Consolidation of ownershp leads to rent growth.
Suburban owners have acquired a “monopoly” in certain suburban micro-markets. They are gaining larger market share. With that comes greater control over space availability, and the ability to drive rents.
Jones Lang LaSalle’s sustainability team published a new white paper focused on why business leaders should consider green leases. The benefits are substantial and offer both quantitative and qualitative perks.
Following are a few of the benefits:
◦Achieve cost savings from reduced utility consumption and waste-stream diversions. As detailed in the report, JLL clients have identified short-term utility spend savings of 3-13% from easy-to-implement, sustainable measures simply built into their leases.
◦Keep employees happier, healthier and more productive. According to a 2009 CoStar study highlighted in the green lease report, workers in environmentally friendly buildings are, on average, 5% more productive and take 3% fewer sick days than others.
◦Enjoy smarter profits. Ray Anderson, a consultant and pioneer of sustainable enterprise, argues that, “sustainability is a better way to a bigger and more legitimate profit” (source). This concept is further legitimized in Anderson’s book, Confessions of a Radical Industrialist, as well as economic strategist Umair Haque’s The New Capitalist Manifesto.
◦Enhance your corporate image—within your industry, your neighborhood and your own walls. Going green isn’t just the smart thing to do; it’s the right thing to do. Buildings account for 30% of all greenhouse gas emissions, according to the U.S. Environmental Protection agency.
JLL was recently recognized with the 2013 Energy Star Partner of the Year – Sustained Excellence Award for the firm’s “continued leadership in protecting the environment through energy efficiency.”
Photo of LEED Certified 99 High Boston
On Thursday May 30th, Jones Lang LaSalle hosted clients for an evening of cocktails and networking overlooking Boston Harbor at Sam’s, located on the second floor of Louis Boston located on Fan Pier in Boston’s Seaport District. Thank you to all of you who joined us for our casual summer evening reception. Click here to view additional event photos.
From Bob Best
Executive Vice President
Jones Lang LaSalle
Every time we have a devastating weather event, like the tornado in Moore, OK, I wonder if climate change is starting to hit closer to home.
I am not the only one.
According to a story in Popular Science (Shaunacy Ferro – 5/22/13), scientists are trying to make the connection between climate change and increased tornado activity.
It’s not at all obvious. In fact, the theories cover all sides of the issue. One scientist says that a warming atmosphere leads to more storms of greater intensity. Another says warming will actually decrease tornadoes. 2011 was the second deadliest tornado season for the U.S., but then 2012 was one of the mildest.
The bottom line is that tornadoes are incredibly unpredictable, and the models are not yet sophisticated enough to make the link between climate change and more or fewer tornadoes.
After every severe weather event, people blame climate change. The fact is no one really knows.
-Bob
Technology has catapulted the evolution of retail. Gen X, Y and the Millenials are changing the way goods are consumed. Here our retail experts highlight 10 key trends sure to change the course of retail.
According to JLL President Greg Maloney: “For the retail industry to succeed, a multi-channel strategy will need to be adopted to meet the ever-changing needs of consumers.”
Click here to read more on our retail web page Retailers Meeting the Needs of the “Me” Generation
High tech companies represent 18 percent of the current tenants in Greater Boston. This is 62 percent more than the second largest sector which is life sciences..
59 percent of tenants in the market are looking to maintain their current size. 34 percent are looking to expand, and 7 percent aim to downsize.
For high tech companies, 40 percent are seeking to expand and 54 percent want to maintain their present size.
The majority of tenants in the market, 67 percent, have a requirement of less than 15,000 sf.
This large demand from high tech and life science companies speaks to Boston’s ability to reinvent itself in the wake of the latest recession.
From Michael Coyne
Senior Vice President
Jones Lang LaSalle
Urban areas have been the overwhelming focus of developers over the last twelve months. New luxury apartment towers are now sprouting up throughout the city.. Approximately 7,800 units of urban, institutional quality rental housing will be delivered through 2016. This wave of development is not an overzealous rebound. It is a long overdue transformation of Downtown Boston’s rental housing, which is supported by exceptional demographics and the well-documented trend of urbanization.
Our outer urban ring represents approximately 4,000 units of new development, just under half of which is located in Cambridge. Proximity to the city and convenient access to the subway gives these properties the ability to lease at a small discount to urban rents, but with a more suburban construction cost structure (generally wood-frame with a lack of structured parking).
Only two deals in our urban pipeline are stick-built. The rest are steel or concrete due to their high-rise construction. Outer urban is the complete opposite, with only three deals requiring steel or concrete construction. Recently delivered high end properties, such as Maxwell’s Green in Somerville (developed by Gate Residential), are now achieving rents north of $3.00 psf.
In response to the lack of suburban deliveries over the past four years, we have seen the suburban pipeline grow to almost 3,000 units, most of which are currently under construction. Much of this suburban development is inside or along Route 128/95, with the majority located north of Boston between the spokes of Route 2 and Route 1. This reflects the attractiveness of the corridor and the difficulty permitting sites elsewhere in the suburbs.
There are few suburban submarkets that face potential oversupply. Many towns have reached their required 10% affordability under 40B, limiting the pipeline in desirable suburbs such as Bedford, Burlington, Lexington and Lynnfield. In response, interest from institutional equity sources is growing for the right suburban project.
Boston is not overbuilt. Demographics are in our favor like never before, and make-up of the development pipeline fits very well with the urbanization trend. There isn’t enough quality multifamily product to meet the pent up demand of renters or investors, and capital allocations are driving more and more institutional equity into the top few real estate markets. Our unrivalled educational institutions will continue to attract the top intellectual capital in the world. Now we finally have the modern housing and 24-hour lifestyle necessary to retain our graduates for the long run.
We feel strongly that Boston area multifamily will continue to thrive.
-Michael
Residential sales prices along public transportation routes of subway, commuter and bus, grew 128% more than prices in Greater Boston as a whole between 2006-2011.
Residential includes homes, multi family and condominiums.
Owning a house along subway or bus routes pays dividends. Prices grew 226% and 125% more respectively than the region as a whole.
From Michael Coyne
Senior Vice President
Jones Lang LaSalle
Recent sales of newer core assets have shown cap rates in the low 4.0% range as investors compete intensely for quality properties. This represents close to a 100 basis point drop since the last peak in 2007. If a new, core asset in a prime suburban location came to market today, we would expect it to sell at a cap rate below 4.0% based on a trended year one proforma. This extremely low cap rate environment coupled with the strong demand outlook will result in record-setting pricing.
Don’t be surprised to see prime suburban deals fetching well over $400,000 per unit during 2013.The last wave of multifamily development in eastern Massachusetts occurred primarily in the suburban ring along Route 128 as developers took advantage of Chapter 40B. Close to 22,000 units were built from 2004-2008, nearly 70% in the suburbs. This time is different, as only 20% of our current pipeline is Suburban.
Due to the imbalance of institutional demand and available product for sale, investors have introduced a “build-to-core” strategy. They simply cannot buy enough core product, so they build it instead. This increased demand coupled with a lack of existing product for sale has sparked a new development wave that started downtown and is expanding into the suburban markets.
This is a distinct shift from the last development wave, which was largely funded by shorter term, build-and-sell capital sources. These investors demanded higher returns and had a more difficult time withstanding short-term ups and downs in a very stable long-term market.
We have been closely tracking development trends, and divide the Greater Boston markets into three categories:
• Urban – including Downtown, Back Bay, North Station, Seaport, and Fenway
• Outer Urban – defined by drawing a ring connecting the ends of the MBTA’s subways lines (not the commuter rail) and including close-in towns like Cambridge, Somerville, Medford and Quincy
• Suburban – covering anything further out from the city, generally ending at the towns on and around Route 495
The last wave of multifamily development in eastern Massachusetts occurred primarily in the suburban ring along Route 128 as developers took advantage of Chapter 40B. Close to 22,000 units were built from 2004-2008, nearly 70% in the suburbs. This time is different, as only 20% of our current pipeline is Suburban.
-Michael
From Dan Probst
Jones Lang LaSalle
Chairman Energy and Sustainability Services
I just had the pleasure of serving on a panel at GreenBiz Media’s VERGE Boston conference, which focused on the convergence of buildings, technology and transportation. The panel, called “The Trillion-Dollar M2M Opportunity,” was about the dramatic impact of machine-to-machine (M2M) technology on four industry segments: energy, transportation, the built environment and agriculture.
M2M technology, also known as the “industrial internet” or the “Internet of Things,” is the term used to describe the application of information and communication technology to improve and automate almost any business process. In the built environment or real estate world, this technology is enabling us to pull data out of building automation systems. It allows us to run real time analytics to fine tune the performance of all building systems and equipment and significantly energy consumption.
The analytics also enable us to tell when the performance of equipment is beginning to degrade, and to correct small defects before a failure occurs. The Jones Lang LaSalle service that utilizes this technology is known as IntelliCommand. As discussed in the panel discussion, IntelliCommand consistently delivers 10% to 25% energy savings while improving operational performance for our clients.
On a related note, The Carbon War Room recently released a white paper that further describes the exciting possibilities across all four industry segments, and describes the M2M industry as a potential trillion dollar industry. If you think that the internet changed the way we do business, the industrial internet is going to have an even more dramatic effect.
-Dan
