The “new era” tech and creative companies—defined for our purposes as firms that have come online in the last 20 or so years, and have grown at substantial rates while subsequently expanding their office footprints—have affected arguably the two most significant components of the commercial real estate business today: the leasing of office space, and what that leased space looks like. Let’s look at the tech and creative companies that are overthrowing traditional drivers of leasing in the U.S., and how current workplace strategy trends—many of which are being driven by Tech/Creative—are influencing other sectors.
At Colliers, we’ve evaluated these trends through the lens of five key cities. If you guessed San Francisco, San Jose/Silicon Valley and Seattle, you obviously wouldn’t be wrong. But you might be surprised at just how much the new creative class has upended cities like Boston and New York, which have historically relied on more traditional industries as their office leasing stalwarts.
In Part Three of our series, we take a closer look at the Boston market.
Read the latest report on The Impact of “New Tech” Tenants on U.S. Office Leasing
With more tech companies than ever shipping up to Boston, Beantown has become highly sought-after by new-era tech firms, both for its “little big city” culture and charm, and for access to arguably some of the most extraordinary talent in the country. The rapidly growing marketing solution company Hubspot has its roots in Boston—recently renewing its lease in Cambridge for 118,561 square feet with an option to expand of 66,867 square feet. Constant Contact, which started in the greater Boston area in the mid-1990s and is now one of the largest email-marketing services companies in the world, was acquired for over $1 billion late last year. They occupy close to 140,000 square feet in Waltham. And online travel resource TripAdvisor—which reported nearly $1.5 billion in revenue in 2015—has its 280,000-square-foot headquarters in Needham, just outside of Boston. Adding to the list of market movers are ABILITY Network, Annkissam, aPriori Technologies, Curaspan Health Group, GuideSpark, Microdesk, Nanigans, Omtool and Rage Frameworks—all Colliers’ clients.
Tech companies drove much of the demand in the first quarter of this year, with several migrating from a very tight Cambridge market to the CBD, where tech start-ups represent an increasingly large segment of the market. WeWork (co-working provider and New-Tech-tenant magnet) inked the quarter’s third-largest deal, taking 113,000 square feet at 31 Saint James Avenue in the Back Bay submarket. EzeCastle Integration, a tech firm servicing the hedge-fund industry, just leased 125,000 square feet. Jana—a Boston-based tech company with the lofty goal of free internet for billions of users that made Deloitte’s Technology Fast 500 list—recently tripled the size of its headquarters when it moved to an 18,500-square-foot space at 101 Arch St. New-era tech is also responsible for some of the largest requirements in the market, with voice communication startup Fuze—hot on the heels of a $112 million cash infusion in February—looking for 130,000 square feet, and Rocket Software angling for 100,000 square feet in the 128 Mass Pike or 128 Northwest corridors. DigitasLBi, a marketing and technology agency formed in 2013, is in the market for 200,000 square feet, and New Tech titan, Akamai, is in the market for 600,000 SF.
On the heels of increased tech demand in the Boston CBD, landlords are increasingly adapting and renovating inventory to attract new-era companies, embracing the nationwide trend of loft and brick buildings being in high demand by “Class A” office tenants. When web-software development company, Acquia, decided to move its corporate headquarters from Burlington to Boston, they knew they needed to keep their open floorplan design, and their new space at Exchange Place features two floors with almost no offices, dozens of meeting rooms and collaboration areas. Online auction house, Invaluable, also values the open floor plan; its executives sit out on the floor with employees in its collaboration-inducing flexible office environment at 38 Everett Street. And it turns out sometimes you can teach an old dog new tricks, as 171-year-old international learning company, Pearson, was eager to restack its existing Boston location and adopt an open floor plan arrangement, which features abundant teaming spaces with an emphases on mobile workforce culture.
With stronger Class B office absorption, New Tech and TAMI (technology, advertising, media and information) tenants continue to be the prime drivers of demand, as increasingly firms migrating from the ultra-tight East Cambridge market and those with fresh venture capital funding are attracted to the CBD’s relative value and transit connectivity.
As president of National Office Services for Colliers, Cynthia Foster leads our national office platform across multiple service lines, including capital markets, tenant representation, leasing agency, property management and valuation.