By Mark Clayton, Executive Managing Director of Development & Project Management
- This past year, a noticeable rise was seen in construction costs. For both labor and material costs, there was an increase of approximately 3.5-5% in the Boston market.
- The Boston market’s average construction costs are higher than the rest of the country, ranging from $110-125 per sq. ft. This compares to a national average of about $100 per sq. ft.
- Due to the higher-than-normal volume of work in the Boston market, when choosing a consultant, it is important to evaluate their existing workload to ensure they have the capacity to meet expectations.
- Most new space designs are moving away from traditional office concepts and in the direction of a more open and collaborative environment.
- Furniture and AV components have become a critical part of the open environment concept, adding to overall first-time costs.
- Workplace strategy has become a buzzword in the industry. Understanding how and where people work is critical in the initial design process, and providing flexibility for employees has become a competitive differentiator.
- Due to the volume of work in the City of Boston, the overall permitting process timeline has been extended, which should be taken into consideration when reviewing a complete construction schedule.
Interested in reading more of our spotlights? Look no further. Read more in our 2017 Market Outlook.
By Taidgh McClory, Managing Director/Partner, Advisory & Transaction Services
Every year, the Commercial Brokers Association (CBA) honors the best and brightest in the Greater Boston brokerage industry, highlighting all-star deals and individual achievements in several different categories. This is the equivalent of our academy awards for all our brokerage teams’ accomplishments as recognized by our industry peers.
This year CBRE/New England stood out as a dominant force at the awards, taking home five out of a potential 11 awards. Topping the list of this year’s recipients was our Rising Star of the Year, Suzie Brown. Her hard work and effort earned her the top award amongst a competitive field of 10 other finalists.
On behalf of the entire company, congratulations to Suzie and all this year’s winners, our clients and the finalists! We continue to be proud of our employees, our collaboration and our market leadership as a
Below are the CBRE/NE finalists for 2016’s CBA Achievement Awards.
Rising Star of the Year
Vice President, Urban Team – Advisory & Transaction Services
Community Impact Deal of the Year
Industrial Deal of the Year
Office Deal of the Year – Suburban
Kronos at Cross Point
900 Chelmsford Street, Lowell, MA
Anchor Line Partners and Farallon Capital Management
Mark Reardon, Peter Dominski, Alex Plaisted, Benjamin Roopenian, Diane Harris
Retail Deal of the Year
Prudential Center, Boston, MA
Boston Properties (also this year’s Landlord of the Year)
CBRE/New England works with several clients to pursue WiredScore Certification, the international standard for cutting-edge internet connectivity in office buildings. Recently, three office buildings in our leasing portfolio within the Greater Boston area have achieved Platinum and Gold Wired Certification for having best-in-class connectivity infrastructure—One Boston Place and 33 Arch Street, both owned by TH Real Estate, and 451 D Street, owned by a joint venture between Meritage Properties and Commonwealth Ventures.
To achieve Wired Certification, properties must meet a rigorous set of standards developed in conjunction with the top minds in the telecom and commercial real estate industries. The accreditation has proven to be a popular accolade amongst Class A and Class B buildings, citing further claim to which assets are more efficiently set up for today’s demanding tenancies.
“Network connectivity has become increasingly more important to corporate occupiers as the adoption of cloud computing, office collaboration, and telecommunicating gains momentum. It is imperative for building owners to provide their tenants with best-in-class connectivity options to stay relevant and competitive in the market. WiredScore has provided a great platform for owners to showcase their technology infrastructure in a concise and standardized manner.” – CBRE/NE’s Rich Modliszewski
By distinguishing buildings with the best tech capabilities, Wired Certification makes information about internet connectivity more transparent than ever before, enabling commercial buildings to benchmark themselves against a single standard and upgrade their offerings and allowing businesses to identify the best buildings in which to grow.
Next up in our New England Market Overview recap series, we cover the Hartford market. Our Connecticut team presented on the state of the industrial, office and investment markets.
Industrial Market Overview
John Reed, Senior Vice President/Partner, led with an in-depth overview of the Greater Hartford Industrial market.
“Last year there was 4 MSF of industrial volume and 1 MSF of net absorption. Consequently, the vacancy was down 9.2% from 2015. This led to improving values, rising lease rates, increased sales prices and higher land prices per acre, creating a premium on large industrial sites.” – JR
“The distribution model has changed. Drivers need to get to their destination and back in one day. Being centrally located in New England has fueled this demand. With the evolution of e-commerce, next-day—if not same-day—delivery will continue.” – JR
“UPS absorbed 230,000 SF of space at Cornerstone’s 1 Market Circle in Windsor. FedEx Ground is building a 525,000 SF distribution center at 1000 Middle Street in Middletown. You may recognize this as the former 1 MSF Aetna office campus; it is a perfect reuse of this property. This is the fourth FedEx operation established in Greater Hartford in the last four years.” – JR
“Due to the diminished inventory of quality existing buildings, some users are having to build.” – JR
Our industrial forecast for 2017 includes:
- Continued demand for large existing buildings
- Continued demand for large permitted sites
- One million square feet of absorption in 2017
- 2017 will be a better year than 2016
Office Market Overview
“2016 was a relatively flat year for leasing velocity, with renewals outpacing relocations. The market saw approximately 100,000 SF of net absorption and the sublease inventory was reflective of a fairly healthy economy.” – AA
“The Greater Hartford Office market is still very much a traditional economy. By comparison, in Metro Boston approximately 40% of the tenants in the market for 2016 identified themselves as ‘tech’ companies.” – JM
“Buildings in submarkets with walkable amenities and superior highway access led the way in 2016.” – AA
Our office market forecast for 2017 includes:
- Increased renewal activity
- Continued urban migration
- State and City budget impacts on the region
Investment Market Overview
Patrick Mulready, Senior Vice President/Partner, covered the Connecticut Investment market.
Our investment market forecast for 2017 includes:
- Continued demand for industrial product
- Interest rates will have minor impact on pricing
- Liquidity not going away
- Overall lower sale volume
- Strong pricing for well-positioned assets with good fundamentals
Overall, market fundamentals in Greater Hartford are strong and the outlook is positive for 2017, particularly in the Industrial Sector.
Did you miss our Boston Market Overview or Rhode Island Market Overview recaps? Click on the following link to catch up.
Next up in our New England Market Overview recap series, we cover the Ocean State. Our team down in Rhode Island presented on the state of the downtown, suburban and industrial markets. Alden Anderson, Senior Vice President/Partner, led the presentation by introducing Governor Gina M. Raimondo, who provided a compelling presentation on the status of the Rhode Island economy.
The first speaker to follow was Andrew Galvin, First Vice President/Partner, who highlighted the Downtown Providence and Suburban Rhode Island Office markets.
“Major themes for the Providence Office market include the continued progress and or delivery of several major projects; the continued growth in the multifamily space; the many newly proposed development projects attracting and growing an exciting tenant base; and the existing fundamentals in the market.” – AG
2016 Development Progress
“We’ve had the continued conversion of obsolete office buildings to housing stock, which has further tightened the available supply in the office market. The current downtown market vacancy rate sits at 13.4%. To put some context to this, since 2013, 11 office buildings totaling 544,000 SF have been converted to residential uses.” – AG
2017 Development Pipeline
“These referenced projects, many of which have commenced construction or will break ground in 2017, total several hundred million dollars in in new development.” – AG
Rhode Island Suburban Office
“Since 2012 there has been approximately 675,000 SF of positive absorption. Nearly 240,000 SF of that amount occurred in 2016. Similar to 2015, there were not market-changing types of large transactions, but 2016 represents continued improvement in the suburban market.” – AG
Rhode Island Industrial Trends
Tom Barry, Vice President, covered the Rhode Island Industrial market, stating that, “flexibility, creativity and persistence were all required to satisfy industrial needs in 2016.”
“Pricing has gradually increased for leasing as well as properties sold in the range of 3-5%, but has not increased as much as the declining vacancy would seem to imply.” – TB
“Companies searching statewide for alternatives, no longer can concentrate on a specific geographic area to solve their needs. The search radius continues to get wider and wider in search of viable options.” – TB
Our industrial forecast for the coming year includes:
- The shrinking supply of quality product will continue to present limited options and will call for creative solutions from the available existing inventory along with exploring new construction as an option.
- Both tenants and buyers will need to be opportunistic and ready to act once an opportunity presents itself.
- Many tenants will be forced to renew leases at their present location given the limited options.
- A good tenant and landlord relationship has become more important given potential renewal rather than losing their space and being forced to settle for a less desirable solution as well as a different geography, which may affect the labor force.
To wrap up the presentation, we were fortunate to welcome back CBRE’s Spencer Levy, Head of Americas Research, for his take on the state of the capital markets in Rhode Island.
Stay tuned for our next post, where we will cover this year’s CBRE/NE Hartford Market Overview. Did you miss our Boston Market Overview recap series? Click on the following link to catch up.