The Boston Globe wrote about a new hotel development that will be soon be built in Back Bay over the Mass Turnpike. We here in Newton have two projects that were built many years ago, using Mass Pike air rights – Shaws Supermarket in Newtonville and the Crowne Plaza Hotel in Newton Corner.
Compared to some of our neighboring towns, Newton is relatively constrained when it comes to commercial development. We don’t have any sprawling, 128-side office parks or malls like Needham or Dedham for example. I’m certain that developing commercial property over the turnpike using air rights is quite a bit more complicated and expensive than a standard suburban office park. That said, the strip of Turnpike air rights that runs across the city is one very large parcel of undeveloped commercial space.
I don’t know the history of Shaws and the Crowne Plaza, but I’m surprised that if those were economically viable projects when they were built 30 or 40 years ago, that there hasn’t been any other development since. Maybe someone with a bit more local history or commercial development knowledge than me, could shed a little light on the topic.
When those were built, there wasn’t an active turnpike that needed to be kept active during construction. So while it was a tricky feat, it was much simpler than development now.
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A quick turn about the web indicates that working over a live freeway, building the deck the building will rest on will cost $700-$900+ per SF. In contrast, acquiring land and building a foundation usually runs under $300 per SF. This premium ($400+/SF of footprint) has to come from somewhere.
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Looking at the assessed value of 3 office buildings in Newton Corner I note:
283 Centre St. – 4 stories – $141/SF
235 Washington St. – 3 stories – $116/SF
1 gateway Place – 9 stories – $150/SF
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To make the math easy – if we spread the $400 premium over 10 floors, then it will cost an additional $40/SF to build over the pike. That $40/SF is would be a 25-40% + premium over what space is assessed at. So unless you can convince a developer that a) Newton is totally going to authorize a 10 story building somewhere desirable (near and exit + rail station?) and that b) this building is going to be so much more desirable than one on solid ground they’ll make back that premium, I don’t think you’ll be seeing more development over the pike.
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Now, the article does reference a new funding scheme for decks, involving the deck being owned as a piece of (State?) infrastructure. But that just shifts the costs to state/local governments rather than developers. Perhaps after we pass an override to pay for new schools we can do one for almost twice the cost per SF to build a deck for an office tower over the pike…
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(http://dspace.mit.edu/bitstream/handle/1721.1/35695/60250140.pdf?sequence=1 page 87+ and http://www.bizjournals.com/boston/print-edition/2012/11/30/prospects-rising-for-new-air-rights.html?page=all seem to be well written and address this)
Great info Anne, thanks
I know that Ken Parker looked into this years ago when he was an Alderman and negotiated some very low rate for the rights. But I also remember that much of the downside is exactly what Anne outlined above.
My guess is that the only way for this to be desirable to a developer is for the city or state to want to encourage the development badly enough that it absorbs the cost differential. But given the current needs I’m not sure the city would be interested in the short-term expenditure for the long-term benefits.
Before announcing my candidacy for Mayor in 2005, I conducted a cost analysis that placed the cost of platforms at between $5-$6M per platform acre. That analysis did not consider the cost of the land on which the platforms would be anchored, and it was before a dramatic escalation in the cost of steel that took place around 2006. I’m sure the cost is significantly higher now.
But let’s back up a moment and start with an old business adage on which to ground the potential of air-rights. You’ve all heard it before… “location, location, location.”
Commercial developers will pay a premium to build in a superior location. The area over the stretch of highway between Newton Corner and West Newton Square, is highly attractive to developers. Particularly in those areas near highway ramps. No one should assume that money is the obstacle to advancing air-rights development in Newton, because that’s simply not the case. The reason development of this largest undeveloped area in Newton has not advanced since the 1970’s, is a lack of vision on the part of our elected officials, who have not provided a road map for development to the private sector.
Being a former developer myself [my development business has transitioned to a real estate holding company] I can tell you that there’s a lot of interest among developers in building over the Pike. I spoke with many of these people prior to my running for mayor, and still have occasional conversations about this topic with some very high profile developers and end users. These people include one of the owners of a professional sports team, the president of a hospital, the owner of a large performing arts center, and a national shopping mall developer, among others. As well positioned as these people are, they do not have the ability to initiate a process that does not exist. And none of them are going to spend money analyzing potential sites, in the absence of such a process.
Anne’s post above was both articulate and brilliant, but a bit misleading at the same time. The Gateway Center, which is now more recognized as the Crowne Plaza, was completed around 1970, while the Pike was active. I believe the Shaw’s in Newtonville was built under similar conditions, earlier in the 1960’s. Sure, it’s tricky to build a platform over an active highway. But once the platform is built, the rest of the construction is no different than building a ground based structure.
As Anne correctly points out, the cost benefit can only be reached by building large structures. In most cases that size would be achieved by adding height, but it can also to some degree be accomplished by combining a land area with a platform, creating a larger, combined area of development. One such potential area exists just east of the Gateway Center, where the City of Newton owns a large undeveloped parcel abutting the east-bound side of the Pike. Combining that parcel with a platform, would mitigate some of the platform’s cost, by achieving a larger developable footprint.
If we are ever going to get serious about cultivating these air-rights, the City needs to initiate that venture. We should create a special zone along the Pike corridor, which allows for taller structures. The process of developing a potential site must be made clear to the private-sector. And the Mayor should appoint an air-rights Czar, with the power to solicit and initiate deals. We are looking at the potential of adding perhaps $50M per year in property taxes if this is handled correctly. Unfortunately, this resource has been ignored for the past four decades.
The rest of construction is no different, once the building is enclosed, and the major equipment installed. I can’t imagine trying to hang panels or glazing on a building over an active freeway.
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And while location is the reason to do it – if it hasn’t been done in Boston (where there have been numerous attempts and space is even tighter than Newton) without financial help to build the decks, I don’t see that it could be done in Newton without that same help.
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Let’s assume we built another 1 gateway center (completely) over the pike. It would bring in approximately $1M/yr in taxes, and have a footprint of about 30,000 SF. Going with the subsidized approach, lets say Newton is going to help with the cost of the deck. The deck premium would be about $12M, and the total deck around $24M. I leave the comparison of annualized costs with- and without bond interest payments to the tax revenue as an exercise for the reader. (Remember! Taxes will only increase at 2.5%, but Newton bonds are currently around 4%)
A developer looking to build a $400M mall or a $500M sports and entertainment complex, is not going to need government assistance to pay for a $20M platform. What they need the government’s assistance with, is defining a pathway to the permitting process.
As far as construction over a highway, of course it presents a challenge. But it’s a challenge to build a ten story building next to any roadway or near an adjacent building.
I agree that this amount would be inconsequential on a $400M project … HOWEVER:
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At the high end (think mall of America expansion) the total cost of development is around $400/SF right now. A $400M mall would have 1,000,000 SF – about 4 times the space at 1 Gateway center. If we use that same decking cost I proposed before, the “mall” would now be 40 stories tall! If we went with a “taller” mall – call it 4 stories – then we need about 10x as much decking … making the decking premium rise from $12M to $120M! (or even only $60M if we use the next example)
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Also, the pike is only about 100 feet wide, if we’re generous and assume that you could get another 100ft over land next to it you now have 200′ to work with. A 1M SF mall at 4 stories would need a footprint of 250,000SF (almost 6 acres) – or about 1/4 mile of distance along the pike. It’s true you could fit this on the East parcel you mentioned, but I just don’t see it being economically practical – we’re still talking a $60M premium on $400M (15%!), or practical for the town – It’s almost a mile from the pike exit, and would require significant work to re-route the streets to deal with the traffic it would generate.
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Now, I think that more development would benefit our town. I’d love to see some taller (3-4) story buildings around our village centers that could be “mini-malls” (think the arcade building in Coolidge Corner) and really promote those both as commercial/economic engines for the city and as a “one-stop” shopping destination for residents and visitors.
But I can’t think of a place in Newton – including over the pike – that has the acres or airspace for the scale of the development you propose, nor do I see it primarily benefiting our city, regardless of the revenue it brings in.
Just for fun, let’s use TD Garden as an example. It’s 750K sf, sits on a 3 acre site, and is 10 stories tall. It would be a perfect fit for the specific location [east of the Gateway Center] that I referenced earlier.
Let’s combine two news stories here. If TD Garden is the example, why not focus our efforts on the Olympics? Should Boston win, why shouldn’t we push for Newton to have an indoor/outdoor sports facility over the Pike as part of the buildup? What about an Olympic Village that includes additional housing? All near public transit and easy highway road access.