Last fall, veteran commercial real estate executiveÂ Cathy ThompsonÂ was named co-managing director of DTZâ€™s Boston real estate office. Thompson, who co-founded and operated Thompson Hennessey & Partners for more than two decades, had also served as senior managing director at Newmark Grubb Knight Frank. She recently spoke with BBJ real estate editor Thomas Grillo about the downtown office market, the future of the suburbs and why, despite double digit office availability rate, the city needs more towers.
Bostonâ€™s office market seems to improving for landlords. Whatâ€™s your take on whatâ€™s happening in the downtown?
Boston is definitely a good ownerâ€™s market right now. Weâ€™re in that sweet spot for landlords.
Rents are rising and concessions are decreasing.
But weâ€™re still seeing double digit availability rates now and we have the equivalent of six John Hancock towers vacant. How is it a landlordâ€™s market?
In the Back Bay and Seaport submarkets, vacancies in the Class A towers are in the low single digits. Some the spaces in the upper floors in the Back Bay towers are commanding rents in the $80s (per square foot). In the Seaport, the top rents are in the low $60s in the new spaces. Thereâ€™s a flight to quality, an upgrading of space. Landlords are taking advantage of the fact that there isnâ€™t much high quality space available right now for blocks of space above 75,000 square feet.
If youâ€™re an tenant seeking office space today, where are the bargains?
We are finding really good values in the lower floors of the towers in the Financial District, where rents are in the high $30s.
What trends are you seeing?
Thereâ€™s the urbanization of real estate, a global trend where suburban companies want to be in urban areas near the talent and public transportation. And now with all the construction of work, live, play opportunities in the downtown, that trend is continuing in Boston. One big example is Converse who left the suburbs for Lovejoy Wharf near North Station.
Does that spell the death of the suburban office market, where the availability rate in some submarkets is in excess of 20 percent?
There are savvy developers in the suburbs who are making improvements in their campuses to retain tenants. Look at the Third Avenue project that Nordblom is doing in Burlington. (The 300,000-square-foot development will be anchored by a newÂ WegmansÂ as well as cafÃ©s, restaurants and a boutique hotel across from the Burlington Mall.) And what Joe Zink, president ofÂ Atlantic Management, is doing to the 110- acre formerÂ Hewlett-PackardÂ campus (with a mix of housing, retail space and a hotel, in Marlborough) trying to create an environment where people can get a lot of their everyday needs taken care of besides going to work.
Given that thereâ€™s more than 10 million square feet of office space available in the downtown, willÂ Tom Oâ€™Brienâ€™s Government Center Garage office towers project and laterÂ Don Chiofaroâ€™s Harbor Garage development ever get filled?
Developers with vision like Tom and Don and others understand there will be continue to be a demand by large companies for new Class A space. At 888 Boylston St., Natixis Global Asset Management signed a deal withÂ Boston PropertiesÂ for new headquarters space, Skanska signed PwC at the Seaport and State Street opened new headquarters space in Fort Point.