Seven Important Boston Development Trends Happening Right Now
David Bates / June 15, 2017-9:47 am
Sue Hawkes, Managing Director of the Collaborative Companies, has helped market many of the Hub’s best-known developments, including Ink Block, Slip65, Telford180 and Pierce Boston. Hawkes recently spoke at an event organized by NAIOP MASSACHUSETTS, the Commercial Development Real Estate Association, and noted what she is seeing in the market.
Here are seven takeaways I got out of her insightful presentation.
1) Boston Is Expensive and Getting More Expensive
“We do still continue to have price appreciation,” Hawkes told several hundred real estate professionals seated inside the Hyatt Regency Boston on Avenue de Lafayette. She was referring to both Boston’s rental and condominium markets.
In Boston, rent appreciation has slowed as a result of the apartment building boom, she acknowledged. In terms of the condominium market, she said, “No question, we still have appreciation there as well.” Hawkes then shared a slide that showed an incredible runup in the last 12 months of new development condo prices per square foot compared to the market’s median price per square foot.
2) Successful New Developments Have This Characteristic
“The difference in this cycle is that it’s all about placemaking,” said Hawkes, referencing the importance of design and services that promote health, happiness, and a sense of belonging in a community. “It’s really about making people feel comfortable in the environment.”
“You can take that theme and you can cross reference it between any form of real estate that we’re talking about today (commercial, retail, multifamily, condos, etc.),” she said. “The most successful opportunities are the ones that created a sense of place.”
3) The Most Valued Amenities Are Changing
The amenity wars are alive and well, said Hawkes, but she also noted, “It’s not just about the spaces; it’s also about the services.” She pointed out that national real estate companies are focusing on providing “immediacy” to their communities through customer service and concierges.
New developments also have less gym space and more socializing and co-work space, she added.
4) Boston Has an Affordability Problem
“You have to start thinking about a studio at $2000 being an attractive value,” said Hawkes. “That’s a pretty scary situation.” Emphasizing the correctness of her data, however, she said, “And I would challenge you to find anything less than that in anything new. If anything, it’s going the other way.”
Hawkes also touched on the high cost of land and construction in Boston that causes developers to price at $1500 per square foot.
She told the audience that affordability is “absolutely forcing a flight to more suburban tertiary markets.”
5) Mid-Luxury Price Points Are Hot
Hawkes created a category of new development she describes as “mid-luxury.” These developments are mid-rise buildings, six to ten stories, and packed full of amenities.
“You can’t build enough of it in the city,” she said. This type of development can be found in Somerville, East Boston, Charlestown, and Jamaica Plain, and is priced between $950 and $1200 per square foot.
“And that’s the market – they’re flying off the shelf,” she enthused, knowing her company represents several such developments.
6) These Are the Parking Needs of New Developments
“We still are a driving city,” she noted. “Parking is still an issue.”
Hawkes said while some smaller condominium units, such as studios and one bedrooms, might not need dedicated parking spaces, new developments can’t sell a two-bedroom condominium without a parking space. She added that for any residence priced in excess of $2 million, “You better have two parking spaces.”
7) This Is How Much Foreign Money a Hub Development Should Have
Hawkes noted the risks and rewards of the sizable number of foreign investors buying in Boston residential developments. While such investment brings able buyers and other benefits to developers, she cautioned that a development allowing a significant concentration of investor units could impact the lifestyle and culture that will develop in a new building.
“If you have a transient situation or dark windows, you’re not going to be able to sustain the value,” she said. “So, capping the building on the investor quotient is really important. “
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