Investment powerhouse KKR has inked one of Boston’s largest deals in a year that has seen the city’s commercial real estate market struggle to join the national office recovery.
The private equity giant finalized a 133,000-square-foot agreement to relocate its regional hub to the Two International Place tower, delivering a healthy boost to a city that has yet to regain its pre-pandemic momentum. The 15-year deal with landlord the Chiofaro Co. signed this month, the two parties confirmed, will kick off sometime in early 2026.
The new office space is initially expected to house KKR’s roughly 300-person workforce in the Boston area, serving as a starting point for larger plans, according to CEO Ryan Stork.
“We intend to grow this location over time to help us deliver on the firm’s future goals,” Stork said in a statement. “We see great potential for Boston to support the broader firm like our offices in Gurugram [India] and Dublin. Our investment in Boston is consistent with our desire to have a U.S.-based location in a similar vein.”
A widespread recovery has been largely elusive for Boston, as is the case with some other challenged markets across the country. Yet some spots have surfaced in recent months that appear to show the market may have hit rock bottom and is now beginning to look up — or at least display signs of a gradual stabilization.
One positive sign is that KKR will take over four floors in the nearly 851,200-square-foot downtown tower, which is wrapping up a more than $100 million capital improvement plan aimed at positioning the property ahead of some of the newer projects slated to soon hit the Boston office market. Renovations have so far included upgrades to the property’s lobby and common areas as well as the addition of a new 25,000-square-foot amenity center that will feature a golfing simulator, podcast recording studios and a gaming center.
Burke Malek, the head of KKR’s Boston office, said the firm has “outgrown our existing space” and that plans to relocate to downtown Boston are part of a “strategic move [that] positions us to invest in local talent and expand our operating platform to support our U.S. and global operations.”
The New York-based firm was leasing an office in the Boston suburbs, but it isn’t clear how much of a footprint it had or if it continues to occupy space there. KKR declined to provide further details.
Office demand ‘resurgence’
The downtown deal is the latest in a flurry of wins Boston has landed among companies recommitting to or signing on to plant a stake in the city.
Hasbro, one of the world’s largest toy companies, earlier this month cemented plans to relocate its corporate headquarters to Massachusetts from its longtime home across the state border in Rhode Island. The manufacturer finalized a deal for about 265,000 square feet at 400 Summer St. in Boston’s Seaport District, a property in which KKR is coincidentally a partial owner.
Hasbro’s and other large corporate relocations, combined with a series of high-profile renewals, have helped prop up the city’s office market after years of major occupancy losses.
Colliding factors such as flatlined leasing activity, a burst of recently constructed properties and high-profile move-outs have pushed the market’s vacancy rate up to a record high of about 14%, according to CoStar data, more than double the levels reported in the years prior to the pandemic’s 2020 outbreak.
Boston’s availability rate has already climbed to nearly 19%, according to CoStar data, largely because of more than 13 million square feet of sublet space, which has weighed down the market and reflects muted demand among tenants that had previously fueled the city’s leasing and investment momentum.
And for landlords such as the Chiofaro Co., deals like those made with KKR are emboldening that upward momentum.
“KKR’s decision to plant a substantial flag at International Place is a major milestone for both the building and Boston’s business community,” Don Chiofaro Jr., the developer’s vice president, said in a statement. “This move reflects the resurgence of office demand in the downtown market and the value tenants continue to place on locating in the highest-quality work environments.”