It?s The High Rents, Stupid
By Scott Van Voorhis
Banker & Tradesman Columnist
03/30/09
Construction has been halted on the former Filene's site in Downtown Crossing.If you want to know what really ails Downtown Crossing, first take a look at some of the sky-high rents that landlords in the down-at-the-heels shopping district are charging.
No one is going to confuse Washington Street, with its bombed-out streetscape (thanks to the stalled Filene?s redevelopment), with Newbury Street.
But that is not stopping some Downtown Crossing landlords from seeking Newbury Street rents, anywhere from $80 to $150 a square foot, brokers and city officials say.
The result has been an abysmal mess, creating a gap-toothed smile of empty storefronts mixed in with fast-food joints and cell phone shops.
The real question though is why no one, outside of the mayor and a few other people at City Hall, is looking hard at this. I mean, this is not rocket science.
Maybe it?s just the dysfunctional way we take on tough issues here in the Boston areas. Downtown Crossing has been on the slide for years, but it?s only when it?s on life support that it starts to get some attention.
Even now, the debate is shaping up over whether to allow cars in the now pedestrian-only shopping district. Sure, that might help, but you have to have something more than sneaker stores and cell phone shops to make Downtown Crossing a destination worth getting in your car to visit.
And, of course, we haven?t even gotten to what needs to be done to fix this mess. I?m thinking a little eminent domain shopping spree by City Hall might be in order, but more on that later.
?No one has changed their attitudes about valuations ? that is kind of a problem,? said Mark Browne, a top downtown retail broker. ?It?s huge. You have very, very high prices.?
He?s right ? just take a look at these numbers.
At $80 to $150 a square foot, dingy Downtown Crossing rents are not that far off from what you would see on Newbury Street, where retail space goes from $60 to $200 a square foot, Browne notes.
All would be fine if Downtown Crossing was a bustling shopping Mecca with a healthy range of retail establishments, but it?s not. Some landlords would rather hold out for sky-high rents than take something less, even if it would bring a little life to this increasingly dead ? and at times dangerous ? retail void, city officials contend.
They point to a parking and retail complex, which is still pushing for high rents, even as vacancies mount, as well another building near the now-gutted Filene?s complex, which has sat vacant for years, despite interest from a number of retailers.
Mayor Thomas M. Menino and his retinue dutifully trot off every year to the annual shopping centers conference in Las Vegas, talking up the city and Downtown Crossing to various retailers.
City officials say they would like nothing better than to see a Trader Joe?s or Forever21 set up shop in Downtown Crossing. Not to mention a bakery and a family-style restaurant. But many of these well-known retailers, when they get around to checking out the district, leave frustrated after banging up against a wall of inflated rent demands.
And despite all those empty storefronts, not even Filene?s Basement, which had hoped to open a temporary store during the now-stalled renovation of the Filene?s block, could find space it could afford, city officials contend.
?The leasing structure down there is pricing these great retailers out of the market,? said Kristen Keefe, a retail leasing expert at the Boston Redevelopment Authority. ?Certain landlords seem to be quite willing to hold their properties vacant in order to get the top dollar.?
Of course, not everyone sees things this way.
Robert Posner, owner of the now empty Barnes & Noble building, denies he is holding out for higher rents. He won?t say what his price is either, but insists it?s nothing like the $100-plus a square foot rents cited above.
He contends he was given a low-ball offer by Filene?s Basement, and had another promising retail deal stolen out from under him by a competitor.
Still, Posner is just one of an array of small-time landlords who control Downtown Crossing ? and that may be the biggest problem of all.
If the area were one giant mall property, City Hall would have just one landlord to deal with. Instead, the ownership of the district is Balkanized, with a wide array of scrappy, small-time landlords.
Get Tough, Menino
So maybe some subtle or not-so-subtle hints about the possible use of eminent domain to seize some empty retail buildings might do some good over at Downtown Crossing.
After all, there were no qualms about using eminent domain a few years ago to relocate a strip club to make way for a new condo tower near Downtown Crossing ? one that, mind you, never got built.
City officials at one point were even planning on seizing a huge swath of the neighborhood around Fenway Park back in 2000 in order to make way for a crazy plan to tear down the old ballpark and replace it with a huge new stadium.
At the least, it might prompt some badly needed introspection on part of some Downtown Crossing landlords still holding out for Newbury Street rents.
