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Colliers: Prized Seaport Listing for Gillette Much Adieu About Nothing

November 09, 2017 — By Joe Clements
18 West Third Street, South Boston MA

BOSTON—Colliers International is launching an exclusive listing for a three-story flex/office building in the evolving Seaport District which Capital Markets principal Douglas Jacoby anticipates will foment “non-stop tours” from investors jockeying to buy the 33,500-sf structure and parking lot whose infill position is prime enough it is being branded to bidders as “The South Boston Gateway.”

“We do have that,” Jacoby concurs to Real Reporter regarding 18 West Third St. and the 32-space lot. Leading the team with colleague Scott Dragos, Jacoby adds, “We are putting it out right now, and are really excited . . . We think there are a range of possibilities on what you can do there and it really is the gateway to an incredibly dynamic part of the city.” Bidders will require upwards of $10 million to win the day should industry estimates prove correct. Declining to discuss pricing expectations, Jacoby does deem the effort “one of the best long-term plays” available in metropolitan Boston, something the firm has a specialty at pitching, as evidenced in their marketing the Boston Globe site for $82 million to Nordblom (pending) and the massive Boston Edison energy plant sale in another part of Southie where a multi-faceted mixed-use project is now underway.

What Colliers is not launching this time, Jacoby cautions, is anything which need stir economic fears among civic and city officials over 18 West Third St.’s well-known owner who is casting it aside—corporate anchor P&G-Gillette Corp. The consumer product giant’s 33-acre campus known as the South Boston Manufacturing Center includes the building vacant now after many years housing researchers for various company enterprises.

“We are selling a piece of surplus real estate for them . . . there is nothing more to it than that,” stresses Jacoby. “This is not the start of any major move of their (property holdings) at all . . . It’s a one-off (divestment) where they see a chance to take advantage of a hot real estate market with a building they no longer need.”

Marketing materials obtained by Real Reporter come minus mention of the client, a norm for such overviews, with Colliers instead putting the emphasis on just how rare it is to have a blank slate come available on such a well-located site. Framed by the South Boston Haul Road and A Street, both key connections between Broadway and Summer Street, Colliers points out that A Street is undergoing a boom of dining, entertainment, and retail construction that the owner of 18 West Third St. is expected to benefit from, whatever its outcome.

The property is so flexible, Jacoby explains “we have no idea which way it is going to go.” Efficient floor plates and expansive window lines make it “perfect” to resume its traditional role as a laboratory or office function, he says, and it that path is pursued, it would likely see interest from startups and firms relocating from downtown and Cambridge.

“You can do some really cool office concepts in there,” relays Jacoby, that and the laboratory options being presented by his group which includes Vice Presidents Anthony Hayes and Timothy Mulhall plus Associate Dan Hines. At 10.4 million sf, the Seaport office market shows a vacancy now below 9.2 percent which year-to-date has enjoyed 207,000 sf of positive net absorption, Colliers research shows, with current availability barely 700,000 sf.

Multifamily suitors will be guided by Colliers practice group leader Christopher J. Sower, Assistant VP Jennifer Price, Associate Jonathan Bryant and Client Services Coordinator Maggie Collins. Principal Peter Montesanto, a seasoned veteran of Boston’s urban retail brokerage sector, has been brought in to advise given 18 West Third St.’s location fronting A Street is in a part of the Seaport undergoing its own cluster of similar redevelopment projects, some office and laboratory but also a slew of residential endeavors whose sponsors are buoyed by demographics such as 7.3 percent population growth projected for the Seaport from 2015 to 2020 in a three-mile radius. A whopping 10.5 percent population growth is predicted within a one-mile radius.

Already thickly settled from Broadway on by the traditional South Boston community, the current three-mile radius has 385,000 people, and their financial details are intriguing with the average household income at $86,065 annually. Those in a one-mile radius are even higher at $106,674 annual average

Rental rates from buildings turned residential have been as high as $6,200 per month for a two-bedroom unit whereas new condominiums have brought average listing prices of two-bedroom formats of $1.08 million at one project and $1.29 million in another, while each of those restorations saw three-bedroom units trade at $1.59 million.

For access, South Boston Gateway is perched at an entrance to all major roadways, including Interstate 93, the Ted Williams Tunnel and Massachusetts Turnpike, and two blocks from a new 900-vehicle parking garage, that part of the State Street Bank headquarters which does offer public stalls. For those preferring mass transit, there are a plethora of bus lines feeding off the nearby Broadway MBTA Station that also features the Red Line—its node one removed from South Station and two stops from Downtown Crossing, then continues on to Kendall, Central and Harvard Squares in Cambridge.

Of course, with economic titans P&G-Gillette and State Street Bank in the neighborhood, the Seaport’s LWP acumen is a distinct advantage for denizens of a redeveloped 18 West Third St., Colliers also outlines. There is another $50 billion corporate citizen about to arrive about a five-minute walk away as well, that being General Electric Corp., and Amazon is leasing 150,000 sf right next door to that at 253 Summer St., that pact with Synergy Investments unveiled this summer by Real Reporter.

In that regard, Jacoby again notes the winning bidder could see office as a viable outcome, and given the Seaport does now boast one of New England’s highest rental rates—pegged by Perry Brokerage Associates research at $59.71 per sf—Jacoby observes “that could be the way it turns out.” Recently achieved office rents for the district include 10-year leases averaging $46.10 per sf, $47.90 per sf and $50.50 per sf, whereas shorter-term commitments have reached $48.92 per sf and $63.94 per sf. On the laboratory front, two 10-year leases signed are averaging $68.76 per sf in one instance and in the other, $71.09 per sf.

That is one reason Colliers does foresee a slew of prospects taking a gander. “Just about any way you go, it looks good over there,” he says. In-place zoning is not especially munificent for expansion, the allowable floor-area-ratio dynamic at 1.5 for both the 11,495-sf site on which 18 West Third St. sits and the 11,357-sf parking lot where one could by right construct 17,035 sf.

The silver lining would be in recent zoning relief given for nearby buildings whose projects were approved at heightened FAR levels of 5.9, 7.2 and 8.4, those generating permitted heights of 90, 142 and 114 feet. “There is a clear pattern there,” says Jacoby, one suggestive of a cooperative attitude among city officials and the parochial South Boston mainstays. “I think you would have a good case” to equal the in-place relief. Whatever the obstacles, Jacoby says Colliers is gearing up for a rush of business in the coming weeks. “We are banking on non-stop tours,” he says. “Everybody wants to be over there.”

Including P&G-Gillette, which features the South Boston Manufacturing Center in an ongoing series of promotions touting the hundreds of employees at the plant which has operated continuously since 1904. Over $200 million has been spent there this millennium on new equipment and facilities, further helping to salve any concerns of a departure. And should market estimates bear out, the 18 West Third St. sale will help recoup some of that investment.

Scott Dragos Doug Jacoby Anthony Hayes Daniel Hines Timothy Hall