Nonprofits are being squeezed out of Boston offices as rents surge
For almost a decade, Big Brothers Big Sisters of Massachusetts Bay has been based on the eighth floor of a downtown high-rise, close to volunteers and donors, easy to reach for families and staff, and smack in the middle of a service area that stretches from Lawrence to Cape Cod.
But by the end of the year, the agency is likely to be forced out by surging downtown Boston rents. It’s one of a growing number of nonprofits feeling the squeeze of the city’s hot office market. As tech firms and other well-funded companies pour into downtown and adjacent neighborhoods to capitalize on their central location and access to young workers, nonprofits are being priced out.
“Nonprofits want all the same things around the private sector does,” said Liz Berthelette, director of research at Hunneman, a Boston real estate firm. “They just have less money.”
Rents in the Back Bay and Financial District have climbed 35 to 40 percent over the last five years, Berthelette said. The cost of leasing in some other areas, including Charlestown and Downtown Crossing, has increased even faster. Because of that, lease renewals these days can induce sticker shock.
That’s what Wendy Foster, chief executive of Big Brothers Big Sisters, felt when her landlords presented her with a 45 percent rent hike on the agency’s 14,000-square-foot office at 75-125 Federal St., in the heart of the Financial District.
When the agency signed its current lease seven years ago, the office market was still recovering from the recession and the Financial District was still largely a place for banks and investment firms. Since then, her building was bought for $327 million by Boston-based Rockpoint Group, tech companies have poured into the neighborhood, and rents have surged.
Foster said she understands the economics, but the higher rent would cost the 90-person agency $250,000 more a year.
“That’s probably five jobs we’d have to cut,” Foster said. “It’s an absolutely dramatic and real thing.”
Rockpoint’s officials did not respond to a message seeking comment.
Big Brothers Big Sisters is talking with donors and board members who work in real estate, looking for a more affordable space in the city. There are a few possibilities, Foster said, and she hopes to sign a lease by summer.
Suburban office space would be cheaper, Foster acknowledged, but leaving downtown might mean losing crucial connections, as well as employees.
“Our volunteers, our donors, our corporate partners, they’re all predominantly in Boston,” Foster said. “And many of our employees are in their 20s. We need to be able to hire young people, who want to be in the city and may not have a car.”
Several smaller nonprofits faced a similar challenge last year when the American Congregational Association sold 14 Beacon St. The Beacon Hill building had long offered cheap rent to dozens of small social service and advocacy groups, but it was showing serious signs of age and the Congregationalists needed a way to sustain their historic library on the lower floors. The group decided to sell the property to developers Faros Properties for $25.4 million, and most of the nonprofits had to find new homes while Faros planned major renovations.
The homeless advocacy group Homes for Families wound up nearby on Bowdoin Street. That was “really lucky,” said executive director Libby Hayes, but the group’s rent and related expenses doubled. That forced a hiring freeze, Hayes said, and her staff of five is now down to three people.
“We are definitely feeling the impact,” Hayes said. “It has really strained us.”
Jane Doe Inc., the sexual assault and domestic violence prevention group that had also operated out of 14 Beacon, found the search for real estate so daunting the organization put it on pause and signed a six-month lease at a WeWork near South Station. The co-working space is expensive, said spokeswoman Toni Troop, but welcoming, and it lets Jane Doe’s employees focus on their mission.
“We made a promise to ourselves that we’d stay put for a while,” Troop said. “Our search had become completely all-consuming, and we have a lot of work to do.”
And at least one nonprofit facing a steep rent hike left town altogether.
The American Schools of Oriental Research — a group for academics who study ancient Middle Eastern archaeology — had operated rent-free in a Boston University-owned building in Kenmore Square since the mid-1990s. When BU sold that building — one of several beneath the Citgo sign along Commonwealth Avenue — to the developer Related Beal, ASOR had to look for a new home.
The organization talked with other local universities, explored buying buildings in central Boston or Cambridge, and looked at rental space in Charlestown and Somerville. Nothing made good business sense, said executive director Andrew Vaughn, so it broadened the search. Last year, ASOR moved to Alexandria, Va., just outside of Washington, D.C., where the real estate is cheaper and there’s better access to federal policy makers.
“Because we couldn’t find anything that was long-term sustainable, it forced us to ask really existential questions about what we wanted,” Vaughn said. “We wouldn’t have done that if we could have found something easily in Boston.”
For locally rooted nonprofits, though, moving out of town isn’t much of an option.
Under agreements with the city, some new buildings do set aside space for civic and nonprofit uses; that’s how the creative-writing center GrubStreet landed new digs in a Seaport condo building. But such opportunities are rare.
Even more unusual are new buildings specifically planned for nonprofits. There’s one underway near Roxbury’s Jackson Square, where Watermark Development and Horizons for Homeless Children are collaborating on a 139,000-square-foot building for social service agencies. Horizons will fill about one-third of the building. The Massachusetts Department of Children and Families and another youth-oriented nonprofit have signed leases, as well. About 30,000 square feet are still available, according to Watermark’s Lee Goodman, who said he has been getting a lot of inquiries.
But financing the $50 million project was tricky. Watermark and Horizons received tax credits that covered about one-third of the cost, Goodman said. Otherwise, it would have been impossible to offer rents that most nonprofits could afford.
“It’s just as complicated as building a Seaport skyscraper, but the rents don’t cover the construction cost,” Goodman said. “I don’t know how many times I can do this again.”