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Old 05-13-2019, 07:07 AM   #61
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Re: MXD II | 325 Main St. | Kendall Square

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The tenant profile in Kendall is significantly different and weaker than Manhattan. Mostly tech and biotech. Not much in terms of legal, finance, consulting, or advertising agencies. Those companies can pass on the costs of their location to the clients. Biotech prefers building their own stuff, and we have no tech companies with the size of say SalesForce in Boston.
And as has been explained before, lab space and tall buildings do not mix well. The higher one goes, the more that space on upper floors is consumed by exhaust vents.

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Old 05-13-2019, 07:42 AM   #62
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Re: MXD II | 325 Main St. | Kendall Square

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Tech companies spend silly on space because they're using venture capital. I don't think that's all that different than passing costs to clients.
VC funded software companies that have product market fit and revenue tend to spend crazy on space because they're trying to scale their business and you end up needing to be in crazy premium spots to do that due to the demands for tech, business and administrative talent. There are very specific goals and timeframe with VC money and while it seems like reckless spending if you're on the outside looking in, from the inside it's fairly justifiable. But, not all companies are swimming in VC money tho and in general, as someone in this industry, Boston entrepreneurs are a lot less flashy and spendy than their NYC and SF counterparts.

Boston has four major locally grown (modern) software companies that come to mind: Wayfair, HubSpot, CarGurus, and Akamai. None of those have the need for major tower offices. CarGurus and Wayfair are probably the best candidates to lease in one though as they're spread out among a few buildings now.

Then you have the satellite offices of MS, Google and Amazon... those companies don't have any interest in skyscrapers. But if they wanted them they could have them a mile away in downtown Boston. And no, I don't think locality to MIT matters that much for software companies so why they're all clustered still in Kendall is a mystery to me. I can totally understand it for biotech, materials engineering, and other stuff but not for software engineering. I wouldn't be shocked if in 20 years those companies have their major offices in DTX instead of Kendall because biotech is going to continue to eat Kendall's commercial real estate.

After that theres a ton of smaller players, but none of them are remotely close to needing tower buildouts or beimg willing to pay the rents on office space 500ft above street level.
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Old 05-13-2019, 07:51 AM   #63
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Re: MXD II | 325 Main St. | Kendall Square

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Boston has four major locally grown (modern) software companies that come to mind: Wayfair, HubSpot, CarGurus, and Akamai. None of those have the need for major tower offices. CarGurus and Wayfair are probably the best candidates to lease in one though as they're spread out among a few buildings now.
I don't disagree with this argument. I'd question, though, whether there are that many companies period that have namesake tower HQs at this point. Salesforce is making a habit of it (and has claimed SST as Salesforce Tower Boston), but NYC's new 1,000-footers are mostly condos. Whales seem to like to play with their leases now and bounce around cities rather than building monuments to themselves.

Wayfair is a perfect example of that in Boston, though Akamai just had a bespoke tower constructed for it in Kendall.

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Then you have the satellite offices of MS, Google and Amazon... those companies don't have any interest in skyscrapers. But if they wanted them they could have them a mile away in downtown Boston. And no, I don't think locality to MIT matters that much for software companies so why they're all clustered still in Kendall is a mystery to me. I can totally understand it for biotech, materials engineering, and other stuff but not for software engineering. I wouldn't be shocked if in 20 years those companies have their major offices in DTX instead of Kendall because biotech is going to continue to eat Kendall's commercial real estate.
MS, Google, and Amazon aren't software companies in Kendall, they're AI companies. That's why they want to be near MIT.
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Old 05-13-2019, 09:42 AM   #64
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Re: MXD II | 325 Main St. | Kendall Square

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...Boston has four major locally grown (modern) software companies that come to mind: Wayfair, HubSpot, CarGurus, and Akamai. None of those have the need for major tower offices. CarGurus and Wayfair are probably the best candidates to lease in one though as they're spread out among a few buildings now.
I agree with much of your post. But I don't think it's quite fair to say there are only 4 locally grown sizable ("modern") software companies; I would at least add:
- TripAdvisor (they do the suburbs/city split, have ~3,000 people)
- LogMeIn (technically founded in Budapest, but now HQ'd in Boston, ~2,750 people)
- Carbonite, ~1,000 employees

...and there are many others founded probably too many years ago to fit the "modern" category and/or largely operate in Bos suburbs (e.g., PTC ~6,000 ppl, MathWorks ~3,000ppl, Kronos ~5,500ppl).

Your point that there are probably few/any who need a large tower stands, though we've been surprised before by consolidation or move-in-from-the-suburbs initiatives. None, though, seem to point toward a tall tower...and not in Kendall.

More likely: as far as SW co's in large towers, we'll see companies like Salesforce open substantive outposts downtown/South station/etc.

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MS, Google, and Amazon aren't software companies in Kendall, they're AI companies. That's why they want to be near MIT.
^ I agree with this
Companies go through the expense of locating in Kendall if they have a cutting edge tech or niche reason to be there. Most SW co's don't specifically need MIT coders. Select efforts, however, do perceive the need and go through immense expense to position/recruit/brand/etc with these graduates in mind.

Back to the point though: even these types of efforts are relatively contained to a few hundred or thousand employees. To the extent they can be housed in a < 20 story building, they will.

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Old 05-13-2019, 11:35 AM   #65
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Re: MXD II | 325 Main St. | Kendall Square

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Back to the point though: even these types of efforts are relatively contained to a few hundred or thousand employees. To the extent they can be housed in a < 20 story building, they will.
Why do so many of these posts insinuate that you need a single tenant to fill the building?

If you can house the tenant in a 20 storey building, then build a 30 storey building to lease the remaining 40% office space, and provide ground level retail.

My understanding in general is that the big fish is often necessary to get the ball moving or to get financing, and this is normally targeted at 60% of the building (when financing is the key, and less when the developer is stronger or more likely to build on spec). That also seems to be the round number needed if you want to have your brand on the building for ego companies.

Single tenant building should be those built by the tenant (don't really see this much anymore besides Liberty Mutual). Developers in general are designing their core/shell buildings with the ability to house multiple tenants, while hoping for the one big fish to fill it.
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Old 05-13-2019, 11:45 AM   #66
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Re: MXD II | 325 Main St. | Kendall Square

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Why do so many of these posts insinuate that you need a single tenant to fill the building?

If you can house the tenant in a 20 storey building, then build a 30 storey building to lease the remaining 40% office space, and provide ground level retail.

My understanding in general is that the big fish is often necessary to get the ball moving or to get financing, and this is normally targeted at 60% of the building (when financing is the key, and less when the developer is stronger or more likely to build on spec). That also seems to be the round number needed if you want to have your brand on the building for ego companies.

Single tenant building should be those built by the tenant (don't really see this much anymore besides Liberty Mutual). Developers in general are designing their core/shell buildings with the ability to house multiple tenants, while hoping for the one big fish to fill it.
I think your post helps answer its own question, when considered in conjunction with the comments above...

Kendall attracts niche/specialty tenants who don't need 60% of a 40+ story building, even though there's high demand, in aggregate, for Kendall. Therefore there haven't been the type of anchor tenants needed to get one of these projects started.

Don't get me wrong: I believe the space-crunched area would benefit from taller office/lab buildings.
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Old 05-13-2019, 11:55 AM   #67
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Re: MXD II | 325 Main St. | Kendall Square

To the point of scaling mentioned earlier, this is true, but not that cut and dry.

While yes, scaling labs gets expensive quick, scaling office space, not as much.
There are ranges where costs gets more expensive once you cross a certain level, but then the cost for the next 10-20 floors isn't that great. (These are just round numbers for conversation, the real break points would be different.)

Once you need a fire pump/booster pump, the initial cost is very similar. A 40 HP vs. a 100 HP pump set is incremental. The big cost is pump vs. no pump. If you're doing an AHU per floor, that cost is there regardless, and the difference is just a bit more for sheet metal, and HP differences to push more air. A cooling tower growing doesn't really add a lot of cost, or chillers growing similar, but adding one or two of each is the big cost driver.

This is where it gets painful when floors/SF are left off projects. The cost of building 8 floors instead of 12 floors is really the cost of construction per floor, not some exponential cost growth by going higher. But, the cost of leaving 80,000 sf of leasable space or 30 units of housing off a project are much greater to the area.
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Old 05-13-2019, 12:05 PM   #68
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Re: MXD II | 325 Main St. | Kendall Square

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I think your post helps answer its own question, when considered in conjunction with the comments above...

Kendall attracts niche/specialty tenants who don't need 60% of a 40+ story building, even though there's high demand, in aggregate, for Kendall. Therefore there haven't been the type of anchor tenants needed to get one of these projects started.

Don't get me wrong: I believe the space-crunched area would benefit from taller office/lab buildings.
On the other hand, one of my points was very valid for Kendall. Most the developers here are capable of getting financing/able to build with a much smaller first tenant. ARE, BioMed, MITIMCo, BP, etc. all have the capital to get out of the ground with less guaranteed up front leases (though they often choose not too despite all signs pointing to them filling the space easily).

Office space is hot here, and they are not building enough of it. Especially when each building could easily support 10-30% more leasable space, that will ultimately lead to bigger profits. I still feel a lot of this is tied to the previous construction bubble bursting, and folks being less willing to hedge their bets. But, at some point during this ridiculous hot streak, someone needs to be a little more bold.

1MP in the seaport was such a turd all by itself, but it sure did get the ball rolling out there.

I'm glad that this round of buildings is taller than the previous in Kendall, and BP is going bigger. But, they also just tore (or are about to tear) down existing space to build somewhat taller buildings. Not sure this is the method. Do we tear down again in 20 years and build slightly taller again when we run out of space? MITIMCo is going taller, and Divco is going taller. But, it's all filling as fast as it's built.
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Old 05-13-2019, 12:27 PM   #69
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Re: MXD II | 325 Main St. | Kendall Square

^ I agree with the additional nuance you point to here...

But there's more...

Tall projects would require substantial zoning variances here. So it's not just a question of whether BioMed, ARE, BP, etc, can deal with a much smaller anchor tenant. It's also a question of: are they confident the whole project would still work if the approvals take years. I agree with you that they're not being bold. But I can also see that Cambridge/Kendall presents it's own set of problems compared to other business hubs in other cities.

MITIMCO, I'll point out, is an exception that pursued and got a zoning variance for 500' for the Volpe site. For obvious reasons, MITIMCO is in Kendall for the loonnnngg game, though.
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Old 05-13-2019, 01:21 PM   #70
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Re: MXD II | 325 Main St. | Kendall Square

Fair points. Would that we didn't have to deal with antiquated zoning, but it is here and a real cost adder/hindrance.
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Old 05-13-2019, 03:25 PM   #71
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Re: MXD II | 325 Main St. | Kendall Square

This building will have a single tenant: Google.
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Old 05-13-2019, 06:03 PM   #72
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Re: MXD II | 325 Main St. | Kendall Square

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This building will have a single tenant: Google.
For now.
Is that necessarily a good thing?
If they can fill 300k SF with a single tenant, why not build 400k (if upzoning further were approved)?

Question is, are they building to the height of the Marriott because they can as of right, because the precedent was set and not worth fighting for more, or just cuz Google wants X more sf?

What is the real reason for leaving money on the table?

The two commercial MITIMCo buildings going up have multiple tenants in each. BP is growing in Kendall, but just to the limit of what the tenant will fill it seems.

Google sits right on the headhouse of the red line. Can't get much closer to mass transit. The demand is here. Build here.
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Old 05-13-2019, 08:11 PM   #73
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Re: MXD II | 325 Main St. | Kendall Square

Disagree with the point above about named towers.

Akamai long has had one in Cambridge and may get another building. Microsoft has had 2, now down to 1. LogMeIn has a largish building in the Seaport.
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