The Boston Globe
by: Sacha Pfeiffer
April 2, 2008
Boston Senior Home Care, which provides services for the elderly and disabled, got a rude awakening when it began searching for new office space last year.
The nonprofit group wanted to stay in downtown Boston to be near its urban constituents and public transportation. But with the city's commercial real estate market at a historic high, affordable rental property was difficult to find, and the spaces it could afford were often subpar.
"Some of the buildings would have been just terrible for our staff, and price was absolutely an issue," said executive director Linda George. "We almost could have been driven out of downtown Boston."
Instead, Boston Senior Home Care moved in January to attractive, contemporary, high-quality offices in the city's Financial District, within walking distance of South Station, at a rate George considers "a very fair deal." The recently renovated space on South Street is part of a building called the Nonprofit Center, which exclusively houses "progressive social change" organizations that work to correct societal problems.
It is one of about 150 such centers nationwide: multitenant, incubator-like spaces operated primarily for nonprofits, which benefit from affordable rents, secure leases, a collaborative environment, and increased visibility. Many of the centers are in modern buildings in prime downtown areas, and some offer shared equipment, such as photocopiers and printers, as well as programs like yoga and lunchtime seminars.
And in hot real estate markets like Boston, they are helping solve a common lament of many nonprofits: that the cost of commercial real estate is driving them out the cities and communities they serve.
"The market for commercial real estate and rentals in the last two years has been really skyrocketing, and that means that for nonprofits that negotiated favorable leases five or six years ago, it's going to cost them significantly more just to stay put when those leases come up for renewal," said Jonathan Spack, executive director of Third Sector New England, a nonprofit itself that operates Boston's Nonprofit Center.
At buildings like the Nonprofit Center, "our tenants know the rent is not going to be jacked up wildly at the end of the lease if the market happens to be hot," Spack added, "and there's a sense of community that doesn't exist in a normal building."
Volatile rents are a perennial concern for nonprofits, which are sometimes forced to vacate downtown office space during real estate booms. During the dot-com bubble, for example, some groups were priced out of their Boston properties; after the dot-com crash, downtown office space was suddenly affordable again.
The real estate crunch for nonprofits, which typically run lean, is particularly acute now. In the Boston-Cambridge area, the price of top commercial space hit its peak in recent months, while commercial vacancies have been at a market low, according to Neil Ross, Boston-based vice president of Staubach Co., a commercial real estate firm. In Boston, prime space downtown has been renting for about $100 a square foot, while lower-tier offices can be $35 to $45 a square foot, Ross said. In Cambridge, top commercial rates are about $50 to $70 a square foot, while class-B space averages in the low- to high-$30s a square foot, he said. "The market in general, specifically in Boston and Cambridge, is pricing out a lot of people," Ross said. "In Boston, when leases are turning over, we have people facing literally double or triple occupancy costs for the same space. It's mind-boggling."
As a result, many nonprofit groups are looking for cheaper offices along Route 128 and beyond. But moving to the suburbs is impractical for nonprofits whose constituencies are located in urban areas, such as Boston Senior Home Care, whose service area includes downtown Boston, Chinatown, Charlestown, South Boston, East Boston, and parts of Dorchester and Mattapan.
By moving to the Nonprofit Center on South Street, which rents for $5 to $10 less per square foot than similar commercial properties, according to Spack, the organization still has easy access to those communities.
Purchased by Third Sector New England for $14.9 million in March 2004, the Nonprofit Center is one of two buildings in Massachusetts dedicated to providing shared space for nonprofits, according to NonprofitCenters Network, a San Francisco organization. The other is Boston TeamWorks, at 150 Mt. Vernon St. in Dorchester, which houses multiple youth-sports organizations. Three more centers are in development statewide - in Northampton, Truro, and Lynn, according to the network.
The nine-floor, 110,000-square-foot building has many of the same amenities as pricier commercial spaces, such as a meeting room with videoconferencing facilities, a landscaped courtyard, and round-the-clock security. Because most of the building is tax-exempt, its roughly two dozen tenants - they range from the Center for Legal Aid Education to the Green Restaurant Association to Easter Seals Massachusetts to the World Society for the Protection of Animals - don't face escalating lease costs as real estate taxes increase.
It's also a "green building" with high-efficiency heating, cooling, and lighting systems, environmentally friendly paint and carpeting, and amenities like indoor bike racks and showers. Tenants don't sacrifice aesthetics, either: The architecturally distinctive brick building - built in 1899, it's listed on the National Register of Historic Places - has lots of natural light, funky paint colors, and even a grandfather clock chiming in the marble lobby.
Roughly 10 percent of the building is shared space, where very small or start-up groups can pay a flat monthly fee ranging from $400 to $900 to rent as little as a desk. Instead of having to commit to multiyear leases, shared tenants sign one-year license agreements that include Internet access, electricity, access to high-tech meeting space, and a shared photocopier, printer, and fax machine.
"We looked at a lot of buildings, and this one was by far the superior building for the rent," said George, of Boston Senior Home Care. "And we loved the atmosphere of a whole family of nonprofits, with everybody having similar goals and missions."