While John Hancock Life Insurance Co. reportedly has renewed its lease at 101 Huntington Ave., the Prudential Center’s mixed-use complex, the firm is expected to give up 70,000 square feet of space at the site. In the abutting Prudential Center tower itself, another 225,000 square feet is supposedly being put on the block from three different sources.
There was a time when Boston’s 131 Dartmouth St. office project could not open soon enough, but these days, the clock seems to be working in the opposite direction against the 11-story building as it nears completion later this year.
Amid talk of infighting within the diverse development group and rumors of a possible internal buyout, the Back Bay market where 131 Dartmouth St. is located is showing signs of further softening and a continuing trend toward negative space absorption. At 101 Huntington Ave., for example, John Hancock Life Insurance Co. reportedly has renewed its lease but will jettison several floors in the process, bringing an estimated 70,000 square feet of space onto the already bloated office landscape.
Although neither Hancock nor landlord Boston Properties returned phone calls by press deadline, sources said the insurer will give up floors two through four in the building, which is located within the Prudential Center mixed-use complex. In the abutting Prudential Center tower itself, another 225,000 square feet is supposedly being put on the block from three different sources. Along with 75,000 square feet that landlord Boston Properties is peddling, Gillette Corp. and Digitas are said to be offering similar-sized portions to a tenant population already brimming with choices. On a smaller scale, nearby One Exeter Plaza has 22,000 square feet up for grabs.
“We’re continuing to create negative absorption,” one Boston broker said last week. “Leases are getting signed, but [many companies] are leaving space behind.”
After breaking ground in June 2000 at the peak of the office boom, construction of 131 Dartmouth St. has been accompanied by a swift and sudden downturn that has sent rents plummeting and vacancies soaring, clouding the future of several new projects. Along with the Back Bay development, the World Trade Center West office tower in the Hub’s Seaport District is slated to open later this year. Down the road, 33 Arch St. will deliver 600,000 square feet to the supply equation, while the 1.02 million-square-foot One Lincoln St. is aiming for a 2003 opening.
In some instances, such as One Lincoln St. and World Trade Center West, substantial pre-leasing is helping to soften the blow of the current climate. And thus far, the developers of 33 Arch St. are displaying no panic given their 2004 completion target. Still, One Lincoln St. is offering 250,000 square feet of sublease space, and the Independence Wharf office rehab near Fort Point Channel has seen subpar activity since opening last summer.
The rise of available space in the Back Bay has not escaped the attention of 131 Dartmouth St.’s development team, confirmed James F. Sullivan Jr., whose Sullivan Properties is among the ownership contingent. But while the extra space “is definitely a concern,” Sullivan voiced overall confidence in 131 Dartmouth St.’s prospects.
“There is no doubt it is a little slow out there right now, but we are grinding it out and we’re pretty optimistic we will be able to make a deal fairly soon,” Sullivan said, adding, “It’s a great building, and I think we’ll do fine.”
Time to Deal
Indeed, Sullivan said the project has seen an encouraging up tick of showings lately, including several companies with six-figure space requirements that could fill much of the bottom portion of the 365,000-square-foot structure. Sullivan declined to provide names, but acknowledged that Bain Capital Co. has toured the site as it looks for an estimated 100,000 square feet in the city. He maintained that 131 Dartmouth would be a better fit for many prospects, noting that the space available at the Prudential Center is older and more scattered than one would find at the new building.
“I think we’ll have a pretty good shot with [at least] one of them,” Sullivan said of the large potential tenants, adding that 131 Dartmouth St. should provide greater identity for a company than it might enjoy lumped in with other firms at the sprawling Prudential Center. The new building is also located adjacent to the Back Bay subway and commuter rail station, and is directly across the street from Copley Place.
Other industry observers concurred with Sullivan’s assessment of increased velocity, including Spaulding & Slye broker David Martel. While stressing that companies continue to drag out the leasing process as long as possible, partly due to uncertainty toward the future, Martel said landlord incentives and other factors are driving increased interest.
“The tenants I’m talking to feel now is the time to do a deal, and I would agree with that,” Martel said. “But they are definitely taking their time.”
As for 131 Dartmouth St.’s development team, Sullivan dismissed reports that the group is embroiled in turmoil, even though rumors of a conflict have circulated for several months and there have been recent reports that a sale of the complex is in the offing, either outright or by internal buying out of some members. In addition to Sullivan Properties, others with an ownership stake in 131 Dartmouth St. include Edward A. Fish Assoc., the Heritage Property Investment Trust and Weston Assoc.
“It seems like it’s sort of a fractious situation right now,” said one source, while another claimed that Meredith & Grew President Thomas J. Hynes Jr. has been brought in as an advisor to the group. Hynes did not return a phone call by Banker & Tradesman’s press deadline. The source would not elaborate whether Hynes is being asked to stabilize the owners or to pave the way for a buyout, but insisted he is assisting the project.
Not so, according to Sullivan, at least from his company’s angle. Although he pointed to a long-standing relationship with Hynes, who was broker for the firm’s 200 State St. office building near Faneuil Hall, Sullivan said “we haven’t met with Tom” regarding 131 Dartmouth St., and said he has not heard of any other members of the team who might have called on the industry icon for advice. Sullivan also downplayed the prospect of a buyout.
“We have a diverse ownership group, and I can’t speak for any of our other members, but I can say there are no imminent changes in ownership planned currently,” Sullivan said. “Right now, we’re stable and we’re all just working towards a successful project.”
