Stop sign of the times
Longwood Center work halts as economy makes prospective tenants leery
Two buildings have been demolished and the site has been leveled, but work has yet to begin on the nine-story Longwood Center.
By Casey Ross
Globe Staff / November 22, 2008
has stopped on a $300 million biotechnology laboratory in the Longwood Medical Area as the city's medical sector, which previously seemed insulated from the nation's economic problems, begins to feel the effects of the worsening downturn.
National Development and Alexandria Real Estate Equities Inc. said they are halting work on the 1-acre site on Brookline and Longwood avenues because they have been unable to secure leases from tenants.
Executives with the companies said the project, known as Longwood Center, will remain on hold at least until spring.
Meanwhile, Brigham and Women's Hospital said yesterday it is delaying plans to renovate its patients tower and may scale back the project as tightening finances begin to restrict what has been a prolonged building boom in the Longwood area.
"In this economic downturn, we are pausing to evaluate the scope of our plans," hospital spokesman Kevin Myron said in a statement. "But it is still our goal to continue renovations in the tower by creating more private rooms."
The two projects are the latest real estate ventures to be put on hold amid the faltering economy. Their troubles show the downturn is beginning to filter through the region's vaunted medical industry, which has been viewed as a financial stalwart that could prevent deeper economic problems in Massachusetts.
Real estate professionals said uncertainty about the economy has made many hospitals and medical companies unwilling to act on their needs for more space. Many hospitals are getting pinched by slower revenue growth, rising costs, and limited access to loans to pay for new equipment or expansions.
"The economic downturn is starting to filter into areas we thought were immune from this," said Mark Winters, managing principal of the global life sciences practice for Cushman & Wakefield, a real estate firm. "All the bad news from the past couple of months is starting to manifest itself in the market."
Hospitals in the Longwood Medical Area have undergone rapid expansions in the last several years. Currently, more than 1.6 million square feet of construction is either approved or already underway, but hospital executives said they are now becoming increasingly focused on paring expenses.
"We are going to be very careful about how much we invest in renovations and upgrades because money is going to be tight," said Paul Levy, president and chief executive of Beth Israel Deaconess Medical Center. "It's just prudent. At a time like this, you don't make major capital commitments."
The delay in construction of Longwood Center, on land owned by the Joslin Diabetes Center, will leave a vacant lot in the heart of the medical area. So far, the developers have demolished two buildings and leveled the construction site, but work has yet to begin on laying the foundation for the nine-story building.
Tom Alperin, president of National Development, said prospective tenants have been unwilling to commit to the complex. Without tenants, Alperin said, the development team is not even bothering to try to get construction loans.
"Caution is prevailing right now," Alperin said. "The demand is there for a laboratory project, it's just a question of when tenants will feel comfortable enough to proceed."
Alperin said he will seek to resume construction in the spring, hoping economic conditions will have improved enough to persuade medical centers to move forward with expansion plans.
The project is the third attempt to redevelop the property. Joslin, the world's largest diabetes center and clinic, first proposed the development in 2001. Two years later, the Boston Redevelopment Authority approved a mixed-use project proposed by Keefe Co. comprising lab space, 150 apartments, and underground parking, but construction never moved forward. Joslin then launched a second effort to codevelop the building with Boston Properties, but that arrangement stalled as well.
The current project by Alexandria and National Development calls for construction of a 425,000-square-foot life sciences building that would accommodate lab, clinical, and office uses. It was originally scheduled for completion in 2011, but that date could be moved back by several months. Joslin, which is slated to become a tenant in the building, did not return calls seeking comment.
A spokeswoman for the BRA said the agency is monitoring the project and remains optimistic work will eventually move forward. "As soon as the market improves, we feel Boston is poised to be up and running ahead of other cities due to our diverse economy," spokeswoman Jessica Shumaker said.
Tom Andrews, senior vice president at Alexandria, said the developers are still in discussions with additional tenants, but decided it would be too risky to proceed without legal commitments. "Given the current economic conditions, it's hard to imagine starting heavy construction until we have substantial preleasing," he said.
One prospective tenant, Dana Farber Cancer Institute, said it is waiting to make any such commitments until its financial picture clears. "We're weighing the impact of the national economic slowdown," said spokesman Steven Singer. "We're actively looking for research space, and we continue to consider the Longwood research center an attractive opportunity for us."
