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27-story Back Bay Station tower on hold, developer says
The developer says high interest rates and the cost of building have delayed construction.
BXP Inc., a publicly traded real estate investment trust, says it does not anticipate starting construction on a Back Bay officer tower next year due to high interest rates and construction costs.
During an earnings call on Wednesday, BXP President Douglas Linde spoke of the future of 171 Dartmouth St. Linde said that the cost of constructing the building would outweigh the rent it could receive in return once opened.
The developer already has city approval to build the 27-story, 660,000-square-foot office building on the parking garage site next to the Back Bay MBTA station. As part of the Back Bay/South End Gateway Project, the building would be constructed on air rights above the Massachusetts Turnpike.
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BXP also owns or partially owns 100 Federal St., 200 Clarendon St., the Prudential Center, 100 Causeway, and multiple properties along the Route 128 suburbs and a few in Cambridge. The company’s portfolio expands into New York City, San Francisco, Seattle, and Washington, D.C.
The Back Bay project was brought up during the earnings call when an analyst asked whether Bain Capital had considered 171 Dartmouth. The company recently expanded its lease at BXP’s 200 Clarendon.
Linde declined to speak on Bain’s decision-making but offered more details about the 171 Dartmouth St. project.
Linde says new construction in Boston costs about $1,400 to $1,600 per square foot. To get the financial return on this project, BXP would need rents that are “materially higher” than feasible in both under-construction and recently delivered new buildings in the Financial District or what they can ask for in Back Bay.
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According to the company’s most recent SEC filing, the monthly rent at 200 Clarendon is just over $84 per occupied square foot. The company receives rents in the $70s for its Prudential Center properties.
“I think the timing at the moment for that new development in Boston doesn’t really pencil relative to where existing rents are now,” Linde said.
However, if interest rates continue to go down and lending conditions become more favorable, “there’s probably a different conversation that could happen at some point in the future with a number of tenants in our Back Bay portfolio,” he said.
At this point, Linde said, starting construction at 171 Dartmouth St. is not “part of the calculus in 2025.”
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