Advancing the Allston Enterprise Campus
The University announced today that Steven D. Fessler will become head of enterprise real estate, effective April 18. The appointment to this new position signals progress toward developing a 36-acre Allston parcel designated for development of an “enterprise research campus” that would rise across Western Avenue from Harvard Business School and east of the complex (expected to begin construction this summer) that will house much of the School of Engineering and Applied Sciences. (Background on the enterprise campus, the broader Allston plan, and a map showing the site are available in this 2015 report.)
Fessler, founder of SDF Properties LLC (apparently a private investment and advisory firm), will report to executive vice president Katie Lapp, who is responsible for Harvard’s Allston activities. In the news announcement, Lapp said:
The enterprise research campus is a bold development: a new innovation district offering a broad mix of uses, including new spaces to live, work, play, research, adapt, innovate and collaborate, all while enhancing links to Cambridge, Longwood Medical Area, Boston’s Innovation District, and other regional nodes. As Harvard continues to advance its plans in Allston, I look forward to working with Steve to engage communities within and outside of Harvard in charting the pathway forward for these critical parcels.
The announcement suggested the scale of Harvard’s ambitions for the program, noting that “this development area is envisioned to support millions of square feet of development—a hub for commercial, non-profit, startup, venture capital, and investment enterprises.” (The list of potential uses is an interesting amplification; see discussion below.)
Provost Alan Garber said in the announcement that “Massachusetts offers a density of academic institutions, hospitals and business that is unmatched anywhere else in the world. Harvard wants to create a venue for research-based businesses to thrive and promote interaction across fields, disciplines and institutions.”
The Long March
The idea for the enterprise research campus emerged from the Allston Work Team, which issued its report in 2011. As explained then, the idea was “to ‘open a gateway to a collaborative community for business, investment capital, research and science development’—in other words, a commercial facility similar to Research Triangle Park situated between three universities in North Carolina.” The vision was very much to proceed with partners—a way of developing Harvard holdings that could advance more rapidly than the University could then achieve on its own, and with less financial strain on its balance sheet. (A small version is the Continuum residential and retail development, shown here, at Barry’s Corner, at the intersection of Western Avenue and North Harvard Street, which began leasing last fall; it was erected by a commercial developer, under a land-lease agreement with Harvard.)
An enterprise research campus planning committee was formed in 2014, under the provost, to advance work on “a community of commercial and nonprofit” entities. Its members were selected to bring to bear perspectives from the academy (heavily focused on engineering, applied sciences, and entrepreneurship), urban planning, and the financial and real-estate markets. By early 2015, the campus was being described as an “innovation district,” where offices, laboratories, and perhaps even housing (desperately needed in Boston’s tight residential market: 400-square-foot studios at Continuum start at a monthly rent of $2,405) might be sited, once the area is cleared of materials left over from its long use as a rail yard, and plans advance for relocating the complicated Massachusetts Turnpike exit ramps. Garber told Harvard Magazine then that
[T]he “time is propitious” for such a commercial development. “Boston has an extraordinary concentration of intellectual capital and of research activity, particularly in the life sciences and technology,” he pointed out. The city is also “an extremely attractive location for knowledge-intensive industries, and virtually every major pharmaceutical company has or seeks to have a research presence in the Boston area.” Kendall Square, the epicenter for such tenants, near the MIT campus, totals 30 acres, he said. Elsewhere in Boston, “There are pockets of land where research-intensive businesses can be developed, but nothing quite like this [parcel] that I am aware of.”
Because Harvard, Boston University, MIT, and Tufts are all near the site, he continued, “If you wanted to develop your plan for dealing with malnutrition in Africa, you have access to scientists and to students who will be passionate about solving worldwide problems. You’ll have also access to a philanthropic community…committed to many of these causes. We believe that the enterprise research campus will be a very attractive location for large research-intensive companies, for commercial startups, and for social enterprises who want to tap into the wealth and talent that are available in our area.”
Such activity will, in turn, “contribute to the academic environment, in part by enabling those members of our community who wish to interact with companies to do so,” Garber said. What construction will appear on the enterprise campus (beyond [a planned] hotel and conference center detailed in [Harvard’s regulatory filing for Allston]) has not yet been decided, but Lapp indicated that the “goal is to create a 24/7-type community,” implying a broad mix of uses.
At that point, Garber estimated that construction on the enterprise research campus might begin within three to five years, subject to “many potential sources of delay.”
The description of possible uses and users in today’s announcement suggests either a broadening of Harvard’s definition of the innovation and enterprise ecosystem, or a market-tested definition of prospective tenants and developers in Greater Boston today, where financial and investment firms are significant users of office space.
Among the challenges facing the project will be competition from continued torrid area development. Kendall Square, the commercial zone near MIT, has emerged as the epicenter of biotechnology ventures, pharmaceutical companies, high-tech enterprise, and venture capital for much of the eastern United States—pushing demand for laboratories, and the accompanying rents, to a level unprecedented in Greater Boston. Cambridge recently approved one million square feet of residential and commercial development there, to be built by Boston Properties; a 14-acre site controlled by the federal government is going to be redeveloped; and MIT is pursuing an additional 1.4-million-square-foot, six-building program in Kendall. Rapid development also continues on Boston’s waterfront, now dubbed the “innovation district,” anchored not only by office buildings but also by the headquarters of Vertex, the pharmaceutical company. GE, now based in Connecticut, recently announced plans to relocate its corporate headquarters nearby. That competition, and the commercial real-estate and biotech-finance cycles—both conceivably long in the tooth locally—may influence the timing and execution of Harvard’s plan.
Today’s announcement, and the plans for the enterprise research campus, suggest how different Harvard and its Allston ambitions are from those hatched a decade ago, before the financial crises of 2008-2009 roiled the University’s endowment. Harvard envisioned millions of square feet of academic development, unfolding at a rapid pace, and in 2005 hired Christopher M. Gordon, director of the $4.4-billion Logan Airport modernization, to be chief operating officer for a dedicated Allston Development Group, reporting to Lawrence H. Summers, then president.
In his mid 2007 report as interim president, Derek Bok noted, “Work on developing Allston has also gone forward on schedule,” with the filing of a master plan, designs for the science complex advancing “so that construction can begin within the year,” and a pending renovation to house the Fogg collections during the reconstruction of the museums. The science center, of course, had to be mothballed in early 2010, after the financial crash—worsened for Harvard in part by its advance-funding arrangements for the anticipated Allston construction. And the museum plans did not proceed; the museums used swing space in Somerville, and moved back into their new home in late 2014.
Bowing to those new realities, Gordon stepped down in mid 2010, observing, “The work I came here to do will be happening at a slower pace and intensity…and that reality led to today’s announcement.”
Now, Harvard will develop its own academic facilities at a much more measured pace, and will pursue development of a significant piece of its Allston property in a way that both complements the University’s interest in entrepreneurship and innovation, and fits its “new-normal” financial resources and appetites. (Constrained federal funding for research makes it more difficult to recover the costs for University-owned science facilities. The resetting of the endowment’s value, and the prospects of more modest long-term investment returns, mean there will be a lower projected assessment on endowment distributions to pay for Allston programs, or to service debt that might be incurred to build there.)
Partnering with developers would radically diminish Harvard’s required investment—initial infrastructure costs in the Allston enterprise zone will be daunting—while bringing new uses to the land perhaps decades earlier than it could be repurposed for academic tenants. And, of course, that modus operandi could turn a fallow asset into a rent-producing source of revenue—perhaps from tenants developing intellectual property created in Harvard labs, and paying royalties to use it.
For now, Harvard has an executive responsible for sorting out what kinds of partnerships to pursue, what mix of development might be feasible, and how to cut the multiple Gordian knots that will certainly need to be untangled on a project of this scope in a heavily regulated city like Boston. Fessler, a Stanford political-science major who then earned a master’s in construction engineering and management, has worked at Beacon Properties Corp., Copley Real Estate Advisors, and Leggat McCall Properties, all Boston-based. He is a director of NAIOP Massachusetts, the commercial real-estate development association. He will certainly call on everything he has learned, and all the experiences he has accumulated in area development, to move the enterprise research campus ahead in the years to come.