even with all of these upgrades and new amenities the space is being offered at net-effective lease rates competitive with surrounding buildings. This two-building office offering is now positioned to be a quality cost effective offering within the Cambridge market. It may even fit the needs of the group that visited the site with me this week.

I was invited to the New England Regional Smart Growth Conference last week – hosted by the Lincoln Institute at the Federal Reserve of Boston. I follow the Institute because I’ve always been a land planning geek. Your twitterers can follow them at (@landpolicy). The conf is a great way to get together with a few people (a couple hundred this year) who work on various issues related to urban growth in New England. They always have great presentations as well. I met a woman who runs stormwater programs for the state of Connecticut, a programmer at ICLEI (USA) – the international org born in Rio’92, charged with supporting the implementation of Agenda 21 – which is a checklist for communities to use to approach a sustainable future. I ran into a cooperative colleague, Orion Kriegman, who is based at the Institute for Policy Studies, but is working on “Pueblo Boston” a creative urban land trust / cooperative concept in Eggleston Square JP/Roxbury. Always good to network with planning types.Armando Carbonell, of the Lincoln Institute, led off with a great tour of work they are doing –  in regional planning, high-speed rail, and land tax policy. He looked at nature in cities, and cities in nature. He commented that the future of human populations is in cities – and cities that are becoming less and less dense than ever before, and what the implications of this will be… I was reminded of reading about America’s Megaregions when I ploughed through the Plan of Nashville last summer – a great document of helping focus growth in a great city. Philip Langdon at the New Urban Network wrote a good write-up and described the issues with the federal de-funding of the Sustainable Community Initiatives program.

Another excellent presenter was Lyle Wray from Hartford CT (though his name and accent places his provenance further south) who is working on enhancing the presence of the Knowledge Corridor – which I would call the Connecticut River Valley or Pioneer Valley – basically Hartford to Greenfield MA. There are 1.9M in the region and it is basically in the top 20 regions, population-wise, of the country, but spread out across Hartford, Springfield/Holyoke, and Amherst/Northampton. Lyle’s big statement was that we planners, if we all take a Myers-Briggs test, will notice that we all enjoy thinking about things systemically and in holistic ways. But 95% of the population does not like to think this way. We have to figure out how to present the solutions we advocate in ways that use the non-systems language of the majority of the population. Food for thought.

The best presentation of the day was from the keynote speaker, Ron Sims – former Deputy Secretary for HUD and former King County (Seattle Washington) Executive. “Sustainability is the way of the future. If you are conservative, you will believe in sustainability” “It is using money smartly and conservatively” “Poor planning is a signal to your business community that you are going to treat them as the ATM for public projects.” “Density improves communities: people living together tightly forces them to figure it out, figure it out how to live well with one another. We all need to do this.” And he urged us to share prosperity across all segments of our communities – it’s not enough to just let some people live in the poor part of town. We need “all hands on deck” to innovate, and solve problems, if we are going to survive. “We can’t compete with China and India based just on the bell curve” and we’ll need everyone’s contribution. He brought up his story about climbing Mt. Ranier – in a rope team – you can only go as fast and as far as the slowest and weakest on the rope team. We are all in it together.

It was a great talk, but not just about planning. Ron talked about motivation. Why go to work in the morning if it is going to be easy? He also talked about managment. He wanted people to take risks. If you take a risk, and you win, I will sing your praises. If you take a risk and fail, I will help you get better. If you do not take any risks while you are working for me, I will make it very hard for you to work here. Chuckles ensued from the crowd. I enjoyed his exhortation to embrace the cause. Sustainability is wonderful because it is not just a practice, or a discipline, it is a cause that we can commit our passion to. It is a community. We are lucky to be doing this work. And I totally agree with him.

I have been thinking a lot about the future of offices – the greenest office is the office that doesn’t exist. Plenty of space is out there to work in – many independent professionals are working out of their homes and coffee shops all the time. But there is a coming convergence between business as projects, using independent pros, the cloud, work-tracking technology and telecommunications. I found an awesome site related to similar concerns – and I’m inspired by their business model to link people together, even as the technologies enable people to work apart from one another.

Loosecubes is like AirBnB or ZipCar for office space. Regus Serviced Office spaces are like this, but they are all under the one brand. Loosecubes enables anyone to sublet a space in their office to anyone. I suppose it’s more like Couchsurfing. They have good rules and a strong general philosophy, and take the ideas of Space with a Soul and Greentown Labs to the next level. I’m definitely going to follow Loosecubes.

This past Friday, Lee Partners was in hot pursuit of a new logistics center for PSS World Medical, a supplier of end-user products to medical professionals.

They have dozens of distribution centers across the country. In Wareham, MA, they have a location that is not quite large enough for their growing business. Lee Partners worked with their corporate real estate partner, PointLine, Inc., vis-a-vis Walt Batansky, their CEO. The tour took us to a number of locations in southeastern Massachusetts. On the tour was their local director of operations and a couple of gents from the Florida headquarters who specialize in efficiency and optimization. Very keen eyes for how space can and needs to be used by their firm.

It was refreshing to be working with clients who have a specific physical need for the space, more than general office space, commercial real estate clients. Sometimes space users come at their square footage needs from a simple formula of feet-per-employee. Sometimes there is a general sense of wanting something different and generally more. And often it is an arbitrary number in the budget that determines the space. The fellows from PSS were talking about numbers of aisles of racking, the depths of each run of aisle, the traffic on the floor between racking, cold storage, and loading docks. I would like to find more commercial office space users who investigate how employees use space and how space is not directly related to use. This leads into more of my ongoing discussion of the future of office space – but that is for another entry.

In the end, the need for multiple loading docks to handle the traffic of their rapid-run delivery van fleet is a dominator in the decision-making process for PSS. It is a bottleneck that can’t be fudged. This property in Sharon seems to fit the bill, but we’ll see how the owner responds to our RFP. Base rent terms are still important, and all the other details even how far employees have to walk to get to the front door factor into the decision. It’s never straight out of the play book in real estate. You always need to be hands on and in person to see your options. I’m glad I could help Walt at PointLine and Chris and his crew from PSS. I’ll keep you posted!

Grey

I attended the upstart-media BisNow “Boston Real Estate Summit” on 9/27, with about 400 other real estate professionals in Boston. At the Hyatt Regency – in what once was the heart of the “Combat Zone” along Washington St in downtown Boston – three panels of real estate luminaries delivered their perspectives and prognostications on the coming year in the commercial real estate world. I took pages of notes and learned a lot. I took a few pictures but they aren’t uploading for some reason. Below is a pic from BisNow – thanks to them – just so you get a sense for the event.Ahead of the meeting I chatted with a dozen new contacts – reflecting on the state of the market but also my particular agenda. I asked about green real estate – were the construction guys I met doing anything, were the brokers ever asked about energy efficiency, did an asset manager ever screen for high-performance space? The answer is: nah, not really. So, I continue to be ahead of the market!

I feel good about some of the comments made by the speakers regarding energy efficiency, LEED and demographics.

• For the Current State of the Market: Equity Office Properties’s Andrew Maher, AvalonBay’s Michael Roberts, Springer Architect’s Marcus Springer, and Brookfield’s Duncan McCuaig

These gents were in general optimistic about the coming year. When asked the question: “Okay, tell us what today is on a scale of 1-10 and what it will be in 12 months” the responses were mostly going from 7 to 9, though one fella, Michael Roberts (the multifamily developer) was thinking things were 9 already and would “level off” to 8. Maybe that was an interpretation of activity level, not overall market conditions. He also had great things to say about building product that will respond to the Gen Y (under-32) who are totally enviro. “Look at college campuses these days – they are totally green.” His implication was that these people are driving his market and will soon be driving the rest of real estate demand as they begin to buy and take responsibilities in corporations. Here he is in a photo from BisNow:

• Looking at the relations of the capital markets to the opportunities in the Boston region: BlackRock’s Shelton Getter, New Boston Fund’s Jim Kelleher, and AEW’s Marc Davidson

These guys were very informative. I tweeted a few things through the event – you can look through the Green2ROI feed to see some of that. One concept I appreciated was shifting from pure growth to “defensible cash flow” which was new to me. They were also bullish on multifamily. Which means it is going to turn into a bubble if it hasn’t already. I’ll say now that the continuing stagnation of the economy and lethargy in jobs recovery will mean people gradually give up on the “having their own place” and continue to double-up, to find savings in that one major expense of where to lay your head at night. First house demand shrinks, then apartment demand shrinks. Just a wager. Of course, the best product always catches the market, even as demand shrinks.

• For prespectives on the national real estate situation: Intercontinental’s Peter Palandjian, Wells REIT II Nelson Mills, and Normandy’s Jeff Gronning

I really enjoyed Atlanta-based Neson Mills’ “I’ll start” attitude. Just jumped right in. Some nuggets from these finance wizards: (and by this time, two hours into the program, the crowd had dwindled to the real real estate nerds like me) the money’s got to go somewhere. People are taking flight to safety.  Liquidity is important – thus the REITs continue to perform (if they chose underlying assets wisely). Focus on quality. However, fund-raising is very challenging as people are scared and uncertain of macro-economic things all the way to Greece. Jeff noted there is a strong correlation between asset quality and location, thus their focus on major core markets. Boston is good in that projects are constrained by regulations, but that means higher quality product overall. So they like the Boston market.

All in all, a good program. Thanks to BisNow for putting it on!

Although the positive ROI of many sustainability initiatives is proven and the continuing proliferation of sustainability work is the proof, many firms continue to balk at embracing sustainability and lag their industry-leading peer. Opportunities to improve operations by lowering costs, improving morale, increasing productivity and generating new sales through an improved brand position slip away as some firms lock their knees to sustainability.

I just read a great article by Paul Honen in The Guardian. He outlines five basic reasons that businesses just can’t get their organizations to focus on sustainability. I must note that a big reason is a difference in ideology and basic philosophy about value creation. Some people believe the best path to success for a business is in providing a product or service to prospective customers. I am part of a different crowd, where success and business goals can be attained by providing value to a community, and in that way, driving stakeholders to you, and thus generating regular customers and continuous cash flow / brand power.

Honen lists these issues:

• Short-Termism: a fixation on quarterly results at the opportunity cost of long-term value creation.
• Value Definition: accounting doesn’t see externalities that eventually affect a business. You can’t manage what you don’t measure.
• Consumer Inertia: consumers also balk at premiums for green products, except for a niche market.
• Regulatory Uncertainty: there is a confusion of governments, at different levels, regarding regulation and also incentivization of sustainability issues.
• Transition Pain: investing in new technologies is scary, retraining staff and management about green issues is time-consuming.

Many businesses and organizations are, however, embracing sustainability – including Skanska, Boston Properties and even New York City among others. If you need help strategizing and learning more about sustainability, let us know!

A huge new partnership will drive green building & energy efficiency practices into the commercial office space market. Jones Lang Lasalle, and Johnson Controls are partnering with the Natural Resources Defense Council and others to make a big push to make energy saving and high-ROI projects a new norm in the commercial real estate industry. GreenBiz has a great article on the project by Leslie Guevarra.

I’m psyched for this broad and massive-scale effort. Commercial buildings account for 17% of US greenhouse gas emissions, with industrial facilities another 29%. The average commercial office space can improve lighting, temperature control, and plug loads and save 10-30% on energy costs. Applying efficiency strategies across a portfolio will save significant money for tenants and increase the value of the assets for owners. The JLL-JCI partnership proves it. Stay tuned, you’ll see more of this. If you want help – get in touch with Lee Partners!

photo from: Inhabitat

The Empire State Building (2.85M sf) going green – w/ “game changing analytical model” read about it at Earth Techling – looking at 38% energy cost savings!