City Journal: The $1 Billion Question
Is the Hancock Tower worth the staggering price it’s expected to fetch? Actually, it looks like a bargain.
1. BUILDING EQUITY When the Hancock went up in the 1970s, the project cost $200 million. The same work and materials would run $717 million today, according to its builder, Gilbane Building Company. Add architects’ fees (among other costs) and the price of constructing the other two office buildings in the Hancock complex, and you’re at well over the tower’s estimated $1 billion–plus price—making it more expensive to build today than to buy.
2. PARK PLACE The dramatic 60-story glass tower makes it easy to forget the big moneymaker at street level. With 2,013 parking spaces in the heart of the Back Bay, the garage might as well be holding cars packed with cash. In Boston those kinds of enclosed spots command an average of $33 per day, a rate second only to New York’s.
3. RENTERS’ CENTER A scarcity of prime office space in the Back Bay keeps vacancy low, with the current rate around 10 percent. Annual rents run about $50 a square foot, making the neighborhood the second most costly in the city (the Financial District tops out in the $60s). With about 2.9 million square feet of rentable space, the Hancock complex can pull in about $145 million a year in rent checks.
4. SMALLER TENANTS = HIGHER RENTS Anchor tenants that gobble up lots of floors to house their headquarters have their benefits—they’re reliable renters who bring a measure of prestige to a building. But those long-term tenants, buying in bulk, often lock in cut-rate leases. With brand-name lessees like Hill Holliday Advertising gradually giving way to smaller, deep-pocketed financial businesses, the new arrivals are signing leases at market (read: higher) rates.
5. THE VIEWS PAY FOR THEMSELVES Since 9/11 closed the observation deck, the 60th story has been converted to one more floor of prime rentable space. While most of the floors below are rented whole or in two parts, up here there are a number of smaller offices available to individual tenants looking for killer views. After he retires this year, Jack Connors, chairman of Hill Holliday, will oversee philanthropic ventures from the northeast corner.