By Aaron Jodka | October 2016
Downtown Crossing — DTX to locals — is hopping. A long-time center of commerce in the city, it has undergone several transformations in the past few decades. The city’s business improvement district, with DTX smack-dab in the middle, has significantly benefited the area, promoting and supporting it and beautifying the streetscape. Long gone are the days when merchants like my grandfather would purchase their store’s inventory from vendors along Washington Street and bring it back to the suburbs. Today DTX has become a hotbed of TAMI (technology, advertising, media, and information) tenants — the likes of Sonos, Arnold Worldwide, Quantopian, Datadog, Salsify, Carbonite, LevelUp, and Mobee, to name just a few. Tenants are attracted to the area’s transit access (Red and Orange Line rail, with Silver Line and other bus routes), grittier image, and lower cost. Restaurants are popping up left and right, offering workers more dining spots, but the ever-increasing night-time population is a driver as well. The Godfrey, a 242-room hotel, has also joined the fray, as has Roche Bros. with its first urban grocery store, and retail clothier Primark opened its first U.S. location here, further fortifying the neighborhood’s status as an emerging 18-hour destination. Retail rents along Washington Street have hit $200/SF.
Perhaps the biggest change has come from high-end luxury residential development. Properties such as Millennium Place and Millennium Tower are setting price records for the area — the latter is home to the highest-priced residence in the city, after all — and are bringing in a different demographic. International tourism is picking up. Primark is one attraction, and foreign investment has been heavy at Millennium’s condo properties, putting the neighborhood on the map. That bodes well for the office market as a whole. Tenants can find historic properties with rents generally in the low-to-mid-$40s/SF, while those looking for modern product have options such as 33 Arch Street, where rents are in the mid-high-$50s/SF.
TIAA, majority owner of 33 Arch, is one of the office investors that will benefit greatly from the area’s transformation. This Class A tower, which has plenty of parking, has yet to fully tap into branding options for tenants at its property. That could be incredibly appealing to firms looking to establish an identity by putting down roots in this emerging neighborhood, with signage on the building, parking garage, or elsewhere. With so many startups already flocking to the area, DTX is in the midst of a renaissance, one that tenants should seek to be part of. Investors have certainly taken notice.
Millennium Partners was awarded development rights to the Winthrop Square Garage, a project that should top $1 billion when complete. Meanwhile, office properties such as 33–41 West Street, 101 Tremont, and 70 Franklin have recently sold, for prices ranging from nearly $400/SF to more than $600/SF. The average sale price of office property in DTX has risen to new record highs, per data from CoStar, and DTX is now squarely in the crosshairs of tenants, investors, and residents.