Evolving use of Office and other Space

[type001]

9/11 didn't actively involve people getting used to and optimizing an effective alternative, though.

Maybe for a few, but just about everyone I know is mentally suffering from the lack of home/work separation and the headache inducing dystopia of constant virtual meetings.

 

[stellarfun]

Long article in the Globe, comparing the post-Covid business and retail environment in the Financial District, Back Bay, and Seaport. Two have substantially recovered, one has not. And what to do about the laggard.

https://www.bostonglobe.com/2023/01/21/business/why-how-downtown-boston-is-recovering-depends-which-downtown-youre-talking-about/

And then there’s the Financial District. Home to 42 percent of the city’s office space, it was the beating heart of Boston’s commercial core. But now it has gone from being the district with the highest volume of foot traffic, according to the report released last October by the city and the Boston Consulting Group, to one that’s limping behind. Foot traffic is still one-third below pre-pandemic levels in the Financial District, according to data firm Placer.ai, and the office vacancy rate is 20.4 percent, Colliers data show.

This downward drift threatens to become a vicious cycle. A central business district where people aren’t going to work isn’t very appealing to retailers and restaurants looking to open up shop. Empty storefronts on quiet streets don’t give workers much reason to return to the office. That’s part of why the vacancy rate around South Station is twice what it is in the Seaport.

Jamison’s COJE Management Group has places in other parts of town too; the Lolita tequila bars in Back Bay and Fort Point, and the Coquette restaurant in the Seaport. They’re busier, and Jamison thinks he knows why. “The Financial District is going to continue to struggle without the return of workers,” he said. “Back Bay, Fort Point, and Seaport all have the benefit of heavily residential populations.”

City officials see this too, and increasingly think the solution may lie in some of those nearly empty office buildings that dot the Financial District, that could potentially be turned into housing. On Thursday the Boston Planning & Development Agency hired a consultant to study this, and some building owners have at least run the numbers on what it would take.

The same story is playing out across the country, as developers are contemplating office-to-residential conversions and other ways to reinvigorate downtowns. Washington, D.C., has 2.5 million square feet of office space dedicated to residential conversions, and is actively courting developers to find ways to transform some of the 20 million more that’s sitting empty. Last month, New York-based commercial landlord Silverstein Properties announced plans to funnel $1.5 billion to turn office towers into apartments.

But the numbers are hard to make work. Because of their different design, not many office buildings work for conversion, and even for those that do, the process can be difficult and costly. And in general, office space commands a higher rent than residential, leading owners to want to hold on and hope, Loh said. So cities that want to convert buildings should look at incentives for building owners, she said.

 

[shmessy]

Long article in the Globe, comparing the post-Covid business and retail environment in the Financial District, Back Bay, and Seaport. Two have substantially recovered, one has not. And what to do about the laggard.

https://www.bostonglobe.com/2023/01/21/business/why-how-downtown-boston-is-recovering-depends-which-downtown-youre-talking-about/

The entire answer is in the 2nd paragraph of that article.

How hard is it for urban officials to understand that post pandemic success for the next century + will be based on how many HUMANOIDS live in an area - - only that will be successful in making a city dynamic. The office as an engine for a district is over. HUMANOIDS will make a district 24-7 dynamic, with demands for restaurants/theatres/services, etc. Going forward, the best way to kill a district is to fill it only with offices/labs.

 

[737900er]

Long article in the Globe, comparing the post-Covid business and retail environment in the Financial District, Back Bay, and Seaport. Two have substantially recovered, one has not. And what to do about the laggard.

https://www.bostonglobe.com/2023/01/21/business/why-how-downtown-boston-is-recovering-depends-which-downtown-youre-talking-about/

I'm not sure that the shoe repair sector is a good example of external dynamics -- office fashion/dresscodes have changed a lot in the post-COVID era.

 

[393b40]

I'm not sure that the shoe repair sector is a good example of external dynamics -- office fashion/dresscodes have changed a lot in the post-COVID era.

Won't someone think of the cobblers?!

Tell me you're out of touch without telling you're out of touch (the reporters, not you).

 

[fatnoah]

The office as an engine for a district is over. HUMANOIDS will make a district 24-7 dynamic, with demands for restaurants/theatres/services, etc. Going forward, the best way to kill a district is to fill it only with offices/labs.

Fully agree. Over the many, many years I've lived and/or worked in Boston proper, I've observed this trend. I worked in the Seaport before the boom, but when it had a couple office buildings. It was a ghost town on holidays, weekends, and evenings. Before more residential buildings started to pop up, it felt like anything downtown that wasn't DTX or Faneuil Hall felt deserted. Anything a human might required, like food, clothing, etc. was closed on weekends. I remember walking down High Street one Sunday afternoon and managing to walk its entire length without seeing another pedestrian.

 

[bigpicture7]

Fully agree. Over the many, many years I've lived and/or worked in Boston proper, I've observed this trend. I worked in the Seaport before the boom, but when it had a couple office buildings. It was a ghost town on holidays, weekends, and evenings. Before more residential buildings started to pop up, it felt like anything downtown that wasn't DTX or Faneuil Hall felt deserted. Anything a human might required, like food, clothing, etc. was closed on weekends. I remember walking down High Street one Sunday afternoon and managing to walk its entire length without seeing another pedestrian.

Agree as well. Well before the pandemic, the Financial District was highly underutilized for substantial portions of time. This is not a new problem (though present trends certainly exacerbate it); thinking about how to diversify the use cases of FiDi buildings has been a challenge many years in the making. The city should not pretend like the pandemic created this, and likewise, the solution depends on many things other than people working in offices.

 

[fatnoah]

I found this linked in a discussion about San Francisco's office vacancy rate. https://www.commercialedge.com/blog/national-office-report/.

 

[HenryAlan]

Per the link, Boston has the lowest vacancy rate among major business centers.

 

[shmessy]

Per the link, Boston has the lowest vacancy rate among major business centers.

.....AND at the same one of the highest (per capita THE highest) sales amount and currently-under-construction activity (really not that far behind leader Manhattan in both categories).

Look at that combo - - any economist would want to be Boston.

 

[stellarfun]

Article in the Washington Post
https://wapo.st/3kOdAtj
^^^ Should not be behind a paywall.

As of the third week of January, the percentage of workers showing up at their downtown offices reached a weekly average of 45 percent, with that number rising to 54 percent on Wednesdays, according to data collected by Kastle Systems, which measures traffic through access cards (the weakest days are those adjacent to weekends).
...........
Even before the pandemic, downtown Washington had an oversupply of offices that was aggravated by the emergence of telework and competition from emerging neighborhoods such as the Wharf. That dynamic has only accelerated since 2020. According to a 2022 survey by the D.C. Policy Center, 137 of the city’s 733 large office buildings — most of them downtown — had vacancy rates of more than 25 percent. An analyses by the CBRE real estate firm found that vacancy rates by the end of 2022 had reached 20 percent in the city’s most modern offices and nearly 25 percent in older buildings.
....

Gray also said she felt buoyed by Bowser’s plan to create thousands of apartments downtown, an aspiration that includes a long-term goal of attracting 100,000 new residents to the city’s core. The mayor has said she would use tax subsidies to encourage the conversions of offices to apartments and may seek to relax height limits in certain spots as an added inducement, a change that would require congressional approval. A total of three office-to-apartment conversions have been completed downtown, while 12 more are planned or under construction, according to the downtown BID.
Yet, developers say that the conversions are not a panacea for downtown’s future. Their hurdles at the moment include rising interest rates and construction costs. They also question whether a sufficient number of offices exist that are suitable for conversion, saying that many are midblock and have partial views.

“The concept is a good one, but it’s not practical in most instances,” said Herb Miller, a longtime D.C. developer. “How do you convert an office building into apartments when 50 percent of the building doesn’t have windows?”

 

[Arlington]

You’ll want to check out the Kastle survey that underpins the Posts reporting

Kastle Systems - Data Assisting in Return to Office Plans

As companies return to the office, we understand prioritizing employee safety. Identify trends and assist return to office plans with our live data.

www.kastle.com

You’ll want to check out the Kastle survey that underpins the Posts reporting

 

[bigpicture7]

You’ll want to check out the Kastle survey that underpins the Posts reporting

Kastle Systems - Data Assisting in Return to Office Plans

As companies return to the office, we understand prioritizing employee safety. Identify trends and assist return to office plans with our live data.

www.kastle.com

Actually it's not a survey, it's based on keycard swipe data. I've been following this source since pretty much the start of the pandemic. It's interesting and useful from a relative (e.g., comparisons over time) standpoint, but not an absolute standpoint due to known sampling imperfections (doesn't span all cities, nor even most buildings in a given city). Yet it's still one of the broader and most objective measures out there, so it gets cited a lot.

In any case, last week's data just posted, and fascinating that it is the first time that since the start of the pandemic that weekly office building utilization topped 50% of pre-pandemic levels on average:

Kastle Systems - Data Assisting in Return to Office Plans

As companies return to the office, we understand prioritizing employee safety. Identify trends and assist return to office plans with our live data.

www.kastle.com

Kastle_dashboard_separate-1_1.30.23-1080x835-1.jpg

EDIT: what you're seeing on the left side of that graph is the holidays' dip. It had been hovering in the high-40s between Thanksgiving and mid-December prior to that.

 

[737900er]

Article in the Washington Post
https://wapo.st/3kOdAtj
^^^ Should not be behind a paywall.

One thing to keep in mind about Boston in comparison to other US cities is that Boston's financial situation is less dependent on commercial property tax revenue than other US Cities. About 30% of Boston's property tax revenue comes from commercial/industrial properties. In DC and NYC it's slightly over half. For those cities, if the market value of office buildings goes down that's a huge problem, whereas in Boston it's not quite as bad as long as this remains an expensive residential real estate market.
Funding formulas in Massachusetts result in revenue centralization -- we don't have local income taxes and minimal local sales taxes (meals) like other states -- and then that revenue is distributed out to the cities and towns, so it doesn't matter as much in terms of where spending is actually happening.

 

[393b40]

it's not quite as bad as long as this remains an expensive residential real estate market.

Good question whether that holds. There's reasons to live in Boston metro that don't involve work, but with a lot of jobs going remote and a lot of <35's unable to find affordable housing and now having job location flexibility the housing market could see some shifts. We won't know for several years though. Anecdotally, I know a lot of grumpy people in my age cohort (30-40) that are are frustrated with the area.

 

[stick n move]

Residential conversion planned for 33-story office tower at 1055 7th Street

“Much has been said about the departure of corporate headquarters from Downtown Los Angeles in recent decades. Likewise, much has been written in recent months about the ongoing struggle's of the neighborhood's office market, and the possibility of converting millions of square feet of unused space into housing. Now, watch as those two narratives collide.

Just west of the US-110 Freeway stands a 33-story, approximately 600,000-square-foot office tower completed during the late 1980s office boom. While the building was once named ARCO Tower for the oil and gas company that once called it home, the property has gone by 1055 7th Street since the departure of its namesake tenant more than two decades ago. It most recently housed offices for Los Angeles County's L.A. Care health plan, which will be relocating into a 370,000-square-foot space at a neighboring building in 2024.

Landlord Jamison Services, Inc., faced with the daunting task of leasing a large high-rise in an era where such buildings have fallen out of vogue, will instead pivot. The Koreatown-based firm has submitted an application to the L.A. Department of City Planning seeking approvals to convert the upper floors of 1055 7th Street into housing. Plans call for a total of 691 studio, one-, two-, and three-bedroom apartments, ranging from 538 to 1,304 square feet in size, as well as nearly 48,000 square feet of amenities such as theaters, fitness rooms, lounges, and business centers…”

https://la.urbanize.city/post/residential-conversion-planned-33-story-office-tower-1055-7th-street

 

[DBM]

BBJ story on 129 Tremont and 85 Devonshire (plus its immediate abutters) being set-up for residential conversion:

https://www.bizjournals.com/boston/...n-office-to-residential-conversions-2024.html

129 Tremont is drop-dead gorgeous, and interesting things are happening up here with the Holocaust museum and 9 Hamilton Pl. hotel both having been approved.

Here's a look at the 85 Devonshire St. cluster from the Washington/Water intersection, and here it is from Devonshire/Water. It now has the cannabis shop open at the base but it's been completely inconspicuous/largely non-descript, from what I've seen...

 

[Justbuildit]

These are two fantastic buildings perfectly suited for conversion. Just yesterday I was walking down Winter and bemoaned how dead the stretch is between Tremont and Washington now that nearly every storefront is empty. That building should be a landmark in the approximate geographic center of Boston, and with its small floorplate could make for some truly exceptional floor-through units with a view of the Statehouse and Common.

The Devonshire cluster has probably my favorite architecture in the city. 85 is very nice, but would love it if 7 Water/Winthrop building were in the mix. Such an important building and very elegant from the street.

I don't have access to bizJ, but do they say there are 4 properties under consideration so far. What are the other two?

 

[DBM]

These are two fantastic buildings perfectly suited for conversion. Just yesterday I was walking down Winter and bemoaned how dead the stretch is between Tremont and Washington now that nearly every storefront is empty. That building should be a landmark in the approximate geographic center of Boston, and with its small floorplate could make for some truly exceptional floor-through units with a view of the Statehouse and Common.

The Devonshire cluster has probably my favorite architecture in the city. 85 is very nice, but would love it if 7 Water/Winthrop building were in the mix. Such an important building and very elegant from the street.

I don't have access to bizJ, but do they say there are 4 properties under consideration so far. What are the other two?

"The other downtown application is from Adam Burns of Boston Pinnacle Properties, for the conversion of 281 Franklin St. into 15 units. Burns has an agreement in place to buy the six-story, nearly 13,000-square-foot property for $3.8 million, he said.
The West End applications are from the Chicago-based real estate investment trust Equity Residential (NYSE: EQR), for two complexes that already feature plenty of housing. The company is interested in converting the commercial base of two residential towers into homes: 24 units at 2 & 5 Longfellow Place and 33 units at 1 & 10 Emerson Place."

You forget how wonderfully close everything is in Boston compared to other cities. I just looked at a map, and 281 Franklin is only a 1,300-ft walk from 85 Devonshire, which in turn is only a 1,700-ft walk from 129 Tremont. Which among other things means if a bunch of residential conversions get going more-or-less simultaneously within the CBD, it will be convenient to conduct reconnaissance!

 

[Justbuildit]

Yes, absolutely. A quick way to sprinkle a couple hundred more people into the middle of the city. $3.8M for a building of that size also seems like a steal...I love the new high rises as much as the next guy, but high taxes and amenity-driven HOAs are a big turnoff for some. Having "new" 10-30 unit small condo buildings in converted ~100-year old office buildings without parking or pet wash stations or golf simulators is how you bring a broader cross-section of people into the downtown core.