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Innovation Economy

Increasingly, tech firms are crossing river

LESLIE COBER-GENTRY for The Boston Globe

Many nights, after the lawyers and architects have all gone home, and after the last filet has been flipped at Ruth’s Chris Steak House, the lights remain on in the copper-clad dome of Old City Hall in Boston. Employees of Mobee, a start-up that makes a mobile app, tend to work late.

“When we leave at 1 or 2 a.m. it’s pretty quiet on School Street,” says Mobee founder Prahar Shah. “It’s fun to close the big ornamental doors behind me, and think about everyone who has done that over the years.” (The building opened in 1865, and it was home to Boston’s municipal government until 1969.)

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Shah started his company on the campus of MIT while earning his MBA; its app enables “mystery shoppers” to gather data about retailers and restaurants. Then, he operated Mobee out of free office space in Kendall Square. But in January, he became part of a pronounced migration of tech start-ups relocating not to other parts of Cambridge or Boston’s waterfront Innovation District, but the convoluted streets of Downtown Crossing and the Financial District.

A year ago, it was rare for growing tech companies to land downtown, except for a few streets close to South Station. But now, the Thinking Cup Coffee Shop facing Boston Common is becoming the caffeination depot of choice, and a regular after-work gathering of mobile software developers has relocated to Quincy Market from Porter Square. Several maps have been published online to document the new arrivals. And the headquarters of Bolt, a new accelerator program geared toward entrepreneurs who design consumer electronics, will soon open on Chauncy Street, at the edge of Chinatown.

Cambridge has become so concerned that fledgling companies are getting priced out of Kendall Square that last week the City Council approved a new zoning law that aims to set aside at least 5 percent of the floor area of new commercial buildings as “innovation space,” with short-term leases and small offices.

Downtown Boston has become appealing to start-ups for three reasons. The rent can be half the cost of Kendall Square ($20 to $30 per square foot is common, and Shah says Mobee pays $15 per square foot for its penthouse office, with one floor featuring porthole windows). That’s the result of the diminished retail action in Downtown Crossing, as well as the shrinkage of the financial services industry along with the law firms, consultancies, and other companies that support it, says Ben Sutton, a senior associate at NAI Hunneman, a commercial real estate firm in Boston.

Second, says Sutton, landlords are willing to sign one- and two-year leases — giving entrepreneurs flexibility as their companies grow — compared with four or more years in Kendall and the Innovation District. Finally, there’s the neighborhood’s close proximity to all the T lines — especially the Red Line. “This feels more central than Kendall Square is,” says Max Goldman, a cofounder of Directr, which makes a mobile app for producing videos. Directr moved from Cambridge in February, and its office next to the Park Street T station looks over the Common to the State House.

Cambridge has become so concerned that fledgling companies are getting priced out of Kendall Square that last week it approved a new zoning law to set aside space for them.

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Asked if Directr’s 10 employees felt it was a sacrifice to leave Kendall, Goldman says: “The team greatly prefers being here. There are more restaurants, bars, and places to be. There are probably a dozen companies within this neck of the woods, and we run into them all the time.” Directr shares its office space with another start-up, BabbaCo, which sells activity boxes to parents of small children. It had been based at the Cambridge Innovation Center in Kendall, which houses hundreds of start-up companies.

Aside from the Cambridge Innovation Center, which rents individual desks for about $500 a month, and a similar facility called Intrepid Labs, Kendall is growing increasingly inhospitable to start-ups — especially those that have 10 or more employees. As Microsoft has expanded at One Cambridge Center, it is nudging out two programs to which it had provided free or discounted space. Many denizens of one program, Dogpatch Labs, including Mobee and Directr, have moved to Boston. The other program, TechStars, is hunting for its next office, somewhere along the Red Line.

All of the buildings going up in Kendall Square are dedicated either to big pharmaceutical companies such as Pfizer and Novartis, or to academic research labs like the Broad Institute. Cambridge’s new “5 percent for innovation space” rule will only apply to future construction. Fast-growing tenants like Google and Amazon.com are fairly insensitive to rents that frequently exceed $50 per square foot.

If there is a complaint that the Cambridge emigres have about downtown Boston, it’s that it can be challenging to get high-speed Internet access in some buildings.

The area doesn’t really have its own tech-oriented moniker yet. Some are trying to dub it the Mobile District, since many of the firms write software for smartphones, but that hasn’t yet caught on. Downtown has nowhere near the number of conferences, cocktail events, and seminars that Kendall does. And there aren’t yet well-entrenched hangouts for entrepreneurs, though bars like J.M. Curley’s and cafes like Thinking Cup are candidates.

“Downtown can develop a start-up identity,” says Sravish Sridhar, who moved his company, Kinvey, to Downtown Crossing from Kendall last month. “It’ll just take a little time, because the density is new.”

Sridhar’s 21-person company offers a service that helps customers develop and operate their own mobile apps, and it recently posted a map on its blog illustrating more than 30 start-ups based downtown. Cort Johnson, a founder of the Web development firm Terrible Labs, says, “I run into people on the street all of the time, and it has a similar feel to Kendall, minus the hype.”

So can Kendall Square hold onto the fast-growing tech companies that helped produce the neighborhood’s vibe, character, and community?

The City Council’s new zoning requirement feels like a rear-guard action. Kendall may retain newborn tech start-ups that are happy to cluster in shared offices, but still lose companies as they grow to 10 or 20 employees and start desiring their own digs. Increasingly, the neighborhood is starting to feel like a research and development outpost for Nasdaq 100 companies.

The migration to downtown Boston shows no signs of abating, according to realtors and entrepreneurs in the market for their next office. Last weekend, a small caravan of trucks stopped outside the new offices of Bolt on Chauncy Street. They were delivering about $1 million worth of machine shop equipment that entrepreneurs will use to prototype new gadgets as part of Bolt’s six-month accelerator program.

As home to between 10 and 15 early-stage start-ups, Bolt is likely to become one of the anchor tenants of this new start-up neighborhood. Founder Ben Einstein says he looked at 30 spaces along the Red Line between the Andrew and Alewife stations before signing the lease at Chauncy Street.

“We saved money, it looks awesome, and the neighborhood is fun,” he says. At about $20 per square foot, “we got a really good deal.” Plus, the nearby restaurants of Chinatown stay open late.

The first set of entrepreneurs arrives at Bolt in June.

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.
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