(NECN: Peter Howe, Boston) With the iconic John Hancock Tower selling for 900 million dollars, many Boston real estate experts are saying there are now signs of hope for a recovery in the battered commercial real-estate market. Some say there may even be hope for Boston's most notorious stalled project, One Franklin Street at the site of the old flagship downtown Filene's.
That site, at the corner of Washington and Franklin Streets in the heart of Downtown Crossing, has been a gaping crater for more than two years since the financial crisis hit in mid-2008 and crippled progress on the $750 million, nearly-40-story office/hotel/condo/retail complex. Late last month, the Boston Redevelopment Authority opened the process of potentially revoking the construction permits for the site, citing One Franklin's developers' failure to get anything built in three years.
Vornado Realty of New York is the main developer behind the moribund project, helped locally by John B. Hynes III of Boston Global Investors. Hynes, grandson of a mayor (the same mayor for whom the John B. Hynes Veterans Memorial Convention Center is named), has been one of Boston's most successful developers. But it is extremely rare you get to hear him talk about what is, or isn't happening at One Franklin.
On Tuesday, NECN and other news outlets got a rare chance to hear from Hynes after he gave a lunch address to the New England Women In Real Estate, a businesswomen's trade group.
"We're working it every day,'' Hynes said of the dead Filene's project. "We're working it every day.'' After months of total radio silence, Hynes said in recent weeks he has finally begun hearing from potential investors and development partners who are interested in seeing whether there might be some way for them to profitably work with Hynes and Vornado and their investment team, who have already sunk $185 million into the project, to bring One Franklin to life.
There's been some speculation the city could push for some quick, cheap construction of low-rise retail and parking, what development experts sometimes call "ground cover," as a way to at least plug the big hole that blights Downtown Crossing.
Hynes said he continues to think, "my own opinion, I think that's a good location for a high-rise building. Downtown Crossing could use it, and that'd be what we'd recommend to anybody'' rather than a cheaper interim project whose only goal was to try to get something on the empty sidewalks above the Downtown Crossing MBTA station.
Hynes also said he envisions One Franklin becoming more heavily oriented towards housing, less towards office space, of which there is currently a glut in Boston. "I think residential is probably a little more attractive right now, particularly rental housing, than it was when we started with the office tower,'' Hynes said.
Hynes's efforts to jump-start the One Franklin project come amid signs -- like the Hancock sale -- that the Boston commercial real estate market may be pulling out of a tailspin and levelling off. The Hancock saled netted its investors $270 million in gross profits in 15 months after they bought the 60-story tower in March 2009 at a foreclosure auction for $660 million and flipped it for $930 million of cash and assumed debt to Boston Properties this week.
Overall in the Boston commercial realty market, in the first nine months of this year, a net total of 485,000 square feet of space was vacated as shrinking companies and law and investment firms gave up space, according to FHO Partners, a leading Boston real estate services firm. (To visualize that much space, imagine about 17 floors of the Prudential Tower.) While that was obviously bad news, it was 73 percent less space given up than in the same period of 2009. Given the soft demand, overall Boston asking rents for commercial space are down 7.2 percent from last year, FHO Partners said.
But managing partner Joe Fallon -- the "F" of FHO -- said, "The pulse of the market feels much better today than it did 12 months ago.'' He predicts commercial tenants will keep shrinking through the end of this year before demand begins stabilizing, and "it wouldn't surprise me in calendar 2012 that we're going to go back to seeing positive net absorption, which is more space is being leased than is being put back on the marketplace.''
With numbers like that, and the Hancock sale, John B. Hynes III said he feels reason to feel growing optimism the Filene's hole will get filled. He said he wasn't comfortable giving odds for a deal in the next year, but said, "I'm very confident that we're going to find a solution well inside of 12 months" for the One Franklin site.
"It's a great location,'' Hynes said. "It's a great city. It's a great project.''
With videographer Christopher D. Garvin and video editor Bob Ricci