At the flip of a switch, COVID-19 created a paradigm shift in real estate investment. Pension fund darlings turned ice cold overnight. Risk profiles turned on their heads. The four, classic real estate investment strategies of Core, Core-Plus, Value-Add and Opportunistic are no longer definitive. COVID-19 also provided the collective built environment with a valuable stress test, revealing new risk variables.
These risk variables include two major components of uncertainty: migration trends and how people will work in the future. In order for real estate investors to stay competitive during the current climate and deliver compelling value, they will have to make educated bets on an unpredictable future. The good news: centralized information and greater visibility into data is on our side.
The pandemic upended the impending population growth of major North American cities, leaving the future of urbanization a guessing game. Chris Nebenzahl, editorial director at Yardi Matrix, recently explained that many large metros underwent five years of outward migration in just six months. Additionally, according to a recent economic report by Upwork, between 14 and 23 million Americans plan to move from urban to suburban and tertiary markets.
To appreciate how urbanization will rebound, multiple questions need to be answered. How will business travel change? Are new shopping trends here to stay? Will people work remotely in perpetuity? There is no magic remedy, and these uncertain times make all questions more challenging to answer.
Even during the most demanding of times, we must not abandon the tried-and-true methods of evaluating real estate investment opportunities. Evolving commercial occupancy rates, consumer trends and new work routines will continue to be the primary drivers of real estate investment models.
The most resilient assets throughout the pandemic have been real estate occupied by credit tenants in the net-leased retail and industrial categories, along with the single-family sector (SFR space) and multifamily assets within secondary cities and suburbia. According to the National Association of Real Estate Investment Trusts, industrial REITs are up 18.5 percent year to date. Data centers are up 37.86 percent, and single-family REITs are up 4.1 percent. Conversely (and not surprisingly), office REITs are down 27 percent, while lodging and resorts are down an astounding 45.58 percent.
How will the real estate investment ecosystem realign? In all times, and specifically during uncertain ones, financiers should profoundly evaluate risk. Investors should be extremely conservative on appreciation and the risks of cash flow with fluctuating tenancy. “Attention should be paid as much to what can go wrong (risk) as to what can go right (return),” Seth Klarman noted in his book, “Margin of Safety.”
As the real estate investment community treads forward, it will have to deep dive into the supply and demand of the asset types under consideration, and then attempt to make a future assumption on that supply and demand. Look back 15 to 20 years to review the historical rents, expenses and occupancy rates. This valuable information will enable investors to make assumptions based on market statistics and performance. The thoughtful collection of fundamental data can be developed into a strategic investment strategy to weather all cycles.
Despite these uncertain times, investors will make bets on core market central business districts, specifically the hospitality and retail properties located within them. These investment types have high risk, but also embody the potential for high returns. However, it is much too early to make predictions about either asset class or primary CBDs. In the immediate short term, cities are going to lose inhabitants. Taking the long view, though, I deeply believe in the attraction of big cities and the benefits of their walkability, convenience, lifestyle, and their culture that fosters innovation.
In an uncertain investment climate, invest in what you understand the best. Seek sticky cash flow and make sure leverage is low. Market timing is paramount, but staying power is just as important. To paraphrase Warren Buffett, “Don’t buy a stock unless you’re willing to hold it for 10 years.” Even good investments with a sound investment thesis have risk. Risks are diminished if you have time on your side.
Jason S. Weissman is founder and CEO of Boston Realty Advisors, the largest full-service independent real estate brokerage and advisory firm in Massachusetts.
A 14,000-square-foot estate, originally built in 1904 as a summer home for the Houghton family, is listed for sale for $10.95 million.
The Mediterranean colonial-style home sits on 1.6 acres at 152 Suffolk Road in Chestnut Hill and features seven bedrooms, 12 bathrooms and an elevator.
“The grand estate was originally built by Chapman & Frazer Architects in 1904, and redesigned today paying homage to its origins while graciously reimagined and rebuilt with a tastefully elegant (palate),” the listing states. “This vast 3 year undertaking yielded an architectural masterpiece with an exhaustive focus on preservation while completing a sophisticated ensemble of innovation and design.”
Interior features include custom decorative floor-to-ceiling wood paneling in the grand foyer, a newly created sun room, elaborate molding and a private parapet overlooking a courtyard.
A three-bedroom, 2,553-square-foot penthouse condominium at Pier 4 in Boston’s Seaport District is on the market for $7.985 million.
Features of the three-bedroom, three-and-a-half bathroom penthouse include Gaggenau appliances, a 99-bottle wine refrigerator, and a staircase that leads to a private 903-square-foot private rooftop terrace with a full kitchen.
“Penthouse G is a floor thru residence meticulously designed to offer two distinct exposures, contemporary finishes with an open living concept,” the listing states.
Features of the 106-unit Pier 4 building includes personal concierge, virtual golf, dog spa, private lounge with gas fireplace and a fitness center.
Janice Dumont of Advisors Living is the property’s listing agent.
Two Massachusetts towns topped the list of best places to live in the United States. Money reporters collected almost 212,000 data points—including cost of living, diversity, weather, amenities, public education and COVID-era factors.
According to the personal finance publication, MA towns – Chelmsford and Braintree, are among the 50 best places to live in country.
Searching for real estate around Boston, it can feel like there are no well-kept secrets left. For those scrolling aimlessly around Google Maps though, here’s a hot tip: Money has scoured the entire U.S. looking for those unicorn towns with reasonable home prices and high quality of life, and landed on two enticing Massachusetts locales. According to the personal finance publication, Chelmsford and Braintree are among the 50 best places to live in America.
Arriving at these winners is no easy process. Money reporters started by narrowing the list of national contenders by considering only cities and towns with a population of 25,000 or more. Then, they filtered out any towns that had more than double the national crime risk or a median income of less than 85% of their state’s median, as well as towns that lacked ethnic diversity, bringing the pool down to 1,890 communities to further evaluate. After amassing almost 212,000 data points—including cost of living, diversity, weather, amenities, and public education—and accounting for COVID-era factors such as housing distress and unemployment rates, they decided on and then ranked 50 leading locations. To avoid clustering, only one winner was allowed per county and a max of two per state.
So, among Massachusetts’ 300-plus possible places, what caused reporters to dub Chelmsford and Braintree the cream of the crop? In the case of Chelmsford, which ranked in the top half of the list at number 14, Money calls out its real estate, which is drastically more affordable than homes in Concord, just two towns away. “Chelmsford shares the beauty and charm of its more famous neighbor, while being much more accessible. Where the median home price in Concord is more than $800,000, Chelmsford’s is a more modest $342,000,” writes reporter Mayra Paris. The public schools are also a draw—Chelmsford High School took 31st place in Boston’s catalog of the best schools in Greater Boston this year. And to round it out, the Middlesex County town’s je ne sais quoi comes from its historical center, punctuated by the Unitarian church’s tall spire and farmers markets on the Town Common.
Braintree, meanwhile, placed at 26 for slightly different reasons. The Norfolk County locale may be more familiar to Bostonians given that it’s just 13 miles south of Back Bay and, Money argues, that’s a major part of its allure. But even when the city isn’t a buzz of activity, Braintree still boasts accessibility to the neighboring Blue Hills Reservation and the South Shore. Though the median home price of $427,000 is above the national average, it’s well below the million-dollar price tags that are far too easy to find in most towns surrounding Boston. At 38,000 residents, it’s a pleasantly small city—though those who live there can easily board the Red Line and disembark at South Station in eight stops.
Massachusetts wasn’t the only New England state to earn a spotlight. Cheshire, Connecticut and Salem, New Hampshire ranked at 28 and 37, respectively. Reporters loved that the Connecticut town, north of New Haven and South of Hartford, claims plenty of access to nature, an annual strawberry festival, and an extremely low crime rate. Thirty-five miles outside of Boston, Salem, New Hampshire earned a spot in the rankings thanks to its prime leaf peeping, hiking spots, and entertainment options (of note for the kids: It’s home to Canobie Lake Park).
For those game to move out of the region entirely, you might want to check out Evans, Georgia. The southern town acquired the list’s top place of honor due to its family friendliness, expanding downtown, top-notch schools, and diverse population. There, the median household income is $101,000 and the median home price comes to $241,000. Need we say more?
As is typical of all bureaucracies, the state of Massachusetts has laid out its guidelines for Phase III Mandatory Safety Standards (August 10) for re-opening restaurants by releasing a 4,500-word directive whose implementation gets down—I kid you not—to pretzels and potato chips, plexi-glass dividers, pool tables, chalkboards and salt and pepper. Tough as such standards will be to adhere to on a case-by-case basis, Boston’s restaurants are doing everything they can do save their businesses.
One large operations which I visited last winter before the pandemic hit, had little time to resurrect their three establishments and re-hire sufficient personnel to enforce the flurry of regulations, but, as I’ve noted before, there is no more resilient and determined industry in America than the restaurant sector.
Woods Hill Pier 4 (300 Pier Four Boulevard; 617-981-4577), located on the repurposed Boston Harbor piers where the famous (and creaky) Anthony’s Pier 4 used to sit, is part of a development, like New York’s Hudson Yards that has razed whatever historic atmosphere the area once had, now a warren of high-rise glass and steel buildings indistinguishable from their mirror images in Asia. Ironically, then, Woods Hill Pier 4 is a restaurant with a very clear link to the traditions of New England bounty and provender.
Owner Kristin Canty and Partner-Chef Charlie Foster (previously at Boston’s Toro and Clio) work with their own Farm at Woods Hill in Bath, NH, and other small purveyors to utilize “the whole animal” approach via “grass fed proteins, sustainably caught fish, raw milk cheeses, locally grown and soaked organic grains, raw fermented foods, and organic produce to deliver nutrient dense dishes that employ the best ecologically viable ingredients available.”
Seeking to maximize all possible means of producing profits during the epidemic, they are currently open for dinner 7 days a week, with lunch on Friday, brunch of Saturday and Sunday. They are doing “contactless” take-out, including cocktails, and the outdoor patio season will extend into fall and winter with heaters.
It’s a good-looking modern dining room, though hardly farm-like, with a rippling wave-like ceiling, sea blue armchairs, and a large window wall. (At full capacity it gets very loud, but these days that’s not a problem with reduced seating.) When I visited last February, the menu was more-or-less winter based, which meant cold water halibut with a luscious green peppercorn beurre monté Swiss chard, rutabaga and candied lemon ($27), and a lovely parsnip tartine with buckwheat crust, maple-glazed carrots, frisée and the tang of grapefruit ($15). Shaved Rhode Island whelk was a delight, bathed in lobster broth with green apple and lime ($17). The housemade pastas included a well-wrought bucatini all’amatriciana with guanciale bacon from their own farm ($28) and another with lamb bacon, eggplant caponata, pine nuts and a mint gremolata ($29). Both are still on the menu. There’s also a lavish shellfish platter for four to six people at $130.
I’m not a fan of grass-fed beef, but the lean steak tartare took on fine flavors of rosemary and tallow aïoli, crispy shallots for textural interest, a quail egg and warm, chewy baguette ($16). I was happier with the nicely-fatted crispy lamb ribs with urfa pepper and a red wine glaze ($19), and a full-flavored glazed pork butt with winter squash ($23). Incidentally, all menu items have code letters to indicate if they gluten-free, dairy free, vegetarian and nut free. It’s come to that.
Now, at the end of summer, menu items (I have not tried) include whelk with melon, cucumber, sesame, torn herbs, Thai chili vinaigrette ($18); pork belly confit with peach ponzu, Maine kelp salad, jalapeño (($17); a watermelon and fried clam salad with shaved sweet peppers, mint and habanero yogurt dressing ($17); and now, with tomatoes at their best in New England, heirloom tomato salad with crispy feta stuffed squash blossom, basil and purslane aïoli and espelette pepper ($19). And this would hardly be Boston if they didn’t include a mound of lobster, celery, red onion, creme fraiche inside a warm popover.
For dessert there are hot beignets with rhubarb aïoli butter and chocolate ($12) and daily ice creams. The lemon meringue pie is an American classic.
Silicon Valley is catching up to the real estate industry. Over the past decade, more than $30 billion has poured into PropTech, a new generation of startups at the intersection of property and technology.
As the owner of the largest independent real estate brokerage and advisory firm in Massachusetts, I have been studying the brokerage industry for 25 years. I’ve seen aspiring disruptors come and go. This time is different.
It’s an open secret that real estate, the world’s largest asset class, has also been one of the slowest industries to adopt new technologies. In fact, a recent KPMG survey found that only 58% of real estate companies have a digital strategy in place. The current situation leaves the field wide open to innovation—and disruption.
Startups like Hemlane and Eden are streamlining property management services. Landis acquires homes as investment properties, then allows tenants to “rent to buy” when the company’s underwriting algorithms deem renters are qualified to purchase. Bowery automates the traditional manual process of appraising commercial properties with a data-driven platform and mobile app. As PropTech continues to infiltrate the real estate industry, the conventional brokerage community will need to embrace innovation if it wants to stay in business and remain competitive.
In order for brokers and agents to take the technological leap, they need to recognize that every real estate transaction will ultimately begin and end online. Today, unicorns such as Zillow and Redfin are redefining and leading the consumer experience of search by creating new platforms for buying, selling, and renting homes. These tech companies are a wake-up call for real estate agents to reinvent or die.
For example, StreetEasy and Matterport have reduced the friction costs of finding an apartment rental. A sophisticated renter can avoid an upfront fee and still find her dream apartment with ease. This experience is one example of many where we see real estate consumers embrace technology and the benefits that it offers.
The question, of course, is how far will tech get us? And is there still a role for people in this digital revolution?
The answer isn’t all doom and gloom for America’s two million real estate agents. While PropTech will ultimately bring all listings online, real estate agents are still critical for the most important part of the purchasing process: advisory service. If all politics is local, that is doubly true for real estate. Even the most tech savvy buyer or seller can benefit from the counsel of someone with market knowledge about individual neighborhoods.
The value of expertise, after all, is timeless. Davy Greenberg said it best in a viral tweet: “If I do a job in 30 minutes it’s because I spent 10 years learning how to do that in 30 minutes. You owe me for the years, not the minutes.” For now, there is no suitable replacement for the time-tested insights of brokers with access to hyperlocal data.
Be that as it may, technological progress is relentless. Real estate brokerages and agents should pay attention to this wakeup call or become obsolete.
The pivot from conventional practice to digital efficiency has created new business opportunities for real estate agents with sharp analytical skills who understand how to translate data into palatable information. While technology narrows the gap, PropTech is still in its infancy, with a lot yet to learn. As the tech editor Chris Nuttall wrote in the Financial Times, “For all our fears about artificial intelligence becoming far too clever—as it uses machine learning on huge data sets to give it superhuman powers—people are thankfully still pretty good at making AI look like an idiot.”
Despite the need for human dexterity, it is undeniable that the future of the real estate brokerage business will revolve around the instantaneous application of data. From leads to listings, we live in a digital world. Consequently, it’s imperative for real estate agents to combine their accrued market acumen with new technology in order to be a trusted resource and effective advisor.
We are at a crucial juncture within the history of the brokerage industry that will test the survival of every real estate agent. The rise of automation and artificial intelligence will continue to propel the growing dominance of tech-powered players. As a result, PropTech will likely drive down transaction costs and eliminate jobs. The real estate agents and brokerages who survive and thrive in the coming crunch will be those who embrace technology, not fight it.
Jason S. Weissman is the CEO of Boston Realty Advisors, the largest independent real estate services firm in New England.
It’s another sign of continued confidence in Boston’s housing market, despite the pandemic
The Midtown Hotel could soon be no more.
Developers on Wednesday filed plans with the city to tear down the mid-century motor inn on Huntington Avenue and replace it with a 10-story apartment building.
Newton-based National Development, which took over the property under a long-term lease with First Church of Christ, Scientist in March, said it aims to put 325 apartments and street-level retail on the site of the hotel. It also promised to make improvements to Huntington Avenue across from the Christian Science Plaza, where the Back Bay, South End and Fenway all meet.
A letter delivered to the Boston Planning & Development Agency was a preliminary step; more detailed plans and images are likely in the coming weeks, followed by rounds of community meetings and public review. A groundbreaking would probably be at least a year away. Indeed, National plans to lease the 159-room Midtown to Northeastern University for student housing this academic year.
But the move is another show of long-term confidence in Boston’s housing market from a veteran local developer. While development proposals basically stopped for several months at the start of the pandemic, a growing number have landed at the BPDA in recent weeks, a sign that developers believe that by the time these buildings open — probably at least three years from now in the Midtown project’s case — the demand for places to live and work in Boston’s core will have recovered.
It’s also the latest in a string of developments to reshape the area around the historic Christian Science Plaza. The church has sold several parcels — most prominently the one that’s now home to the One Dalton tower — to builders over the last decade or so.
Terms of its deal with National have not been made public.
Like a lot of other real estate activity, the coronavirus pandemic has represented a pause for the luxury condo market in greater Boston. But there are signs that the pause won’t be a long one.
After a period of adjustment to the new realities of the pandemic, buyers who put off buying upper-end properties will soon be back in the market, developers said on Bisnow’s Boston Luxury Condo Update webinar. Demand will rise, but supply won’t rise as far, because it never has in Boston, whose entitlement and zoning process is protracted.
“There are not a lot of silver linings in this pandemic, but it has created a surge in the Massachusetts residential market, both in the traditional single-family bedroom communities in Boston, but also in the Cape and islands,” Boston Realty Advisors Senior Partner Jason Weissman said.
For the moment, that might mean people are looking to live outside the city, but in terms of the ecosystem of Boston residential properties, activity near Boston will ultimately be good for the city market, he said.
“I don’t look at it as losing people from Boston, but as more liquidity in the market post-pandemic,” Weissman said, adding that in many Massachusetts communities, there is less than one month inventory of single-family homes.
There are also hints that, however much cachet upmarket single-family suburban houses might have for the moment (because it is easier to distance oneself in them), buyers are still interested in luxe urban properties.
In June, just one Boston residence listed for over $5M took an offer, while in July, five properties at that price range found buyers, according to a report by David Bates, a Boston Realtor and specialist in the luxury market.
Of the six accepted offers for those months, four were in Beacon Hill, one was in Back Bay and one was in the South End, and they were all new construction or recent rehabs, Bates noted.
When the luxury market does make its comeback, its fundamentals will be strong, because there is a lack of inventory. The amount of condo inventory varies significantly between city neighborhoods, according to Boston Realty Advisors data. In places like East Boston, the South End and Allston/Brighton, there is less than three months’ supply. Beacon Hill has about five-and-a-half months’ supply, and Back Bay has more than six months.
“What that means is, demand will quickly catch up to the supply, once people begin to come back,” Weissman said.
“We see that people are still interested in buying and leasing,” HYM Investment Group Senior Development Manager Julie Livingston said. “We’re going through a pause right now, but people are still craving a return to some normalcy.”
In partnership with National Real Estate Advisors, HYM is developing The Sudbury, which is the first residential building in Bulfinch Crossing in Downtown Boston. It includes 55 condos on its top 11 floors and 368 rental units on the lower floors.
Bulfinch Crossing is the 2.9M SF redevelopment of the Government Center garage. Part of the project involves taking down half of the garage and wrapping three new high-rise buildings around the remainder. One of those buildings is The Sudbury.
One reason for the strong interest, Livingston said, is that people still want to be in the city. The Sudbury has a walkability score of 99, but also quick connections to transit.
“For the sales that are happening, prices aren’t coming down,” Livingston said. “We’re targeting between $3.5M and $6M, at over $2K/SF, and we feel confident in the market.”
Community will be an important concept for downtowns after COVID-19 subsides, and Raffles Boston Back Bay Hotel & Residences will take advantage of that, said Noannet Group founder Jordan Warshaw, whose company is developing the new condo/hotel tower with Cain International.
For example, he said, there will be 16 intimate spaces in the building for residents and hotel guests to meet, a design that will cater to the human need for interaction in smaller settings. That is something the pandemic will not destroy.
“Has there been a pause because of COVID? Have suburban sales taken off? Yes,” Warshaw said. “But people are desperate for community, they live for community, and the place to get it is cities. You can’t change the massive demographic phenomenon of people moving toward community.”
Raffles is an international luxury hospitality brand founded in Singapore, with 14 properties worldwide now. When 33-story Boston Raffles opens in 2022, it will be the first North American location for the brand, which is owned by Accor. The tower will include 147 hotel rooms and 146 residences.
“Boston isn’t a newly developed, cookie-cutter type city, and Raffles is the furthest thing in the luxury realm from a cookie-cutter-type brand,” he said.
Cain International CEO Jonathan Goldstein said that his company is a believer in gateway cities, such as Boston, and in the luxury space. There is an undersupply of luxury space in Boston, he said.
“We have a huge amount of confidence we’re in the right position, notwithstanding the pandemic,” Goldstein said. “Whilst we might, for the next six or 12 or even 18 months, be doubting ourselves or our cities, ultimately human talent will want to be in metropolitan cities, and will want the luxury and entertainment and business opportunities.”