Fallon, Drew Move Ahead on Big Boston Residential Projects
- Jul 23, 2012
Developers like The Drew Co. and The Fallon Co. are taking note as demand for apartments in Boston continues to soar and the call for condominiums is on the upswing. Recently, Drew secured financing for its Waterside Place apartment building and Fallon topped off a development that, once completed, will allow the company to start construction of a high-rise condominium.
In a partnership with an institutional client advised by J.P. Morgan Asset Management, Drew will bring 236 units to Boston’s Seaport District with the $120 million development of Waterside Place. “The high end of the residential the market is doing very well on the rental side,” Robert Gehret, deputy director for policy development and research with Boston’s Department of Neighborhood Development, told Commercial Property Executive.
The sustainable transit-oriented project caught the eye of the lending community; a consortium of banks led by RBS Citizens has just provided Drew with a $72 million construction loan. Acting on the developer’s behalf, HFF arranged the financing with the consortium, which also includes Eastern Bank and Blue Hills Bank. “This is a prime example of what we are seeing across the country; construction financing is readily available to well-positioned projects backed by top-notch sponsorship,” said Anthony Cutone, a managing director of HFF.
Demand continues to shoot up in the apartment market—the vacancy rate is expected to drop to 3.5 percent this year, according to a report by Marcus & Millichap Real Estate Investment Services Inc.—and and it’s creeping upward in the condo market. Fallon is well aware of the change and with the recent topping off of its Eleven Fan Pier Boulevard office project, the company is one step closer to commencing the next major phase of the 21-acre Fan Pier development—a luxury condominium building.
Upon completion of the two-tower Eleven Fan Pier office complex, which will serve as the global headquarters of Vertex Pharmaceuticals, Fallon will kick off development of the 15-story condo community. The timing of the project may be just right.
“High-end condos seem to be doing pretty well,” said Gehret said. “For all ownership housing, sales prices and volume have moved up a little bit. (The housing market in) Boston didn’t tank as much as others cities. There are approximately 550 (REO properties) right now, but that’s way down from what it was at the peak of 2008, and median sales prices are starting to pick up, so that’s certainly a favorable turn.” The non-luxury condominium market, however, continues to struggle, as new development in other categories is basically nonexistent, he noted.
In addition to limited construction over the last few years, much of the upward trend in both the apartment and condominium markets can be attributed to the all-important jobs factor. With most major employment sectors posting solid job growth, Boston is expected to gain 46,000 positions this year, according to Marcus & Milichap. That would mark the best performance in more than a decade.
“Boston is still a place people want to be, so it’s a very attractive market to industries like healthcare, and the education sector is pretty strong,” said Gehret. “So the growth sector is bringing in jobs; there’s definitely an influx of folks moving there.”