A Boston land swap is testing a development strategy that could be used by more colleges and universities seeking to maximize the value of underused properties.
The Longwood Medical and Academic Area, part of the nation's largest market for lab-oriented office space, is the site of a development arrangement between Swedish construction giant Skanska and Simmons University. Skanska secured the rights to develop a mixed-use development anchored by offices with laboratory space and surrounded by retail, restaurants and apartments. The lab space is expected to be geared toward medical professionals who work nearby.
But before it can start work on the project, Skanska must complete a new 19-story dormitory a half-mile away for Simmons, a small private college with an all-women undergraduate enrollment. Skanska is fronting the construction costs of the dorm for Simmons. In exchange, Skanska obtained a 99-year ground lease for property on Simmons land where it plans to develop the mixed-use complex.
The partnership is something other colleges may try to emulate, said Doug Kozma, campus planning strategist at the architecture firm SmithGroup. If successful, it could be a strategy to kick-start projects at universities that lack the financial wherewithal but face pressing demands for new buildings, an issue gaining added attention as students head back to campus.
"This is precedent-setting," Kozma, who isn't involved with the Skanska-Simmons project, told CoStar News. "We're seeing an increased push from [higher education] institutions that have land assets and they're doubling down on those assets as an economic engine."
While Skanska is accepting financial risks in the deal, such as construction obstacles that can emerge once the project is underway, the developer could receive a big payoff if its mixed-use project is a success. The Longwood Medical and Academic Area, where Simmons is located, has one of the largest concentrations of scientific researchers anywhere in the world, but lacks offices with available lab space.
For Skanska, it's worth the wait for the chance to pursue a potentially highly lucrative development, said Russell DeMartino, executive vice president within the company's commercial development division.
"We're going to be very patient about getting access to that land," DeMartino told CoStar News.
The first phase of the Skanska-Simmons partnership, the Living & Learning Center, is scheduled to open by January 2027. Once completed, Skanska plans to start construction work on the nearby Longwood Place. Because the company does not have a set date for starting work on Longwood Place, it doesn't have an estimated completion date, according to a Skanska spokesperson.
On top of the standard risk of construction hiccups, the economy could enter a recession, leading to financing challenges for Skanska. And while it's certainly not the first university to use creative deals with developers, the Skanska-Simmons partnership is more high-profile given the projects' location in the country's biotech hotbed.
Lab space wanted
The Longwood district, about 2 miles west of downtown Boston, is packed with institutions that conduct high-level medical research. Harvard Medical School, Beth Israel Deaconess Medical Center, Brigham and Women's Hospital, Dana-Farber Cancer Institute are tucked together in Longwood, part of the Fenway-Kenmore neighborhood.
District professionals' daily schedules are often split between a hospital and a lab. The ideal setup is having a short walk between the two, said Carolyn Desmond, vice president of development at Skanska. That's not the case in Longwood, while similar neighborhoods in other cities, like Mission Bay in San Francisco, do have lab space-equipped offices located close to hospitals.
"They need that bench-to-bed proximity, where they can do research for a couple of hours and then do surgery in the afternoon," Desmond told CoStar News.
Boston leads the nation with about 70 million square feet of lab-oriented research space, according to Phil Mobley, national director of office analytics at CoStar. The San Francisco-San Jose market is second with 32 million square feet and San Diego is third, with 27 million square feet.
Despite its concentration of scientific professionals, the Longwood district is severely lacking in available lab-anchored offices. About 6% of the 6.3 million square feet of lab-oriented space is available for lease, according to CoStar data. That compares to 22% availability in the 12.3 million square feet of lab/office space in the nearby Kendall Square district in Cambridge.
"If you're going to put up lab space in Boston, Longwood is probably the place to do it," Mobley told CoStar News.
The lab space market in Boston has recently struggled with leasing due to oversupply in other parts of the city, including Cambridge and the Seaport district. But Skanska's Longwood Place isn't scheduled to be completed until no earlier than 2028, giving the lab space market plenty of time to recover, Mobley said.
Longwood also has a relative lack of amenities such as restaurants, bars, shops and outdoor gathering areas, Skanska's Desmond said.
"The living experience doesn't match the prestige for that neighborhood," Desmond said. "That area is really void of things that make a good neighborhood."
Neighbors, students
Skanska staff knew that construction in Longwood would be tricky. The district is filled with historic buildings housing museums and concert halls, as well as K-12 schools, college classroom buildings and a Merck pharmaceutical research center.
Skanska said it devised a 16-by-60-foot steel wall explicitly used for the construction of Simmons' new building to shield a neighboring building just 18 feet from the construction site. The wall, used only for the Simmons project in the tightly packed area, was also designed to protect pedestrians on a nearby public walkway.
Longwood Place's next phase of construction may also require a similar metal wall, as it will involve the demolition of dormitories and an athletic center now situated on Simmons' residential campus. The four-story, red brick dorms are arranged around a quad, creating the visual impression of a traditional college campus.
Simmons decided to demolish the structures, however, because they are in poor condition, resulting from years of deferred maintenance. Only some of the existing dorms have air conditioning.
"A lot of our alums are sad to see the residential campus go, but it's important for institutions like Simmons that are located in very expensive real estate markets, to be very careful about their space planning," Laura Brink Pisinski, vice president of university real estate development and facilities management, told CoStar News.
More important to Simmons was addressing the complete separation of its academic and residential campuses. Emmanuel College, a 2,500-student Catholic institution, is located directly between the two Simmons campuses.
"Students with accessibility issues will no longer have to walk from their dorms to class," Brink Pisinski said.
Simmons may also lease part of the new tower to outside tenants, depending on financial needs, she said. Simmons already leases several floors at its 1 Palace Road academic building to the Massachusetts College of Pharmacy and Health Sciences.
As of now, about 20% of Simmons' 5,440 students live on campus. The new dorm tower, with about 1,100 beds spread out among 14 floors, is expected to increase that percentage significantly. The new building is also designed to have 26,000 square feet of dining space and an 80,000-square-foot athletic center.
Simmons is voluntarily transferring use of more than half its 11 acres of property to Skanska for nearly a century as part of their partnership, Brink Pisinski said.
"We're getting a massive construction project for almost no cost," she said. "Our financial exposure is almost nothing."
Skanska likes its side of the bargain, too, according to DeMartino and Desmond. They expect to receive strong interest in Longwood Place when it finally opens.
The two Skanska executives also acknowledged that Simmons is getting a good opportunity.
"They really liked the idea that we weren't going to ask them to pay rent while they moved students from their residential campus to the academic campus," DeMartino said.
For the record
Elkus Manfredi is the design architect for Simmons' new dorm. Sasaki created the master plan for Longwood Place. Lisa Serafin, Tom Hamill and Melanie DiGregorio at Redgate Real Estate advised Simmons on its campus master plan and the selection of a private development partner. John Rattigan at DLA Piper served as legal counsel to Simmons.