John Dolan, Managing Director, Boston, Avison Young

In an interview with Invest:, John Dolan, managing director of the Boston office of commercial real estate services firm Avison Young, talked about the firm’s strategic priorities for future growth, the significant pipeline of life science spaces and residential construction in Boston, and the gradual transition back to office settings, with varying policies across sectors. 

What have been the most significant achievements for Avison Young in the Greater Boston commercial real estate market in the past year?

I believe anyone who took on this job in 2023 knew it was going to be tough. Our team has truly stepped up to the challenge. We have a lot of dedicated individuals here, and what sets us apart in the market, besides our client-centered approach, is the size of our project management team, which matches that of our brokerage team. We involve them in numerous transactions, which has been a significant differentiator for us.

Everyone has maintained their hard work, and it’s inspiring to see the effort put in by the brokers, project management team, construction team, and property management team every day. Thanks to their dedication, we have had a strong start to 2024. Downtown tenant activity is nearing pre-pandemic levels, indicating a positive trend.

We have also observed increased tour activity, good revenues, and higher deal activity. Our goal is to sustain this momentum. While the future remains uncertain, we are hopeful that we have turned a corner in many aspects.

How are you leveraging your global footprint to navigate emerging real estate trends in the Boston market as a global enterprise?

We are seeing a flight to quality in the market. Tenants are gravitating toward newer, top-tier spaces, even over older high-end properties. Interestingly, we have observed a surge in lease signings for class-B buildings recently, indicating a broadening interest in quality.

To keep up with the demand for top-tier options, landlords are investing heavily in upgrading common areas. For instance, the Chiofaro Company, a prominent landlord in downtown Boston, is pouring millions into renovating lobbies and common spaces at International Place, a landmark building. These enhancements are aimed at providing additional incentives for tenants beyond what they can do within their own office spaces.

As older assets receive more attention and upgrades, landlords are well-positioned to offer a more comprehensive package to meet evolving tenant needs. This strategic approach reflects the dynamic nature of the market and the efforts to stay ahead of changing requirements.

Is there still a trend of office spaces transitioning into alternative housing spaces?

While there is merit in exploring innovative ways to repurpose obsolete office spaces in light of post-pandemic dynamics and the return to work, the reality is that few buildings are viable candidates for conversion, especially in our current marketplace. I estimate that perhaps only around 1 in 20 downtown office buildings would be suitable for cost-effective conversion.

What are some trends in the real estate market that you are seeing?

Two notable trends I have observed are the return-to-work policies and increased concession packages in the market. Return-to-work policies are averaging around three and a half days per week, indicating a gradual transition back to office settings. Currently, we are at a 60% recovery compared to the post-pandemic period in Boston.

In terms of sectors, we are seeing varying rates of return, with the tech, software, and media sectors averaging about three days per week in-office, while consulting and life sciences sectors are in the office approximately four days a week. The hope is for an eventual four-day workweek, as it seems unlikely that we will return to a five-day schedule.

Additionally, there has been an increase in concession packages as landlords seek to incentivize tenants in a competitive market. With a surplus of available space, both direct and sublet, landlords are offering larger concession packages, including free rent and tenant improvement allowances, to attract tenants. These dynamics underscore the current tenant-driven nature of the market.

In discussing industries needing development in the Boston economy, where do you perceive the most significant developments or projects?

In the region overall, there is a significant pipeline of life science spaces, with a considerable amount either delivered in the last six months or scheduled for delivery in the next six to 12 months. On the other hand, residential construction has cooled, particularly in the city of Boston. While there are some residential developments emerging in inner suburbs, Boston’s residential construction activity has notably slowed down.

Furthermore, there is minimal office construction underway. Although there has been significant industrial development in the suburbs, much of it remains vacant due to a post-pandemic demand that has since cooled to pre-pandemic levels. Overall, very little new construction is underway beyond projects that were already in the planning stages.

Have the ongoing economic changes affected your business over the past year?

The current state of the economy is undoubtedly impacting our business, as client hesitancy is leading to a slowdown in deal-making and expansion efforts. Some clients may even be contracting their activities. The overall market and economic slowdown affects everyone in the industry.

However, there is hope for a slow and steady recovery on the horizon. We anticipate this recovery will instill more confidence in bringing people back to the office and stimulate growth in the office space sector. Additionally, there is optimism for potential interest rate cuts, possibly by the end of the second quarter or beginning of the third quarter. These rate cuts could bolster confidence in the economy’s position and potentially encourage decision-making regarding asset buying and selling.

How are you incorporating innovative technologies and creative approaches to stay ahead?

We are continuously exploring technologies to maintain our edge and streamline processes. As a growth-oriented and innovative company, we have always strived to be ahead of the curve in leveraging technology, including our proprietary software, Avant. Our focus remains on innovating for the benefit of our clients, ensuring they have access to cutting-edge tools and solutions.

What infrastructure needs do you believe are most pressing to rejuvenate consumer engagement within the region?

In terms of infrastructure in this market, one pressing issue is fixing rapid transit, particularly the MBTA. It is essential for the city’s functionality and vitality. Without improvements, we risk stagnation and inconvenience for commuters.

We must ensure efficient transit to facilitate people’s access to work and incentivize those who prefer to stay home but still reside in the city. The MBTA’s reliability directly impacts people’s willingness to commute and engage with urban life.

Efforts are underway to address these challenges, led by capable leaders devising solutions while striving to maintain service levels. However, the fundamental issues plaguing the MBTA must be addressed decisively and comprehensively to ensure its long-term viability and effectiveness.

Looking ahead, what are your priorities and goals for Avison Young in Boston’s commercial real estate market over the next two to three years?

My goals for this office align with our vision of becoming the most respected commercial real estate firm in the marketplace. Central to this vision is having the best people, culture, and processes to benefit our clients. We are fortunate to have an outstanding team dedicated to achieving this.

To realize our vision, I prioritize three key objectives. Firstly, it is crucial to recruit top-tier talent to complement our existing team. Secondly, we must continue to develop new business opportunities, expanding our reach and impact in the market. Lastly, maintaining an excellent culture is paramount, fostering collaboration, innovation, and client-centricity.

Our focus remains on nurturing a culture of excellence, attracting top talent, and driving business growth to better serve our clients, particularly in occupier services and select landlord listings. These priorities underscore our commitment to delivering exceptional results and earning the respect of our peers and clients alike.