Boston beckons
Marcus & Millichap’s Q2 Boston market report signals urgency to retailers like the famed lamps Paul Revere placed in the tower of the Old North Church. To wit:
Retail vacancy rates are below 2% in some areas, such as those along Route 128 and Interstate 495. Retail space under construction is up 30% this year.
Whole Foods, Wegmans, and CVS are among the players in a spate of new necessity-based centers.
Luxury high-rises are sprouting in old warehouse and dock areas, creating new neighborhoods with new retail demands. Retail space in central Boston is highly sought after, with prices starting at $800 per square foot.
Two-and-a-half linear miles of streetfront retail will line the streets of WS Development’s 20-block Boston Seaport project, the largest currently under construction in the city. Lanes where shipyards and warehouses once did business will house the likes of Bluemercury, Bonobos, L.L. Bean, Shake Shack, and Filson — a Seattle-based outfitter debuting its first New England-area store.
“Boston’s growing and needs new neighborhoods fast,” said Yanni Tsippis, WS Development’s SVP in charge of the Seaport project, which will add to downtown’s real estate inventory with 2,500 residential units, 2.8 million sq. ft. of office and research space, three to four hotels, a million sq. ft. of retail and entertainment, and up to three parks.
New England’s biggest town also badly needs more retail, Tsippis said.
“There’s just one retail area — the Back Bay. There’s no other area outside the Seaport that’s realistic to serve as a second retail zone,” he said.
The famously criticized Big Dig, the most expensive highway project in U.S. history, gave the Seaport ready access to Logan Airport and, at the same time, cleaned up the formerly nasty Boston Harbor. Transit lines also intersect there, near the Convention Center. “The Seaport District,” he said, “is now the most accessible area in the whole city.”
West of downtown, just outside Cambridge, lies Watertown, where Boston’s other big new retail project, Arsenal Yards, is taking shape. The mixed-use development, a co-project of The Wilder Companies and Boylston Properties, will feature 350,000 sq. ft. of retail and entertainment, some 500 residences, and 100,000 sq. ft. of office space.
“Four ecosystems drive the area: tech, health care, finance, and higher education,” said Tom Wilder, who’s leading the development of Arsenal Yards. “We always had great universities, but we didn’t always retain a lot of those graduates. Now the growing tech and biotech companies realize there’s a pool of talent available here.”
The project replaces an enclosed shopping mall that had overtaken an old U.S. Army ordnance depot and small arms factory in the 1980s. Historic portions of the manufacturing complex will be retained in the new Arsenal Yards, which makes a logical move into residential in an area with considerable housing shortages. When completed, it will offer up half a dozen chef-driven restaurants, a 30,000-sq.-ft. specialty grocery store, a multiplex cinema, and a combination of boutiques and national retailers. The first stores are set to open in fall 2018.
“The site is unique,” Wilder said. “It’s its own town, but it’s urban-edge. You’re in walking or biking distance of Cambridge and Boston, which millennials demand. We’re giving them everything they’re asking for — outdoor dining, beer gardens, bocci courts.”
Arsenal Yards’ timing might be right. According to the Marcus & Millichap report, a slowdown in project completions along with strong tenant demand dropped Boston’s vacancy rate by 50 basis points in Q2 2017 over the same period the previous year. In Cambridge, however, the rate plummeted 80 basis points to 2.6%.
The trend is likely to continue. Marcus & Millichap forecasts a 128,400-resident increase over the next five years in Boston, a town where average monthly household retail sales top $4,000, more than three times the national average.
Paul Revere would have needed a third lantern to signal this trend, for it would appear that retailers and residents are coming by both land and sea.