Dive Brief:
- Boston's commercial real estate market is getting ready to explode, according to The Wall Street Journal.
- The city has 14 million square feet of property under development in addition to the 40 million square feet of projects permitted and preparing to break ground. Approximately 20% of total new square footage is for office space, and 80% represents new condominium and apartment buildings.
- The pace of development, however, has sparked concern that developers are creating a glut of luxury housing and office space — a market that saw a slight increase in first-quarter 2017 vacancy rates.
Dive Insight:
In February, the Federal Reserve expressed concern that overbuilding in the luxury high-rise condo market was creating a bubble and cautioned lenders to be vigilant in their loan requirements for such projects. It pointed to New York City as an example, as rental rates for similar units there had begun to fall.
The swing toward pricey developments has also concerned affordable housing advocates in Boston who say that the city lacks options for middle- and low-income residents.
Contributing to the boost in construction activity in the area is the relocation of General Electric from Fairfield, CT, to Boston. The company broke ground on its new $200 million, 390,000-square-foot headquarters this week. The complex will feature three buildings, two of which will be existing renovated brick buildings, connected to a new 12-story tower. Work is already underway on the renovations. The company's new offices were designed by Gensler, and Suffolk Construction is the general contractor.
Like many other major metros, Boston is a draw for those looking for a more modern, urban, walkable lifestyle. This environment is a millennial favorite, and that demographic is a target for companies looking to tap into a skilled labor force.
Chicago is a prominent example of that trend. Caterpillar announced its move to the Windy City earlier this year, just one of several major companies that have relocated to Chicago area in the hopes of attracting talented new employees. Unlike Boston, however, Chicago offers a relatively lower cost of living, which is attractive to both businesses and employees to make the city their home.
