Boston Properties sees nothing to dislike about the Bay Area.
THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN JANUARY 2014[dropcap]B[/dropcap]ob Pester has been involved in Bay Area real estate for more than 30 years. As senior vice president and manager of Boston Properties’ Northern California region, he oversees all company activity on the West Coast. Pester launched his real estate career as a commercial broker with Cushman & Wakefield when he was fresh out of UC Santa Barbara. He worked his way up to vice president before becoming president of Bedford Property Development, a private West Coast development concern that held more than $2 billion in real estate. In 1994 he became chief investment officer for Bedford Property Investors, an East Bay real estate investment trust. He led the acquisitions and development program.
He’s been with Boston Properties since 1998, when was appointed to his current position. Boston Properties’ Bay Area portfolio includes Embarcadero Center in San Francisco, Mountain View Research Park and Mountain View Technology Park. One of the newest additions is a parcel next to San Francisco’s new Transbay Terminal. Boston Properties will own 95 percent of the 61-story Transbay Tower planned for the site, slated to be the tallest building on the West Coast.
Q: We wrote earlier this year that Boston Properties was busy working on its developments in San Francisco while at the same time shedding some assets in Silicon Valley. Was this just an opportunistic coincidence, or is the organization truly placing more focus on San Francisco?
BP: Purely coincidence. While it is true we sold an asset in downtown San Jose, we also bought out our partners’ interest in our Mountain View Research and Tech Parks in this past year—an additional investment in the Valley in excess of $100 million.
Q: As someone who has visibility to markets across the United States, how are we comparing to those others? Yields are shrinking and prices are going up. Does it still make sense to invest in the Bay Area?
BP: We are focused on four core markets: New York; Boston; Washington, DC; and San Francisco, and I think it is safe to say that these are the highest profile markets in the United States. We continue to look at development and acquisition opportunities all the time, but pricing is a little “frothy” right now.
Q: Given the anemic recovery across the country, is it conceivable that we may have the next recession hit our national economy before we actually get out of this one?
BP: That would be a good question for Mort Zuckerman, our chairman and founder. Just read his editorials from US News and World Report over the past few years for your answer. In the Bay Area, all the metrics point to a growing local economy for the next several years.
Q: What are the biggest challenges facing the commercial real estate industry in the Bay Area today?
BP: Lack of land. The Bay Area is built out, so if you are building something you have to tear something down first. Assembling a large site for a commercial development is very difficult to do.
Q: One of your organization’s core strategies is to explore joint-venture opportunities. Does this include potentially bringing international partners to the region? Other parts of the country?
BP: If the opportunity presented itself where it is advantageous for us, it is something we certainly would explore.
Q: Your national focus has been on traditional centers of economic activity. As we see the prominence of energy and technology expand, will Boston Properties (nationally) expand its focus on those industries as well? (Seattle, Austin, Houston, etc.)
BP: We have in the past, and continue to explore other markets, but have yet to find one with the right opportunity that makes sense for us. One of the things that have made Boston Properties so successful for so long is to stay focused on its core markets.
Q: Are you optimistic about 2014 in the Bay Area? Why?
BP: The Bay Area is one of the most desired areas in the United States, tech capital of the world, with a booming economy, certainly one of the strongest from a commercial standpoint in the U.S. What is not to like about the Bay Area?
Q: What else should we be asking?
BP: As Shakespeare once said, “Brevity is [the soul of] wit”.