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Tourism and Boston's Commercial Real Estate Market

Tourism is a huge part of Boston’s economy, so monitoring the number of travelers is important in evaluating the health of Boston’s real estate market.  Due to COVID-19, the number of travelers, not only at Boston-Logan Airport, but throughout the country, has decreased dramatically since the beginning of this year. 

 With the holidays around the corner and the number of cases on the rise, many are expecting flight traffic to remain low as people plan to travel by car instead of plane.  In order for Boston’s commercial real estate market to rebound, we will likely need to see passenger traffic return.

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Thanksgiving in the Time of COVID, 2020

It’s been too many months since we have been able to see extended family and friends. The holidays bring back nostalgic memories of past gatherings, and lure us to think of throwing caution to the wind, and forge ahead with our traditional feast and get together.

Given the current surge in coronavirus infections, health experts and the CDC are advising all of us to avoid our traditional gatherings around Thanksgiving. So what can we do to still celebrate, and keep everyone safe and healthy?

1. Arrange a Zoom family gathering. The video conferencing tech company is giving a gift to everyone, by eliminating the pesky time limit of 40 minutes for its non-paying subscribers. So, your family gathering on Zoom doesn’t have to get cut short. #ZoomTogether this Thanksgiving.

2. At every Thanksgiving, certain friends and family are known for a specialty dish. It could be Mom’s best stuffing, or Dad’s fried turkey, or Grandma’s pumpkin pie. Arrange for everyone to make their specialty dishes ahead of time, portion them out to deliver and share on your Zoom.

3. Dine al fresco if possible if you insist on getting together. You can use outdoor portable heaters, and leave some blankets out.

Finally, here’s a link to my hands down, best ever, Thanksgiving Turkey recipe. It’s courtesy of Melissa Clark of the NY Times. It’s so easy, and comes out perfect every time. FYI, I’ve tried all the fancy organic, farm raised, heritage, you name it turkeys, but have decided that a Butterball is still the best! 

Happy Thanksgiving!

 

Why Title is So Important

Whether you are buying or selling, clear title is essential to the purchase or sale of real estate. “Dirty” or “bad” title can be fatal to a deal. Unlike the deed (a legal, physical document recorded in the Registry of Deeds), the title isn’t a piece of paper, but a concept that gives you ownership of the property. Without clear title, you generally cannot purchase, mortgage or sell it in the near future. Some common examples of title defects are improper title transfers, previously unknown heirs, state or local tax liens, estate complications, contractor/mechanic liens, boundary encroachments and liens from creditors, lenders and the IRS.

The GBREB's (Greater Boston Real Estate Board's) standard purchase and sale agreement form provides for what happens in a transaction if defective title is discovered. Clause 10 states the seller has 30 days to use reasonable efforts to clear the title. If the seller cannot deliver clear and marketable title within the 30 day period, the buyer may elect to withdraw from the contract without penalty.  

Sellers benefit by searching the title prior to listing their property for sale to ensure there are no title defects or other title issues. Buyers protect themselves by having their attorney search the title as soon as the purchase and sale agreement is signed, and by purchasing title insurance.

One of the key services that real estate attorneys provide is verifying that the title is good and marketable, thereby providing peace of mind to both buyer and seller. And the bank.

DISCLAIMER: This is provided for informational purposes only and is not offered as legal advice. Please consult an attorney to discuss your specific questions regarding title and other legal matters.

 

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Roadmap to Buying a Home in and around Boston

While the year 2020 has presented some major challenges for many people, there have been some upsides as well. For instance, interest rates have set record lows a few times this year, creating a rare opportunity, especially for first time home buyers. So what does the buying process look like in the Boston area?

Once you have spoken with your real estate agent and identified neighborhoods and types of properties you are interested in, and established a price range through your lender, here is a general overview*:

1. Start viewing homes.  Visiting open houses and viewing properties by appointment with your agent are both great ways to see available options. Our website is a great place to search homes available for sale in the Boston area.

2. Make an offer.  Once you’ve found a property you are interested in, make an offer. This is one of the most important steps in the process. Your real estate agent will provide you with a market analysis to help determine a price to offer, guide you through the various aspects such as timing and contingencies, and help position the offer as strongly as possible. Generally, a $1,000 deposit is due with the offer and the seller is usually given a 24 hour deadline to respond.

3. Home inspection.  When the offer is accepted, a home inspection is typically the next step, and usually takes place within 7-10 days of an accepted offer.

4. Review condominium documents (if applicable) and other items.  This is also the time when you generally review the condominium documents (if you are purchasing a condo). Your attorney should review them as well. The master deed, declaration of trust, rules and regulations, condo budget and recent condo meeting minutes can all provide important context on the building – for instance, is the association budgeting for capital improvements, are there any restrictions on renting out the condominium, are there are pet restrictions, etc. This usually takes place within 7-14 days of an accepted offer.

5. Sign the Purchase and Sale Agreement (P&S).  The P&S sets out, in greater detail than the offer, the terms of the purchase/sale. With the P&S, the deposit also increases – typically, the deposit is increased from the $1,000 deposit made with the offer to 5% of the purchase price (though this can vary greatly). Generally, the P&S is signed within around 14 days of the accepted offer. 

6. Obtain your mortgage commitment letter.  Throughout the process, you will be working with your lender to provide them the information that they need to approve the loan. The lender’s approval is given to you in a “commitment letter”, which they typically issue to you within 30-45 day of the accepted offer. Note that this timeframe varies depending on current processing times, so check with your lender. Commitment letters also typically contain conditions, so they are not a “guarantee” of financing – this is also something you should discuss with your lender. Here is a list of some common mistakes to avoid while your mortgage is in process.   

7. The final walk-through.  Usually done the day before or the morning of the closing, the final walk-through is a short visit to the property (usually 10-15 minutes) to ensure it is in the condition that was expected (e.g. any repairs that were required to be made have been done, furniture has been moved out, appliances are all still in place, etc.).

8. CLOSING!  This is when you sign A LOT of documents. But once the deed is recorded, the home is officially yours! 
 

* Please note that while this is a general outline, there is no one-size-fits-all. The steps, deposit amounts and timeframe will all vary case-by-case. Closings may happen quicker, for instance if you are paying with cash, or slower. For guidance on your particular transaction, have a discussion with your real estate professional. 

 

 

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Cap Rates for Boston Commercial Property

We are frequently asked: “what’s happening with the market?” and “where are cap rates going?”  We’re still in the midst of the pandemic and we expect to continue seeing the effects for several months/quarters, so it is difficult to predict.  However, we wanted to provide an update with the latest data.

A quick overview for those that are unfamiliar, the cap rate - short for capitalization rate - is a quick and easy way of gauging investment opportunities.  Essentially, it is calculated by dividing the annual net operating income by the purchase price.  (It is a little more complicated than that, so please reach out to us if you would like to have a better understanding.)

The lower the cap rate, the more investors value the asset – a lower cap rate means that investors are willing to pay a higher price/accept a lower rate of return to own it.


Source: Based on data compiled from CoStar on 9/29/2020

 

In Boston, investors’ order of preference is projected to remain the same as it has for the past several years: Multifamily, Office, Retail then Industrial.  As the chart illustrates, cap rates for multifamily properties have been substantially lower than the other property types – Boston multifamilies remain highly sought-after by local, national and international investors.

Due to the pandemic, many are predicting cap rates to increase over the next few quarters for all property types, followed by a return to pre-pandemic levels.  The projections depicted in the chart are always subject to change – they are provided by CoStar, one of the main commercial real estate databases.  

Based on what we are seeing/hearing though, it is surprising that the retail and office markets are projected to follow similar paths.  Retail vacancies seem to be spiking more quickly and severely than office vacancies, as we seem to see another business close each day.  On the office side though, even if a company is in “work from home” mode and not in the office, they are likely still paying their rent – accordingly, the vacancy rate for office space is likely to increase more slowly, as companies’ office leases expire and they choose not to renew or to decrease the size of their space.

The projected path of industrial property is also surprising.  While things have been shut down, there has been a substantial increase in online/website ordering.  If sales are not happening in retail stores, grocery stores, shopping malls, etc., then there will likely be an increased demand for industrial space so that businesses can store inventory and fulfill orders.  Accordingly, cap rates for industrial space may not see the sharp increase that is projected - industrial space is seeing greater demand and its an asset that investors are becoming increasingly interested in.

For investors looking for opportunities to capitalize on current market conditions, it is prime time to set up a search plan.  Over the next several months, there are likely to tremendous deals – the key is to have an organized search in place so that you hear about the opportunities as soon as they become available.  

For owners that want/need to sell, it would be best to bring your property to market as soon as possible, since many are projecting that cap rates will continue rising for several quarters (meaning lower sale prices).  We have closed deals in the midst of the pandemic and are happy to offer a free consultation to discuss a proposed marketing strategy.

 

Positive ways COVID 19 will change our lives

- Drive in movies are back    

- Family board games are back

- People are getting back to nature

- Timed entry at museums, aquariums, etc makes for less crowds

- No stigma associated with working from home

- People won’t feel forced to go to work when sick

- People will never stand so close while waiting in line

- People with colds will wear a mask in public and prevent the spread of colds

- Public places like airplanes, bathrooms, restaurants, etc... will always be cleaner

- Ability to be part of family events and be in touch with distant family and friends via Zoom

- Doctors will continue to do some appointments via Zoom or phone

- Al fresco dining is so popular; Boston neighborhoods look like you are in Europe

- Most importantly second homes real estate is booming

 

CRE Update: How has the Pandemic Impacted Boston's Office Market?

The COVID-19 pandemic has impacted the relationship that landlords have with their tenants across all property types. This article focuses on the office market. With many people working from home, companies are now questioning how employees will use office space moving forward. 

 
 

Short-Term Leases: 

  • For leases that have expired during these uncertain times, many companies have sought to sign short-term leases, while trying to evaluate the future needs of their employees. 
     
  • While traditionally preferring long-term leases, landlords have been very receptive to short-term deals. Keeping a space full or filling a vacancy for a short-term is typically preferable to guessing on how long an office space may remain empty. 

Wellness & Airflow: 

  • Many tenants have concerns regarding wellness, cleanliness and air flow, so they have been making special requests in those regards to landlords. These requests may include an increase in frequency of common area cleanings, availability of hand sanitizer and masks for building visitors, and improving or replacing HVAC systems.
     
  • Landlords have generally been flexible with these requests, provided they are reasonable, as they want to work with tenants to ensure a safe and clean environment for everyone. 

Parking: 

  • With some employees returning to the office, the demand for parking spaces has increased as many do not feel comfortable/safe taking public transportation. 
     
  • Landlords are working hard to come up with parking alternatives for tenants, but this will likely get more challenging as more and more companies begin to return to work.  Additionally, the increase in driving will almost certainly lead to an increase in traffic in and around Boston. 


With companies evaluating their office real estate strategies, this has tended to increase the level of communication with their landlords. Due to the nature of these conversations, they can be stressful, uncomfortable and challenging. As real estate agents, we understand our role is as important now as ever. We are experienced in representing both landlords and tenants. If you would like assistance with addressing a challenging office situation, please don't hesitate to contact us.

 

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Apartment Market Update

With an abundance of vacant apartments in the (traditionally) most sought after neighborhoods in Boston, it is now a "renters'" market. According to some reports, there has been a 7-9% increase in empty apartments since the COVID-19 pandemic struck. In a drastic change from recent years, landlords are looking to sweeten the deal for tenants by offering free month(s) of rent, a paid broker's fee and rent reductions.  

We currently have a great selection of apartments to choose from. A few are highlighted below: 

200 Warren Avenue, Boston (South End)
Renovated one bedroom on Warren Ave.  Cozy, sun drenched apartment with hardwood floors throughout.  Kitchenette with stainless steel appliances.  The apartment has an in unit washer and dryer, and central air conditioning.  Amazing location steps to everything the South End has to offer and quick walk to Back Bay.  This is a must see!  $1,995/month. ***Offering 2 months rent free and brokers fee paid for***
 

34 Isabella Street, Boston (Bay Village)
Very spacious 3 bedroom on Isabella Street! Features hardwood floors, high ceilings, gorgeous detail, eat in kitchen, one large bedroom, two good size bedrooms. Heat and hot water included! $3,795/month. ***Offering 1 month rent free and brokers fee paid for***
 

475 Beacon Street, Boston (Back Bay)

Victorian, renovated parlor front studio with new hardwood floors, decorative fireplace and a large, brand new kitchen and bath. Heat and hot water included, and laundry in the building. Awesome deal for this space! $2,150/month. ***Offering 1 month rent free and brokers fee paid for***
 

For more available apartments, check our Featured Rentals page. As always, feel free to contact us - our apartment experts can help you navigate the options to hone in on those that best fit your criteria.

 

 

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Finding a Home Where You Can Live, Work and Play

Feeling claustrophobic, lonely, or overcrowded? Many renters coming to Cabot & Company are feeling at least one of these in their current living situation. COVID has made our world feel small and our home even smaller. All of sudden our homes are our workplace, our gyms, and if you are a parent, our daycare and children’s school. 

This year, we have clients looking to accommodate their “stay at home” lifestyles. Common requests are an extra room or alcove to transform into an office, outdoor space and in-unit or on-site laundry. Nearly all clients are looking for more elbow room to feel safe, productive and content. People still want to be close to restaurants, public transportation and coffee shops, as they are hopeful they will return to work sooner rather than later. 

Here are some great rental options offering that live, work and play opportunity: 

Renovated South End 1 bed with private deck, an office alcove, and in-unit laundry. $3,500/month.

Sunny Back Bay studio boasts 500 SF with skylights, dishwasher and laundry on site. $2,195/month. 

Back Bay 2 bed 2 bath duplex in concierge building with common roof deck, City views and parking. $4,995/month.

Modern and bright 2 bed in Beacon Hill with in-unit laundry and central air. $3,595/month.

2,877 SF of luxury living in this 3 bed, 2.5 baths complete with a gas fireplace, 2 garage spaces and private elevator access. $18,500/month

 

 

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Tips for Landlords to Rent Vacant Apartments in the COVID-19 Era

Due to the COVID-19 pandemic, there has been a dramatic influx of apartments on the market for rent in Boston. In the not-too-distant past, inventory was low and it had been a "landlords' market" for several years. However, these days, incoming tenants looking for a deal can certainly find one.  

As a landlord, a recommended strategy right now is to make your apartment as attractive as possible. If it hasn’t been renovated in 10+ years, this is the time to do it. Price is important, but today's discerning renters are looking for "new and shiny", generally preferring nicer apartments over the absolute lowest-priced options that are not well maintained. 

Here are a few improvements to consider, based on the feedback we receive from tenants evaluating apartment options:

  • Kitchen updates are among the most important. Consider installing new cabinets - if that's not in the budget, then consider having the cabinets repainted and replacing the hardware.
  • Stainless steel appliances are becoming a "must have" for many renters.
  • Refinish the hardwood floors and apply a fresh coat of paint to all walls.  
  • Update the bathroom(s).

With the inventory out there, expectations are high. Here are some "before" and "after" pictures of an apartment that was just renovated. It tremendously helps with the marketing - not just now, but for years to come.
 

 
Before


After

 


Before

 
After

 

If you would like to schedule a complimentary consultation, contact us here. We can schedule a visit to your apartment and suggest improvements that prospective tenants would most likely request. During our visit, we can also present a pricing and marketing strategy to help you get your vacancy filled so that your investment property can maintain a positive return!