Community Real Estate

MassDOT Advisory Committee Leaning Toward 2-Story Market Hall for Parcel 9

Parcel9FinancableSlideThe third meeting of the MassDOT Parcel 7 & 9 Advisory Committee might have been the turning point for the direction of these developments located near Haymarket and the Greenway. Many on the committee want to see a 2-story “market hall” concept advanced rather than a 5+ story structure.

Such “low-rise” assertions were made despite MassDOT’s consultants indicating that a one or two story buidling is not economically feasible. Continuing his presentation from the second meeting, GLC Consultant Drew Leff, took the advisory committee through the challenges of developing the two parcels. Parcel 7 is a shell building with a parking garage currently operated by MassDOT. Parcel 9 is an empty parcel with a triangular shape.

Click here to view the slides presented at the meeting (pdf).

Office Building Economics

Draft spreadsheets included in the slides showed that an office building would have “negative” economics given today’s rental rates. A representative from The Gutierrez Company disputed that assertion based on their previously proposed office building project. Still, there was general consensus that with an 11.4% vacancy rate in Boston office space, the economics are challenged. Interestingly, there are some signs of “net absorption” with vacancy on the decline. Recent rents on nearby Merrimac St. have fetched around $35 per square foot which is an improvement. Consultant Drew Leff stated, “It will be very difficult to develop this as office space anytime soon.”

Multi-family Housing Economics

The condominium market remains weak but the rental market is alive and well as indicated by projects such as the Archstone Avenir in the West End. The activity of Haymarket makes housing a problematic issue, but probably more so for condos than for rentals. Rental vacancy in Boston is less than 5%, down from nearly 10% in last year.

Hotel Economics

Hotels are showing signs of recovery. Parcel 9 is not large enough for a conference hotel, but something like a Residence Inn might work. The space would allow for about 160 rooms using a 55’ height limit.

Civic/Cultural Uses

The annual revenue from a cultural institution, such as a museum, would be generally insufficient to support operations. Previous proposals required grants and fundraising. A leadership gift would be key to getting such a project off the ground.

Financial Feasibility

In a somewhat pessimistic review, the GLC consultants reviewed spreadsheets (see the slides) that showed little to no “residual value” to the property owner, MassDOT. This means to achieve an assumed 11% return on the project, a developer would pay less than $1 million to acquire the property.

Parking Garage

Until now, it has been assumed that Parcel 7 parking operations would continue to be operated by MassDOT. Some committee members asked whether this revenue stream could be used to entice developers. It was noted that there are existing commitments (i.e., discounted parking) as part of the parking garage operation.

Local Public Market

Committee members continued to express concern as to whether there is demand for a local public market of cheeses, produces, breads, etc. Parcel 9’s market is expected to be an extension of Haymarket while Parcel 7 would be a Massachusetts products market, supported by the Dept. of Agriculture.

Low-Rise Scenario

MassDOT’s consultants believe that a one or two story development RFP would not attract any bidders. Using today’s retail rents, the consultants believe that a developer would lose $3.1 million in developing develop a single-story building. The revenue from the structure will not payback the development cost. They claim that the project needs to get into the 4 or 5 story range before the numbers start to work.

Dan Nuzzo asked, “Should we consider a 2 story building on Parcel 9, adding in the ground floor of Parcel 7, plus the garage revenue stream? If we incentivize developers with added benefits, could they make money with a smaller structure?”

The representative for Faneuil Hll merchants said, “If we build only a 2-story building, it would leave the Greenway beautiful and appease the concerns of the North End neighbors.”

Committee member Tad Stahl said, “We have a public purpose here. The desire for a public marketplace is known. We don’t have an office user that would bring substance and value to this location. Low-rise market halls have worked well in other cities. It is a seductive concept.”

NEWRA Vice-President, Victor Brogna, said “I support a low-rise marketplace too. My direction comes from ascetics. I like to look at the Blackstone St. and Haymarket across the Greenway. We think about the street pattern of 200 years ago and it brings us pleasure.”

Reading an excerpt from the Boston 2000 Plan, Mr. Brogna makes the case for reconnecting the Blackstone Block to the North End. According to the DOT document, “Parcels 8, 9 and 10 form a critical link between the North End and the Blackstone Block, and reestblish a street and block pattern that was broken by construction of the elevated Central Artery. The design of these parcels should place landscaping materials and any structures in a way that maintains and enhances views between the Blackstone Block and the North End along Hanover, Salem and North streets, and encourages pedestrian safety.”

Bob O’Brien from the Downtown North Association added, “This is a public property. Does the State have any interest in occupying office space in Parcel 7 to reduce the uncertainty? The adjacent hotel also might have an interest in the adjacent property.”

Developer Phil DeNormandie made the final comment. “Numbers are numbers and you can play with them to work or not. GLC’s numbers seem to say that Parcel 9 has no value to MassDOT and they should accept that.”

The next meeting of the advisory committee will be held on November 17th at the Mariner’s House (11 North Square) at 6:00 pm. The Commissioner of Agriculture is expected to attend to talk about the local public market to be located on the ground floor of Parcel 7.

Related posts:

Trying Again on Parcel 7 & 9; RFP Guidelines Meeting #2