|National Development Managing Partner Ted Tye with New England Women in Real Estate President Claudia Piper (center) and Sue Hawkes, President and CEO of The Collaborative Cos.|
BY MIKE HOBAN BOSTON — A few short years ago, with the economy just coming out of the recession, the thought of developers building condos in Boston would have seemed almost unfathomable. But with urban living being embraced by empty nesters and young professionals alike, the market for condominiums in the urban core is booming as never before, especially at the luxury level. This past week at the Intercontinental Hotel on Boston’s waterfront, New England Women in Real Estate presented a program on the surge featuring The Collaborative Cos. and National Development Managing Partner Ted Tye, whose firm is developing Sepia at Ink Block, the city’s first new major out-of-theground condominium project in this current real estate cycle.
Hawkes began the program with a market overview, detailing for the estimated 250 attendees just how Boston condo pricing has exploded in 2014, particularly over the last few months. Current listing prices for condominiums in Boston’s top 13 neighborhoods (Back Bay, Midtown, Beacon Hill, Waterfront, South End, Financial District, North End, Fenway, Seaport, Leather, Charlestown, West End, and South Boston) have climbed a stunning $145 per sf over sales already closed in 2014, with the Back Bay topping $1,250 psf. Midtown (just above) and the Waterfront (just below) are hovering around the $1,050 psf mark, while Beacon Hill is just under $900 psf. Since 2011, year-over-year psf pricing has steadily increased by $23 in 2012, $75 in 2013 and $59 in 2014 to today’s eye-popping numbers.
Hawkes said that there are a couple of significant trends emerging: high-end units are getting bigger and the buyer profile driving that development is changing. “The majority of the people that are
spending over $1,000 per square foot are the empty nesters,” explains Hawkes. “They’ve been very happy that they’ve been able to sell their homes in the last two to three years and (can afford the units).” The other key demographic for the high-end units are foreign buyers. As a result of this constituency’s demand, there were nearly 200 more $1 million or above condo sales in Boston in 2013 (675) than 2012 (481).
But what people are not doing these days, Hawkes quantifies, is paying for inefficient space, with buyers less willing to pay for an 1,100-sf one-bedroom unit. “If they’re paying for 1,100 square feet, they want usable space. So they’ll pay more money for an 1,100-sf two-bedroom or for a (one-bedroom), one den, one-and-a-half bath, because they want usable square footage. It’s too valuable to waste on a lot of open space that just becomes transfer space,” she observes.
The other element buyers are demanding is an enhanced onsite amenity package, with club lounges, fitness centers, private dining and conference rooms and outdoor decks and terraces. There is also an expectation buildings include concierge, valet and personal shopper services as well as dog walking and grocery delivery. “It’s not just about price and the common areas, it’s about the service, and I think you’ll see that with the (product) coming online now,” Hawkes predicts.
Amenities are considered a factor in National’s pre-sale success of Sepia, the 83-unit condominium complex currently under construction as part of its six building, mixed-use Ink Block development being constructed at the former Boston Herald headquarters. The building was 50 percent pre-sold by the groundbreaking in July and an additional 15 units have been purchased in the past 90 days. “The commercial (space) is your best amenity,” said Tye of the Ink Block development’s synergistic
relationship with the Sepia condominiums. “In fact, we couldn’t build the residential without the commercial here because it’s the retail that creates all the energy on the street. The fact that we provide retail and restaurants and service on the first floor that has lights on 18 hours a day gives a feeling of vibrancy.” Tye adds that in order to get the right mix of retail to suit the South End ambience that the project is aiming for, “we’re making very aggressive deals to get the right tenants in there—not just the national tenants with credit that can pay a lot more money.”
Tye also stresses the important role timing has played in the robust reaction to Sepia. “Condos typically have a very short market window, and you’ve got to hit it at the right time,” Tye relays, adding that the development process is much longer, riskier and costlier than that of apartments. Recognizing that, National set up a pre-sale office “six or seven months” before groundbreaking and embarked on an aggressive billboard and social media campaign that featured an edgy hip-hop video (which Tye included in his presentation) to successfully spur sales.
Following the event, NEWiRE president Claudia Piper told The Real Reporter she was impressed with Hawkes’ detailed presentation, particularly concerning changing metrics on the size of the one-bedroom units. “It is probably true in the rental market as well, that people don’t want to pay for inefficient space, and that’s certainly a change from the past,” Piper says. “To me, that was fascinating because as lenders (Piper is a Senior VP with Webster Bank’s CRE division) we’re always so focused on dollars per square foot, but the reality is that when you tour a unit, I personally think of wanting space, but it sounds like renters and buyers aren’t going to pay for space unless it’s space they can really use.”