Last Developable Back Bay Parcel Purchased by Skanska for $177 Million
A multinational construction giant has purchased what is believed to be the last remaining developable parcel in Boston’s tony Back Bay neighborhood. On December 4, 2020, Skanska, the Swedish development company, announced its acquisition of the parcel at 380 Stuart Street in Back Bay for $177 million. The firm also announced that it intends to develop a 27-story office tower on the site – despite ongoing issues regarding office space in the city due to the COVID-19 pandemic.
This isn’t the first proposal for the parcel in question, which includes a vacant 144,000-square-foot building and is located just a few blocks from Newbury Street. In 2015, the Boston Planning and Development Authority approved plans filed by John Hancock Life Insurance Co. to develop a curved, 26-story high-rise office building on the site. However, the $350-million project never saw the light of day, so the parcel remains empty and ready for development. In 2019, John Hancock Life Insurance Co. stated that permits for the building originally planned for the site were being included with the sale.
The new building will be just a stone’s throw away from the neighborhood’s best-known skyscraper, the 62-story John Hancock building. The developer has stated that the building will consist mostly of modern, flexible office space. A below-ground parking garage is also included in the plans, and ground-floor retail space will be included as well. The developer is also seeking LEED Platinum certification, meaning that the building is expected to be designed to save as much energy as possible.
Renderings of the new proposed building are not available yet, so it is unclear whether it will also have a curved design like the originally planned building. However, it is clear that the developer is not overly concerned about the current state of Boston’s office space market, which has been hit hard by the pandemic.
Indeed, downtown Boston offices currently have a daily occupancy of just 8% to 12%. Asking rents have also been declining across downtown; most recently, they stood at $68.73 per square foot. Rents are expected to start rising – albeit slowly – starting around 2023. Complete recovery may not happen until sometime in 2024. Still, most believe that a full recovery is ultimately possible – and in that case, more office space in the Back Bay makes sense.
Since plans for the new building at 380 Stuart Street are only in the earliest stages, no timeline has been released regarding when construction will begin and when it is expected to be finished. With many companies delaying return dates until mid-to-late 2021, it is certain to be some time before strong demand builds up again. However, the new building's construction is sure to take at least a few years; by then, the city’s office space market is apt to be in good shape again.
The new building will sit on a parcel measuring around 3,000 square feet. All told, it will offer around 625,000 square feet of office space. Since February, office-using employment in Boston has dropped by about 5%, or approximately 36,800 jobs. Currently, around 5.1 million square feet of office space is being developed across the city, with around 4 million square feet expected to be delivered between 2021 and 2023. Therefore, the new Back Bay building will be in good company. Of course, the question is whether or not demand will be there to fill it when it opens.