For a sector that’s lately been overshadowed by tech expansion in downtown Boston, the financial service industry is expected to play an outsized role in some of the biggest upcoming lease transactions.
Bank of America, State Street Corp. and Fidelity Investments all face decisions about where to house thousands of employees in the next decade, and the scarcity of large office blocks in Boston’s increasingly tight Financial District is prompting them to take a comprehensive early look. Combined, the companies are in the market for a potential 3.4 million square feet of office space, according to local brokers familiar with the process. There’s no guarantee they’ll end up occupying that much space, however, and they could opt to renew leases for much of their current footprints.
The biggest moving piece is Boston-based Fidelity Investments, which brokers say is looking for 1.4 million square feet of office space. The mutual fund giant’s search is prompted partly by the potential redevelopment of Massport’s Commonwealth Pier property, where Fidelity occupies 565,000 square feet through its Pembroke Real Estate arm.
Massport has acknowledged talks with Pembroke regarding a redevelopment of the property, including potential renegotiation of the ground lease reflecting costs to rehabilitate the aging pier. If Fidelity decides to stay at the Seaport Boulevard location, it could be forced to relocate employees for several years.
At the same time, Fidelity’s large requirement would give it the option of leaving its 245 Summer St. headquarters, where it currently occupies 890,000 square feet with a lease expiring in 2020. Fidelity sold the property to Benderson Development of Florida in 2005, and moved its headquarters to Summer Street from 82 Devonshire St. in 2012 as it prepared to sell that property, which is now being redeveloped as Congress Square.
The Summer Street location next to South Station may warrant a large rent increase and prompt Fidelity to consider other options, said Brendan Carroll, director of intelligence for Perry Brokerage Assoc.
“Benderson might want a lot of money now that the transit issue is everything. It’s probably the city’s best transit-oriented building location,” Carroll said.
Two commercial brokers said Fidelity has sent mixed signals about 245 Summer St., with one saying the company has a strong commitment to the site and another indicating it’s leaning toward an exit.
Fidelity spokesman Michael Aalto said the company periodically reviews its real estate options but declined to comment on specific requirements or timelines. Massport declined to comment on the status of the Commonwealth Pier redevelopment.
With its big space requirement, Fidelity could consider HYM Investment Group’s 43-story, 1-million-square-foot One Congress office tower at Bulfinch Crossing. The 2.9-million-square-foot Government Center garage redevelopment has been seeking an anchor tenant before breaking ground on the Pelli Clarke Pelli architects-designed office tower. HYM did not respond to a request for comment.
State Street Exploring Its Options
After anchoring the 1-million-square-foot One Lincoln tower, which opened in 2003, State Street Corp. is already looking at its options as lease expirations for both its headquarters and offices at 100 Summer St. approach in 2023.
State Street has an active requirement for 500,000 to 1 million square feet, but is believed to have a preference for 600,000 to 700,000 square feet, a real estate industry source said. State Street did not respond to a request for comment, but a company spokesperson recently told The Boston Globe that it will keep the headquarters in Boston.
The company has a history of skyline-altering real estate projects in Boston, anchoring the Financial District’s first skyscraper at 225 Franklin St. in 1966 before moving to One Lincoln. It was one of the first major employers to settle in the Seaport District with its 501,000-square-foot One Channel Center offices, which it leased through 2029.
One new project that could be suitable is Millennium Partners’ 1.6-million-square-foot office and condominium tower at 115 Federal St., scheduled to break ground this year with completion in 2022. The tower will contain 750,000 square feet of office space on the third through 30th floors, which is being marketed by CBRE/New England.
And Bank of America has begun exploring its options to replace its offices at 100 Federal St. and 100 Summer St. The bank is shrinking its footprint at Boston Properties’ 100 Federal St. from 787,000 to 650,000 square feet to make room for Putnam Investments’ new 250,000-square-foot headquarters this year. That deal also saw Putnam gain the branding rights for the 1.3-million-square-foot tower.
Charlotte, North Carolina-based Bank of America’s decision doesn’t involve a headquarters location, so it’s unlikely to sign onto a high-profile new project, Carroll predicted.
“State Street and Fidelity are truly headquarters locations. These are more integral to the corporate image in these organizations,” he said. “Bank of America has a little bit more desire to have a functional space that works and is easily accessible to talent pools, but I’m not sure if they really need the headquarters statement experience.”
