If you're wondering when you'll see some signs of construction over at Copley Place, where a massive residential tower was reportedly going to be built soon, it looks like you will be waiting for a while. Simon Properties, the developer behind the project, recently postponed it indefinitely. Citing escalating construction costs and concerns about a glut of luxury residential housing in the area, the developer thought better of it. As a result, we won't be seeing any major transformations over at Copley Place anytime soon. However, it's entirely possible that the project will eventually move ahead if everything aligns properly. Stick with Boston City Properties for continuing coverage and updates regarding this project.
The tower that Simon Properties wanted to build would have been one of the tallest in the city. Plans called for a 52-story, 625-foot tower situated above the shopping center on Dartmouth Street at Copley Place. Incredibly, this project has been renewed and approved three times already. The last time was in May 2013, and only now has Simon Properties decided to pull the plug for the time being.
As mentioned above, the developer is concerned about construction costs and an overabundance of luxury housing in the area. Additionally, however, construction at this site is notoriously difficult due to the fact that it is within such close proximity of the Massachusetts Turnpike and the Orange Line. While construction costs have surged in general recently, this project would have been especially expensive due to the logistics of working around such massive infrastructure.
As for the idea that there are simply too many luxury units on the market now, it's being met with a lot of skepticism around the city. After all, numerous other developers are forging full steam ahead with their projects, including Weiner Ventures' 40-story condo building that is being built at Boylston and Dalton Streets. There's also Millennium Partners' recently closed deal to purchase the Winthrop Square Garage for $153 million. In its place, the developer plans to build a 750-foot residential tower.
Pre-sales among many projects that are in the works have been very strong, so why does Simon Properties feel like their residential tower is too risky? It could very well be that there are other underlying reasons that simply haven't been made public. Then again, there have been a few signs suggesting that the luxury residential real estate market might be cooling down a bit. However, demand for moderately priced homes appears to still be very high, so it might be that we will see a shift away from luxury housing toward more affordable housing in the near future--but don't count on it.
As for the on-hold project, Simon Properties has said that they could very well bring it back someday. For now, the developer is focusing on its expansion of Copley Place, which includes adding new shops and restaurants as well as a new entrance along the southwest corridor. Therefore, Copley Place will still be transformed to some degree, but we won't be seeing a massive skyscraper towering over it any time soon.
If Simon Properties put the project on hold due to concerns about the luxury housing market, perhaps it's time to take a look at how it's doing. According to the Boston Foundation, permits for new housing units in Eastern Massachusetts are expected to fall by about 20 percent in 2017. This would be the first decline since the construction boom started back in 2011. As it stands currently, luxury apartments in the city are averaging around $3,000 per month for rent, so might it be that the high rental prices are scaring people away at long last? This seems pretty unlikely given that vacancy rates for such housing are incredibly low. Clearly, plenty of people are willing to pay the prevailing rate.
What happens if other developers become spooked like Simon Properties and pull the plug on their projects? If construction slows down enough, the new supply of luxury housing will dwindle. This could actually cause rent prices to rise even higher, which would be pretty catastrophic. Still, developers are kind of stuck between a rock and a hard place, as development costs have risen so steeply. Prices for buildable land are extremely high as well, and zoning continues to be tight all across the city. With these hurdles in their way, it's easy to see why many developers may start holding off on new construction.
While demand for luxury housing may be tapering off a little, there's no doubt that the state as a whole needs a lot of new, moderately priced housing for the foreseeable future. Over the next two decades, Massachusetts reportedly needs to add 17,000 new housing units per year to keep up with projected population growth. The vast majority of these will need to be built in Greater Boston, as that is where the population is the most heavily concentrated. There's only so much space, though, so it leaves us wondering where developers will go next.
Despite the fact that the state needs a steady stream of new housing for the foreseeable future, housing permit numbers have been dropping in recent years. In 2016, 11,386 housing permits were issued in Eastern Massachusetts, which reflects a drop of 18 percent from 2015. All told, 4608 permits were issued in Boston in 2015. As of mid-November 2016, only 2,683 permits had been issued. This reflects a drop of about 42 percent. Of course, there is no way to tell if this is just a one-time drop or if it's indicative of a more lasting trend.
It's also important to keep in mind that many new units have been approved by the city, but housing permits haven't been issued for them yet. Indeed, there are currently more than 5,000 approved units that are expected to be built in the near future, but housing permits have not been issued for them yet. Therefore, we can't rely entirely on the number of housing permits that have been issued to gauge the health of the construction market. Perhaps many of those permits will be issued in early 2017, and this year will end up being a huge one for the luxury housing construction market.
If you were eagerly awaiting the development of the residential tower at Copley Place, it looks like you are going to have to seek greener pastures. For the time being, it doesn't look like this project is going to move forward, and there is no telling whether or not it will be put back on the table. Luckily, you have plenty of other options when it comes to securing an apartment in a snazzy luxury apartment building, as plenty of other projects around the city are moving forward. In Back Bay and downtown especially, you don't have to look very hard to find something suitable.
At Boston City Properties, we believe that 2017 is going to be a big year for real estate in Boston. It will be very telling to see which projects are approved, which ones begin and which ones are completed. By mid-year, we should have a much better feel for what the prevailing trends are. If it happens that construction costs have become too prohibitive, developers may increasingly pull back. However, this might mean another major spike in rental prices, which are already at record highs.
Finding the right luxury apartment in Boston doesn't have to be difficult. Although it appears unlikely that the residential tower at Copley Place will happen any time soon, you can take your pick from all kinds of other great developments around the city. The best way to explore the available options is by connecting with Boston City Properties. We will give you free access to our searchable listings, so you can see what's available in the neighborhood of your choice with the click of a mouse button. If new information regarding this project becomes available, we will share it with you here. For more information, give us a call today.