2014 Colliers International 35th Annual Seminar

Slides from Colliers | Boston's Trends in Real Estate seminar held on January 16, 2014.

Transcript

1. Colliers 35th Annual Seminar
2. Introductory Remarks
3. The Boston Market
4. The Story 11 consecutive quarters of positive absorption
5. Equilibrium 2010 Tenant Landlord 2013 Tenant Landlord
6. Towers Are Tight Financial District Back Bay VACANCY RENTS 5.9% Class A: $40 to $80 3.1% 3.6% Class B: $30 to $45 10.6% 20th Floor
7. Game Changers
8. Game Changers
9. Game Changers One Post Office Square One Financial Center 51 Sleeper Street 40 Broad Street
10. Seaport is Buzzing
11. New Developments | 5M SF One Congress/Government Center Garage Boston Harbor Garage 350 Boylston Street South Station 888 Boylston Street North Station
12. Traditional vs. Technology | 4M SF Traditional Technology
13. Forecast 11.9% 8.8% -20% -15% -10% -5% 0% 5% 10% 15% 20% -3,000 -2,000 -1,000 0 1,000 2,000 3,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Vacancy Rate Future Absorption Absorption SF (Thousands)
14. Even Playing Field
15. Cambridge Market
16. Office Vacancy | Absorption 137 -345 -410 272 244 -83 712 8.6% 15.5% 10.0% 10.8% 9.0% -10% -5% 0% 5% 10% 15% 20% -800 -600 -400 -200 0 200 400 600 800 1,000 1,200 1,400 Vacancy Rates Absorption SF (Thousands) 2007 2010 2013 Market Size: 10.9M SF 2011 2008 2009 2012 0%
17. Core Kendall Square Market Very Tight!! 1.8% Vacancy MIT 2 First Street 193,000 SF 10 Canal Park 110,000 SF
18. Office Transaction Velocity 117,000 SF 60,800 SF 51,000 SF 48,000 SF 36,000 SF 44,000 SF 32,000 SF 30,000 SF 30,000 SF 27,000 SF 24,000 SF 23,000 SF 775,000 SF | 46 Leases
19. Asking Gross Rents – Current Kendall Square/East Cambridge 1 & 101 Main Street $68/SF 10% Class A 25 First Street $53/SF 10% Class B+ 215 First Street $50/SF 7.5% Class B
20. Biotech Vacancy | Absorption SF (Thousands) 246 -98 265 127 -85 485 -593 13.8% 17.0% 11.0% 19.5% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% -800 -600 -400 -200 0 200 400 600 2007 2008 2009 2010 2011 2012 2013 Vacancy Rates Absorption 2010 2012 Market Size: 8.7M SF 2007 2009 0%
21. Promising Companies Struggle – Negative Absorption – Major Factors 120,000 SF 682,000 SF 98,000 SF 75,000 SF 173,000 SF 562,000 SF Move to Seaport 4 Buildings Vacated Consolidation in Kendall Square
22. New Golden Age of MA Biotech
23. 75 & 125 Binney Street – 386,000 SF Iclusig Troubles
24. Biotech Transactions | Velocity 869 954 1,450 1,280 1,200 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2007 2008 2009 2010 2011 2012 2013 SF (Thousands) 369 500 515 439 420 1,030 370 910 New Lease Renewal 2013: 30 Transactions 139 1,061 571 382
25. Lab Transaction Velocity | 1.2M SF Big Pharma/Bio Emerging Companies 581,000 SF | 8 leases 620,000 SF | 22 leases 229,000 SF 100,000 SF & 40,000 SF 63,000 SF 142,000 SF 62,000 SF 44,000 SF & 43,000 SF 42,000 SF 18,000 SF 46,000 SF
26. Recently Filed IPO Window Opens for Biotechs Cambridge Watertown 8 companies | $760M raised $122M $116M $96M $89M $71M $122M $81M $64M $69M $75M
27. 229,000 SF 300 Massachusetts Avenue
28. Class A - Existing Rent: $54-$63 TI: $25-$125 Build-to-Suit Rent: $65-$75 TI: $150-$200 Current Asking NNN Rents Average for Term Class B Rent: $42-$53 TI: $20-$150 Class A - Shell Rent: $58-$68 TI: $150-$200
29. Recent Sales 123,000 SF 100% lab $94.5M $768/SF Seller: Skanska Buyer: Alexandria 150 Second Street 669,000 SF 9 buildings 51% lab / 49% mixed-use $395M $590/SF Seller: Beal / Rockwood Buyer: Divco West One Kendall Square 298,000 SF 2 buildings 45% lab / 55% office $192.6M $646/SF Seller: Equity Office Buyer: Jamestown Riverview
30. Life Science-Fueled Building Boom 30 75 & 125 Binney St. 386,000 SF 5 Education Way 230,000 SF 75 Ames Street 250,000 SF 450 Kendall Street 63,000 SF (speculative) 300 Mass Ave. 229,000 SF 22 Windsor Street 181 Mass Ave 550,000 SF
31. MIT Kendall Square Rezoning Petition Office/Lab/Retail: 1,000,000 SF Residential: 240,000 SF Academic: 800,000 SF 26-acre district
32. Suburban Market
33. The 3 R’s… Reading ‘Riting ‘Rithmetic
34. The 3 R’s… Renewal Relocation Redevelopment …of suburban leasing.
35. The Suburban Market Office/R&D Market (as of Q4 2013) Supply: 134,000,000 SF Vacancy: 19.8% 2013 Absorption: +750,000 SF
36. Renewal: Dunkin Donuts 130 Royall Street Canton
37. Renewal: Dunkin Donuts 130 ROYALL STREET - CANTON Landlord: H.N. Gorin Leased SF: 175,000 SF LED: May, 2015
38. Renewal: Dunkin Donuts 130 Royall Street Canton Westwood
39. Renewal: Dunkin Donuts UNIVERSITY STATION - WESTWOOD Proposed Dunkin Building: 200,000 SF Landlord(s): 130 acres Retail – 750,000 SF Office – 350,000 SF Residential – 650 units Hotel – 150 rooms Memory Loss – 100 units
40. Renewal: Dunkin Donuts 130 Royall Street Canton Low $20s NNN SIGNED LOI 200,000 SF 15 years Low $20s NNN Base Building (w/ some TIs)
41. Renewal: Dunkin Donuts “We can’t lose Dunkin Donuts!” LENDER: CANTON ECONOMIC DEVELOPMENT SUPPORT
42. Renewal: Dunkin Donuts 130 Royall Street Canton Westwood SIGNED LOI 200,000 SF 15 years Low $20s NNN Base Building (w/ some TIs) RENEWAL 175,000 SF 12-year extension Low $Teens NNN $25 TI Allowance
43. Relocation: Wolters Kluwer 95 SAWYER ROAD - WALTHAM Current Size: 78,000 SF Desired Size: 120,000 SF 3 RELOCATION GOALS: Proximity to Current Location Expansion & Growth (8K/year) Well-Capitalized Landlord ~
44. Relocation: Wolters Kluwer 1265 Main, Waltham Bay Colony Corporate Center, Waltham 95 Sawyer Road, Waltham 230 CityPoint, Waltham 133 Boston Post Road, Weston Watermill Center (800 South St), Waltham
45. Relocation: Wolters Kluwer Leased SF: +/- 120,000 SF Lease Term: 12 years Effective Rent: $33.25/SF T.I. Allowance: $55.00/SF
46. Redevelopment: Marlborough Hills
47. RESIDENTIAL 25 acres - 350 apartments Sold for $14.8 M (Avalon) OFFICE / R&D 750,000 SF (2 buildings) 200,000 SF leased to Quest Redevelopment: Marlborough Hills RETAIL 50,000 – 70,000 SF (Restaurants, Shops, Small Grocer) HOSPITALITY 3 acres - 150 hotel rooms $17,000/key – Probable sale to Hilton
48. Redevelopment: Marlborough Hills Somerville Cambridge Weymouth Burlington Lynnfield Quincy
49. Linking the 3 R’s Renewal Relocation Redevelopment
50. Investment Market
51. Total Sale Volume by Sector $1.9B $2.9B $5.2B $4.5B Billions
52. The Blackstone Effect Billions 37% 30%
53. CBD Office Buyers by Sector REITs Private Foreign Fund Managers $1.9B 2013 Users Foreign REITs Fund Managers Private Capital $1.6B 2012
54. NCREIF 2013 Annual Returns 0% 2% 4% 6% 8% 10% 12% 14% All Property Types Apartments Retail Office Industrial Income Appreciation
55. Institutions Embrace Class B Property Price SF Buyer Center Plaza $420 SF Shorenstein One Washington $401 SF Georgetown 51 Sleeper St. $399 SF TIAA-CREF 1 Liberty Square $389 SF Clarion
56. Suburban Office 2012 2013 CBD Office 2012 2013 Accelerating Pricing $350 6.0% $379 Average Cap Rate 5.5% Average Price Per SF $168 7.8% $179 Average Cap Rate 7.0% Average Price Per SF
57. Users REITs Fund Managers Private Capital $1.1B 2012 Suburban Office Buyers by Sector User REITs Fund Managers Private Capital $2.6B 2013 Foreign
58. The Burlington Phenomenon 3.5M SF traded ($860M) 63% of Class A Market Burlington Centre 5 & 15 Wayside Road 5 Burlington Woods 25 Mall Road New England Executive Park 1 and 3 Burlington Woods 77 South Bedford
59. Cambridge Spotlight $133M $306 $342M Average Price SF Office Lab/Office $658 Total Volume 5.7% 6.0% Average Cap Rate
60. Legacy Buying in Harvard Square 18-28 JFK Street $1,100 SF 48 JFK Street $700 SF 115 Mt. Auburn Street $700 SF 39 JFK Street $1,300 SF 89 Winthrop Street $937 SF
61. Boston Core Cap Rates By Property Type 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Apartments Grocery Retail CBD Office Warehouse Suburban Office Flex 12 Months Ago Current Current vs. 12 Months Ago
62. Core Cap Rates Vs. Debt 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% '06 '07 '08 '09 '10 '11 '12 '13 Average Cap Rates 10-Year Treasuries Average Mortgage Coupons 232 bps 450 bps 313 bps Year End
63. Conclusion › Pricing near 2007 peak levels in core submarkets › Abundance of capital for all property types › But remaining gulf between core and non-core submarkets › Impact of rising interest rates on pricing › Banking on strengthening fundamentals
64. Capital Markets
66. 179 Campanelli Parkway Stoughton, MA
67. Ink Block, South End Boston, MA Phase 1: 312 Units/65,000 SF retail
68. New Balance World Headquarters Boston Landing, Brighton, MA
69. Valley Research Center, San Jose, CA
70. AmCap Denver King Soopers Portfolio Denver, CO Metropolitan Area
71. Forest Pointe Apartments - 272 Units Coconut Creek, FL
72. Panther Properties Apartment Portfolio 908 Units - AL, GA, TN
73. Effingham Parc Apartments [352 Units] Rincon, GA
74. 242 Trumbull Street, Hartford, CT
75. 253 Summer Street Innovation District, Boston, MA
76. 50 Federal Street Boston, MA
77. 300 Crown Colony Drive, Quincy, MA
78. 325 Corporate Drive, Portsmouth, NH
79. Broadway Plaza, Malden, MA
80. Comfort Inn & Suites, Logan Airport Revere, MA
81. 100 Arboretum Drive Pease Tradeport, Newington, NH
82. 200 Forest Street, Marlborough, MA
83. Innovation Center of Vermont South End Arts District, Burlington, VT
84. The Lenox Hotel Exeter Street, Back Bay, Boston, MA
85. Moody & Main on the Common Moody Street, Waltham, MA
86. Olmstead Place - 196 Units Jamaica Plain, Boston, MA
87. Commerce Way Portfolio Portsmouth Office Park, Portsmouth, NH
88. Rockdale Plaza, New Bedford, MA
89. Townline Plaza, Medford, MA
90. 60 & 70 Codman Hill Road Boxborough, MA
91. Copaco Center, Bloomfield, CT
92. Best Western Plus, Hotel Tria Cambridge, MA
93. 5 Omni Way, Chelmsford, MA
94. Retail Market
95. The 3 F’s FOOD FITNESS FARMACIES
96. The 3 F’s – Food FOOD
97. The 3 F’s – Fitness FITNESS
98. The 3 F’s – Fitness
99. The 3 F’s FARMACIES
100. Westwood Waltham Burlington Lynnfield Game Changing Developments Beverly
101. Downtown Crossing Game Changing Developments Assembly Row Chestnut Hill North Station
102. Downtown Crossing Westwood Waltham Burlington Lynnfield Game Changing Developments Assembly Row Beverly Chestnut Hill North Station
103. Trends – Live, Work, Play City Point, Waltham New England Executive Park Andover Square
104. Trends – Medical Retailers
105. Harvard Square – 31 Years Boston – 15 Years Boston – 50 Years Charlestown – 20 Years Trends – Out with the old… Saugus – 50 Years
106. Trends – 10,000 new seats
107. Trends – Technology
108. Trends – Technology