By NAI Hunneman’s Downtown Group
If there’s one thing that’s certain in commercial real estate, it’s this: there will always be a new hot neighborhood. For the first quarter of 2013, that was undoubtedly Downtown Crossing, particularly for startups.
Just how and why Downtown Crossing became so alluring to Greater Boston’s innovation economy is detailed in our first ever Hot Spot Index. As a new element of our quarterly reports, we will analyze which area is dominating the Massachusetts real estate market and why.
It’s no wonder that tech start-ups are especially drawn to Downtown Crossing. Just a couple of years ago, the Innovation District was an inexpensive antidote to Kendall Square’s high real estate costs, which in Q1 ranged from $40 to$50 per square foot. Startups in the first or second round of funding found the area alluring – there’s an ever increasing array of new restaurants and night spots, which are important to the live/work/play mantra common at many up and coming companies.
While established entities like Google and Microsoft long to be near the intellectual hubs of MIT and Harvard, that dream is less realistic for new businesses in their infancies. These same companies are now getting priced out of the Innovation District, which saw prices climb to $35-40 per square foot. Big companies like Boston’s own Life is good have seen the allure – NAI Hunneman brokers represented the lifestyle giant in its lease of more than 21,000 square feet at 51 Melcher Street earlier this year.
Downtown Crossing is easily accessible by public transportation – Cambridge-based talent can just hop on the Red Line – and offers the same lifestyle opportunities as its Innovation District neighbor. It’s close enough to the Seaport that techies can still bump and connect with others located there and at $28 to $32 per square foot, Downtown Crossing is highly affordable. In total, our estimate is that Q1 saw more than 150,000 square feet leased to startups in their first or second round of funding.
The question now is how long the area will stay affordable and where techies will move to next. For more information, read our full quarterly report here.