T
he old Barnes & Noble in Downtown Crossing has sat vacant for nearly two decades. The building, 399 Washington Street, was family-owned until 2017 when Chicago-based LaSalle Investment Management and L3 Capital bought it for $63 million. They invested millions more into upgrades, including working bathrooms and elevators, new mechanical systems, and a sleek metal and glass facade.
Despite marketing the retail space after completing upgrades in 2021, tenants never materialized. With office demand still weak following the COVID-19 pandemic, the property ended up in a real-estate owned sale earlier this year. Several investors showed interest, including Celtics star Jaylen Brown, but Hudson and Assembly won the bid.
The new owners plan to market the property at rents in the $40s per square foot, significantly lower than typical Class B office space downtown. They aim to bring energy back to the building by adding a ground-floor retailer and resetting office rents. "That will cast a wide net for tenancy," said Papanastasiou. "Just lighting up this building is going to help tremendously."
This deal is part of a broader post-COVID reset in office values across the city, with investors and developers snapping up well-located spaces at discounted prices. One such investor is Broder, a Boston-based real estate firm that recently bought 15 Broad Street downtown for $13.5 million – $5 million less than it first paid to buy it 18 years ago.
Broder's managing partner Eric Svenson said his firm has little debt and is privately funded with family wealth. He expects to make several similar acquisitions this year, taking advantage of sellers who are feeling pressure to sell at a loss due to weak office demand.
Properties like 399 Washington Street and 15 Broad Street can give landlords flexibility to offer tenants space for a discount or invest in modern amenities, said Wil Catlin, a senior partner with Boston Realty Advisors. However, pricing is no longer the only consideration; tenants now prize amenities and places for employees to connect with peers.
As sales activity increases this year, experts expect more deals like this as deep-pocketed global real estate owners pivot away from commercial real estate in an effort to curb future losses. Private equity behemoth Blackstone has already begun paring back its office holdings, while Swiss bank UBS Group has been shedding office properties across the United States.
In Downtown Crossing, Papanastasiou and Ron are already in advanced conversations with several retailers to lease 399 Washington's expansive first and second floor. They aim to sign an office lease soon for one of the upper floors, confident they can lease it to a tenant this year.
