Finding vacant land in Boston's dense Financial District is as likely as the Red Sox achieving postseason success. So it comes as no surprise that retail, hospitality, residential and office developers are beginning to assess prospects a short walk across Ft. Point Channel in the Seaport District.
At least nine projects encompassing a variety of property types, including the 1.7 million sq. ft. Boston Convention & Exhibition Center, are either under construction or planned in the submarket, reports investment and development firm Pembroke Real Estate.
The first phase of the the 800-room Convention Center Headquarters Hotel is scheduled for delivery in late 2005. The project is being built by the Fallon Co., a local firm, and White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. A second phase will add 400 rooms.
With roughly 1,000 acres of undeveloped land, the Seaport District is the only part of the city with substantial parcels available for building, explains David Perry, a senior vice president in the local office of Houston-based Hines. “It's inevitable the city will grow in that direction.”
The Seaport District also has something else working in its favor: infrastructure improvements. An extension of the Massachusetts Turnpike currently runs through the district. The Massachusetts Bay Transportation Authority, a bus and rail network, will soon provide rail service to the area on the new Silver Line.
“With the opening of the Mass Pike extension, tenants can drive from the suburbs to the World Trade Center buildings easier than they can get to the CBD,” says Richard Backer, a senior vice president with Pembroke.
In partnership with the Drew Co., Pembroke owns and operates the 850,000 sq. ft. World Trade Center and its East and West towers, which provide an additional 1.1 million sq. ft. of office space.
The WTC East and West towers are 83% and 77% occupied, respectively. Another office property, the 450,000 sq. ft. World Trade Center South, is planned at the complex, according to John Drew, president of the Drew Co.
Any office development in this soft market is dicey, say local industry experts. The vacancy rate in South Station/Ft. Point Channel submarket, which includes the Seaport District, registered 14.9% at the end of the third quarter, for example.
Cushman & Wakefield reports Class-A rental rates in the South Station/Ft. Point Channel submarket registered $37.34 per sq. ft. in the third quarter of 2003, compared with $40.48 per sq. ft. in the Financial District. Rents are substantially discounted from the highs reached before early 2001, when fundamentals began to crumble across the entire market.
Drew contends that office space in the Seaport will ultimately fetch CBD-type rents, but where those rates settle and when they stabilize is unclear.
“When the market was white hot, the best Class-A space was between $60 per foot and $70 per foot,” says Jay Driscoll, a senior director at Cushman & Wakefield. “Today, we are at or near the bottom of the market.”
Meanwhile, a partnership of the Drew Co. and Urban Retail Properties of Chicago has proposed a lodging, retail and residential development for the Core Block, a 12-acre site owned by the Massachusetts Port Authority.
“It's an interesting site that will tie the convention center to the World Trade Center,” says Drew. “The city can grow out here and needs to grow out here,” he emphasizes, “but it's going to take 10 years to 15 years.”