Property

Downtown Rejuvenations In Boston And Detroit

Downtown Rejuvenations In Boston And DetroitOn the surface Detroit and Boston are very similar: moderately sized so-called second-tier cities of a little over 600,000, their respective states’ key urban centres boasting a team in all four major sports leagues and quickly identified with an American institution (cars and Harvard). But as of late-2014 Detroit’s population had fallen to under a million while Boston’s has held steady or risen in the last decade or so. They’re on fast tracks, just heading in opposite directions. For now.

Boston has had its struggles but nothing quite so deflating as the collapse of the Motor City, reaching its zenith (or nadir) when the city filed the largest municipal bankruptcy in history in July 2013. The home of Motown and the backbone of the US’s industrial ascendance was broke. With it went the city’s property market. Prices in Boston are currently averaging roughly US$400 per square foot. In New York they are US$1,300. San Francisco, US$600, resurgent Miami US$190. Detroit is averaging US$55 (HK$425) per square foot

Right now property in Detroit can be picked up for a song for those with the patience to wait for things to improve. “It’s high risk. However, there is significant interest from investors across the world. While a few Mainland investors have inquired about [it], Hong Kong real estate investors seem to show no interest at this point in time,” says Sam Van Horebeek, director of East-West Property Advisors. The downtown core looks like a ghost town and police and fire services in the area are all but non-existent. But, "As both rent and purchase prices are low, more and more small to medium-sized firms currently based in the suburbs are moving to downtown Detroit. As such, over the last 24 months, more companies have set up their office in several pockets in downtown Detroit. These firms tend to have a younger workforce that is looking to live in close proximity to their office. This creates demand for residential apartments, restaurants and bars. Also, you will see more and more nightclubs popping up. These pockets across downtown will continue to grow in size and eventually evolve into larger clusters, and that might be the start of a transformation.”

Nowhere but Up
There may be some truth to that. Along with local businesses, Hollywood has made Detroit chic lately, shooting art films (Only Lovers Left Alive), television (Low Winter Sun) and blockbusters (Batman vs Superman) alike. And it goes beyond locals and artists. Chinese manufacturing is seeing, “A little more competition coming from the US where wages have remained stable for five or six years, and many companies are looking at manufacturing in the US for the US market,” according to James Macdonald, director and head of China research for Savills. “We’ve had this massive globalisation over the last 20 years, however it is now changing from globalisation back to localisation.” Cars and manufacturing have nearly vanished, but the language, wages and logistical problems are forcing some major corporations to reconsider overseas manufacturing — like cars. “The benefits and cost savings that typically were achieved by firms that once embraced offshoring are becoming less profound. As such, these firms might be moving back their operations to the US … and maybe Detroit.,” theorises Van Horebeek.

In addition, urban regeneration exploiting Detroit’s automotive/industrial history has led to several renewals and conversions of historic buildings into swank hotels and residential projects through the 2000s and is ongoing — such as Alden Towers across from Belle Isle, and the Griswold Building (now The Albert) on Capitol Park among others.

If Detroit gets lucky it may be able to tell a story similar to Boston, proof positive that American cities are not dead. “The market has been on fire. Demand from the international community continues. When we started working years ago it was a very parochial town and it’s more and more international now. It’s a wonderful thing to see,” notes Richard Baumert, partner in developer Millennium Partners, which just launched Millennium Tower Boston. Located on the site of the city’s iconic Filene’s department store — the famed 1912 Burnham Building — the project can be credited with truly setting off the area’s rejuvenation.

Renewed Energy
“This project means so much to the revitalisation of the neighbourhood. What we’ve seen happening, and I hope it will continue, is increased activity in the neighbourhood,” continues Baumert. The old Filene’s is returning to its commercial and retail roots, with most of its 200,000 square feet already committed. The ground floor will also be home to a Roche Bros grocer — downtown Boston’s first. “Nathaniel Hall is kind of forgotten spot and it’s between us and Downtown Crossing. The Boston Globe wrote a story last week about major plans for that spot. We’re seeing a lot of that now.” A year ago the site of Millennium Tower was a hole in the ground.

The rebirth of the city centre is being led by Millennium Tower, which Baumert describes as the culmination of the developer’s experience in previous luxury projects in San Francisco, Miami and Washington DC. Setting the Boston Tower apart is The Club, which aims to redefine the residents’ clubhouse. “It’s the coolest thing we’ve ever done,” Baumert enthuses. Among the expected amenities are Chef Michael Mina bespoke menu in the residents’ restaurant and a series of private talks (think Ted Talks but less arrogant) with neighbours like former 49ers quarterback Joe Montana and venture capitalist Tom Perkins. “We’ve created a social programme that’s meant to educate, inform and entertain our residents. We have all these club facilities and these fireside chats bring those to life. One of the unintended outcomes of this is that it has built a community that is remarkable,” says Baumert.

Boston is making a case for itself as a first-tier investment too. Sales value in downtown Boston rose 20 percent in 2013, average condominium prices in Midtown grew 119 percent, sales are up across the board (44 percent) and some prices in the downtown core have surpassed those in more elite locations such as the Back Bay. The concentration of financial and tech industry offices and elite schools mean, “All the conditions are right. So many people who are international — China, all throughout Asia, the Middle East — are looking because of the schools. And there are plenty of renters for this kind of building. The rents at Millennium Place have been at the top of the market and we expect this to be similar,” Baumert finishes. Prices at Millennium Tower Boston start at US$850,000 (HK$6.6 million). The residences should be ready in mid-2016.