As an owner engaged in every step of project development, Boston Properties has propelled sustainable office construction in the San Francisco Bay Area through projects such as Salesforce Tower and 535 Mission. At the same time, as a long-term property holder and manager, Boston Properties continually boosts energy efficiency and comfort in its existing buildings to appeal to tenant demand and keep pace with the market. As a result, the company has been named ENR California’s 2016 Owner of the Year.

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Founded in 1970 by Mortimer Zuckerman and Edward Linde in Boston, the real estate investment trust (REIT) focuses on four key markets: Boston, New York City, Washington, D.C., and San Francisco. These 24/7 cities possess political and geographic constraints to development that help maximize value growth, says Bob Pester, executive vice president and regional manager.

Since entering the San Francisco market in 1998 with the purchase of the 3.3-million-sq-ft, four-building Embarcadero Center, Boston Properties has grown its Bay Area portfolio to include 33 in-service properties totaling more than 5.8 million sq ft. Boasting an occupancy rate of nearly 94%, the developer aims to create iconic locales for its tenants.

“We really focus on the highest of the highest end,” Pester says. “Although we are the single largest landlord in San Francisco by a factor of two, if you look at each building that we have, they would be recognized in the top tier of all the buildings in the city. That’s a combination of architecture, location, quality of improvements and quality of tenants.”

Maximizing Value

Unlike many of its competitors, Boston Properties does not develop properties to sell once they are completed or leased. “We are long-term holders of our assets,” says Michael Tymoff, senior project manager of development. “When we develop, our horizons are 15 or 20-plus years out.” As a result, the firm looks at designing building systems from an operational and expense standpoint with an eye toward energy efficiency more so than a typical merchant developer would.

The owner-developer “focuses on value of the asset holistically,” says Zorana Bosnic, vice president with HOK, who has designed projects for Boston Properties since 2000. “They are very much focused on the quality of what is built. They have an eye on the future tenant as well as the shell of the building.”

To best control the quality of the end product, Boston Properties remains involved during every step. “We are very hands-on. That’s where we create the most value—by seeing a project from inception through turning it over to property management as a longtime holder,” Tymoff says.

The developer organizes each of its departments—including development, construction, engineering and property management—in specialized compartments. For example, in the construction department, employees can focus on either shell-and-core or tenant improvement, developing specific expertise in either market.

As a self-administered and self-managed REIT, Boston Properties cuts out the middleman between its consultants and building partners. “They are a great owner to work with because they are in-house, so you are dealing with the actual owner of the property as opposed to some projects where you are dealing through a construction manager,” says Tom Eymer, senior project manager with Swinerton Builders, the general contractor for the developer’s 28-story 535 Mission office tower in the South of Market (SoMa) district of San Francisco, completed at the end of 2014.

The firm’s staff “understands construction, which made the collaboration a lot less encumbered,” he adds.  “They were very familiar with the construction process and the challenges we faced, and were always there to be a partner with us to solve them.”

Supporting a contractor’s safety program forms an important component in that collaboration. “We go to the meetings, we offer as an owner encouragement and feedback,” says Peter Back, senior vice president of construction. “The best thing we can do as ownership is be engaged, present and have an overall plan so that if something does occur, we are ready to do our part to make sure we support the effort in every way possible to keep it as safe as possible.”

Boston Properties’ liquidity became a key element in mobilizing construction of the 61-story Salesforce Tower, which, at 1,070 ft, will become the tallest structure in San Francisco. Originally developed by Hines in 2007, Boston Properties acquired a 50% stake in the project in 2013 and has since taken on 95% ownership and the role of sole decision-maker.

“We brought the financial viability which made the project actually happen, and it wasn’t going to happen without us,” Pester says. “We are one of the best—if not the best—credit-rated REITs in the country. Everything we own in the Bay Area, we own for cash. Everything that we are building, we are building for cash.”

Boston Properties also brought along its development, leasing and design and construction expertise to the project, he adds.

Designed by Pelli Clarke Pelli Architects and being built by a joint venture of Clark Construction Group and Hathaway Dinwiddie Construction Co., the 1.4-million-sq-ft tower features foundations reaching down 265 ft to bedrock, structural steel framing and a uniform steel and glass curtain wall system. The building will connect to the 5.4-acre rooftop park atop the new Transbay Transit Center next door.

Pre-certified LEED Platinum, Salesforce includes outside air ventilation and an under-floor air distribution (UFAD) system, which is expected to exceed the new, more stringent California Title 24 code (which goes into effect in 2017) by 30%. 

“I couldn’t possibly overstate the value of the UFAD,” says Danny Murtagh, vice president of engineering. “It’s a technology that should be a game changer for future high-rise office buildings, because the energy requirements for that type of system are substantially less.” In San Francisco’s moderate climate, the system exploits 60 degree median temperatures to operate at lower pressures and higher temperatures without the need for mechanical cooling.

Boston Properties’ board of directors espouses leadership in sustainability as a key initiative, and employs a full-time sustainability officer nationwide plus sustainability leaders in each office—including Murtagh in San Francisco. The firm’s Bay Area portfolio includes three LEED Platinum projects, four LEED Gold and nine that are Energy Star labeled, with a tenth—535 Mission—going through the submittal process.

“There’s a return on investment that is measurable on a lot of the green initiatives that we are taking,” says Aaron Fenton, project manager of development. “Tenants want to be in buildings that operate as efficiently as possible.”

With the four Embarcadero Center buildings ranging in age from 36 to 46 years old, the company identified retrofit strategies to reduce energy and water consumption, enabling the buildings to earn the Energy Star label. “If you look at the goals of our operating staff—diversion rates in the buildings, water conservation, reducing greenhouse gas emissions and how we operate the buildings from an efficiency standpoint—all of these things are important to us and are backed up by the fact that they are part of our goals and compensation program with our property management group,” says Steve Colvin, senior vice president of property management.

New Opportunities

Upcoming work in the developer’s portfolio includes the 1.6-million-sq-ft Station at North First in San Jose. At build-out, the office campus will include seven buildings ranging in height from five stories to 10 stories. Also on a full block, the firm’s preferred site type, at Fourth and Harrison in SoMa, Boston Properties will develop a 1.1-million-sq-ft office complex designed by HOK. The project features a 65-ft-tall podium encompassing the entire site and a unique sculpted 240-ft tower with slanted segments.

The developer is also exploring multifamily project opportunities throughout the Bay Area and looking to expand in other markets around California, Pester says.

Once these projects come to fruition, the developer should have no shortage of designers and contractors willing to build them. “I would relish the opportunity to work with them again,” Eymer says. “I look forward to any Boston Properties proposals and I hope I get assigned to those jobs.”