Boston Real Estate News – 4/19/2010

Last Lot in the Back Bay Sold: Ted Raymond has sold the site of his planned luxury condominium project in the Back Bay for $8.2 million. The site consists of one of the last remaining lots in the Back Bay as well as an adjacent apartment building (163 Commonwealth Ave), and its sale marks the abandonment of Raymond’s plans to build a 5 story luxury condominium complex there.

“The real estate market got a little soft on condos, so we felt it would be best to sell,” said Raymond. However, “Sales of million-dollar-plus downtown condos have more than doubled – from 32 to 73 units sold – in the first quarter according to the MLS Property Information Network,” reports Thomas Grillo of The Boston Herald, hinting that Raymond may have pulled the plug a little too soon.

Raymond purchased the properties in the 70’s for under $500,000, and claims to have no regrets selling the properties to Seth Klarman, founder of the Baupost Group, a Boston private investment partnership.

Quotes from ULI’s Real Estate Summit in Boston: (Courtesy of The National Real Estate Investor)

Stephen Furnary, CEO and chairman of ING Clarion, talking about the criteria for success in the commercial real estate industry today:

“I tell the newer people to the business that you have to do everything you can to develop your judgment. The people that have judgment win. They don’t lose money, and they get the importance of risk management. They understand the criteria to succeed in a real estate investment.”

Sam Zell, chairman of Equity Group Investments, gauging his level of interest in the U.S. commercial real estate market:

“I continue to be an optimist about the U.S., if no other reason than I think we are going to alter the current political situation. If the current political situation is indicative of the next half century, I think we’re screwed.”

Geoff Colvin, Senior Manager of Fortune Magazine, speaking on risk management:

“In fact, there were only two industries in which the executives were very confident. They said, “Yes, we do have a handle on this. Our risks are identified and well managed.’ These two industries were financial services and real estate. It is always when the risks appear least, that they are probably [the greatest].”

Avg. Home Prices Rise and Fall, Rent Stays the Same: This Boston Globe article contemplates the relative stability of the cost of renting an apartment in Boston compared to the average cost of buying a home, which has gone down significantly since 2005, in the same area. I found this article to be a bit off the mark however, because it fails to account for the recent revitalization of the housing market in Boston, of which only commercial real estate seems to still be lagging. Jenifer B. McKim writes:

“Boston-area home values fell about 16 percent since their peak in 2005, motivating bargain hunters to scurry in search for affordable homes. But rents in larger Boston-area buildings have fallen only about 3.7 percent since their peak in late 2008, according to new data by a New York-based company that tracks apartment buildings with 40 or more units.”

“And rent decreases have slowed this year, real estate brokers say, as some landlords have resisted slashing rent or offering prospective tenants incentives, despite the economic downturn. Rent dropped only 0.2 percent in the first quarter of 2010, according to REIS, which tracks about 200,000 units locally.”

“As a result, the Boston area remains one of the most expensive places to rent in the country, despite the fact that vacancy rates in the area have steadily increased over the last few years — from 5.1 percent in the first quarter of 2006 to 6.5 percent in the first quarter of this year, according to REIS data. Tenants here pay an average rent of $1,598, the fourth largest average rent behind New York, San Francisco, and Fairfield County, Conn., the real estate tracker said.”

The article does attribute the high average rent in Boston to a variety of other reasonable factors including the increase in demand from the abundance of college-aged renters and the premium placed on apartments that are close to public transportation and shops.

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