The Uptick in Tech – part two
This blog post was submitted by Ben Breslau, Managing Director, Americas Research at Jones Lang LaSalle.
The third impact of technology on our markets is through the workplace. Here the confluence of demographics and improving technology is enabling and inspiring progressive companies to redesign how we think of space. Employees are clearly more mobile, as technology allows the flexibility to work from anywhere and on any device. But even within the space, tenants are harnessing more open, collaborative, flexible, efficient, and sustainable workplaces.
The driving force for tenants in the past was typically cost, but now in addition to driving efficiency the space itself is being looked at as a way to enable productivity as well as recruit top talent. These trends likely mean lower demand for commodity office space, and a redefinition of the characteristics driving space demand. Office space is not going away, but the target is moving.
One question that I always get is whether the tech boom is just the tech bubble 2.0. Is it sustainable? We recently did an analysis of technology P/E ratios as compared to the dot com bubble and found that valuations remain near the lows of the last 15 years. Today’s tech companies are cash rich and startups have been funded more conservatively. I won’t pretend to know what they all do, but many are making products that enhance and improve the lives of people and the productivity of businesses.
We think this tech wave is still in its early to mid stage with plenty of room to run.
The Uptick in Tech – part one
This blog post was submitted by Ben Breslau, Managing Director, Americas Research at Jones Lang LaSalle.
Last week I spoke at a NAIOP event titled Boston: Hub of the Future? Technology’s Impact on Commercial Real Estate. I was joined by Maureen Joyce, AEW and Tim Rowe, Cambridge Innovation Center (see event photos). The focus on technology and real estate is not a new one. In fact, parts of the topic are very reminiscent of the technology boom of the late 1990′s. There are some clear differences too. My talk focused on three primary ways that I see technology impacting the commercial real estate landscape.
The first is through space demand. Tech companies are the fastest growing members of the office tenant base as we analyze demand across the country. As a result, the top tech markets like Silicon Valley, San Francisco, Boston, Austin, and Seattle are among those leading the office recovery.
It’s the tech submarkets within those metros that are really hot. Rental rates last year grew 25% in Palo Alto, 35% in south of San Fran, and 20% right here in Cambridge. The tech services sector and specifically mobile, social media, search, cloud, and gaming that are the most active. They are recruiting young creative tech talent, and have to be in the urban tech hot spots with “creative” space to find and keep them.
The second way technology is impacting real estate is through our business. I see it plainly in my research world, where real time interactive digital content is rapidly replacing traditional quarterly PDF reports. Blogs like this one are the norm. Social media and mobile apps are changing how we connect with and engage clients, prospects, and our own people. There are many other examples, but one thing for sure is that as more millennials enter our industry, technology will play a bigger and bigger role in how we work. View event presentation.
Lowell Richards: A Boston Leader & Visionary Who Will be Missed
Lowell Richards, Chief Development Officer for the Massachusetts Port Authority, died suddenly this past weekend. This tragic loss is very hard to grasp for many of us that knew him as an energized, dedicated, well-liked advocate and friend, committed to public service throughout his life.
It is very difficult to know the extent of Lowell’s involvement in economic development in Boston and throughout the Commonwealth. He was not a “grand-stander,” preferring to work quietly behind the scenes making things happen, giving others the spotlight. Lowell enjoyed solving problems, and in development and in politics, there are plenty. The advantages that Lowell brought to the table were his deep understanding of the complex political environment, a clear focus on the public policy objectives, a keen mind regarding finances, and the negotiation skills needed to close the deal.
Lowell graduated from Dartmouth College in 1969, earned a Master’s in City Planning from MIT in 1971, and a J.D. from Harvard Law School. He began his distinguished career as a college intern at the Boston Redevelopment Authority.
Within Mayor Kevin White’s administration from 1976 to 1984, Lowell served as Collector-Treasurer, and then Deputy Mayor for Fiscal Affairs. (Just last week, he served as a part of the honor guard during the memorial services for Mayor White.)
Lowell’s private sector experience included senior responsibilities at Cabot, Cabot & Forbes, the commercial real estate development company based in Boston.
From 1994 to 1999, under Governor William Weld, Lowell served as Assistant Secretary for Capital Resources of the Executive Office of Administration and Finance, and then Chief Development Officer for the Commonwealth.
He joined Massport in 1999, where he ultimately became the agency’s Chief Development Officer. There, he was responsible for its agency-wide strategic and master planning activities, including the airports and the seaport, as well as Massport’s private commercial and residential real estate development in South Boston, East Boston, and Charlestown.
Under his direction, Massport received MEPA certification for the Commonwealth Flats Development Area (including the newly designated Boston Innovation District), authorizing development of over 3 million square feet of hotel, office, retail and residential development. During his tenure, construction commenced on over 3 million square feet of maritime industrial, commercial office and apartment development on Massport property leased to developers. He also directed third party development at Massport’s three airports.
Lowell had many friends who are now stunned by his departure. It’s hard to imagine this city without him, but we are fortunate that he left an indelible mark on Boston. His presence will remain with us as we travel through this great city each day.
Massachusetts Community Colleges Need to be Up to the Challenge
The Massachusetts Community College system is getting some well-deserved attention in Governor Patrick’s State of the Commonwealth address, the recent Boston Foundation report, and various news articles and editorials.
Primary concerns voiced by many are their underperformance and the current mismatch between the skills taught through our state higher education system in general (and community colleges in particular), and the middle-skilled jobs currently unfilled or expected to be available in the coming years.
One clear indicator of the problem is that graduation rates at the state’s community colleges are very low, especially as compared to other systems across the country.
The Boston Globe editorializes that the community college system needs to focus on being a “springboard to a productive career,” preparing students for gainful employment, especially “in an economy where competition for jobs is fierce.”
“Everyone without a job in Massachusetts today is likely to need more education, more training, directly relevant to employment opportunities, before they find one.” With over 240,000 people unemployed in the Commonwealth, community colleges have a very large pool of potential students to help.
The question becomes: what needs to be done to bring the existing system of community colleges in better alignment with the needs of employers in today’s economy?
To start the process, in 2010 Governor Deval Patrick established the “Vision Project” initiative using data to align higher education with workforce needs, with the objectives of:
- Improving college readiness;
- Improving student completion rates;
- Aligning degrees with workforce needs;
- Improving student learning; and
- Decreasing gaps between different groups of students
The Boston Foundation study (The Case for Community Colleges: Aligning Higher Education and Workforce Needs in Massachusetts) developed the following recommendations as a strategic blueprint for “building a system that effectively leverages the capacity of community colleges to be leaders in meeting the workforce needs of Massachusetts”:
- Clarify the mission of community colleges, with a priority on preparing students to meet critical labor market needs.
- Strengthen overall community college system governance and accountability.
- Adopt performance metrics.
- Better prepare students for community college-level work and graduation.
- Stabilize community college funding.
- Form a Community College Coalition.
Now is the time to focus on this critical component of the state’s economic development strategy, by boldly working to reform and strengthen the state’s community college system. We need to make it more accountable and performance driven as a strategic path for workforce development.
In a global economy, education will be the prime differential determining the winners and losers. We can and will rise to the challenges of tomorrow, if we make the right choices today.
Kevin White Made Boston the World Class City it is Today
Kevin White, who served as Mayor of Boston for four terms from 1968 to 1984, died at his Boston home this past Friday, January 27th.
After leaving office, he was quoted saying, “I left the city a little better than I found it.” Truly, this was a spectacular understatement. The mayor stepped into office with big dreams, big plans, and the belief that Boston could become a great, world class city.
Kevin White built upon the renewals started by the previous two mayors, John B. Hynes and John Collins. But it was the revitalization of the historic Faneuil Hall Marketplace in 1976 that became the “tipping point” for the downtown’s and waterfront’s emergence as vibrant, mixed-use centers of activity.
Looking at the Marketplace today, it is hard to envision what it looked like before its redevelopment – rat infested, crumbling structures; with the highest and best use for two of the buildings being a flea market open on Sundays. When the project went looking for financing, all of the Boston banks showed their pessimism by refusing to participate at any amount. It took the active role of Mayor White to help secure the financing in New York City (although, only under the condition that the redevelopment be phased to limit the risk.)
During his time in office, new developments sprung up, including towers in the financial district, a redeveloped waterfront, the massive Copley Place retail, office, and hotel complex, and the transformation of the Charlestown Navy Yard.
The Mayor attracted some of the brightest in Boston to be a part of his team to help create this transformation including, Barney Frank, Peter Meade, Lowell Richards, Fred Salvucci, Paul Grogan, Robert Kiley, and Micho Spring.
I will always remember walking through the Boston Garden one evening and running into the Mayor and his wife, Kathryn. It was not difficult to see his love for his wife and his pride in his city. Mayor Kevin White will never be forgotten – his presence will always be with us, as we look upon our world class city.
NAIOP just had its gaming program: Casinos Coming to Massachusetts: Spinning the Wheel – What this New Industry Means for the 
Commonwealth. The event attracted a large crowd and generated significant media coverage. It was the first program of its kind since the casino legislation was signed into law and it was the first public speaking opportunity for Steve Crosby, the Chairman-Designate of the newly established Massachusetts Gaming Commission.
During his presentation, Steve indicated that there were eight guiding principles that came out of the legislation:
- The public must have confidence in the selection and oversight process.
- There will not be a local referendum until there is a signed agreement with the casino operator/developer and the municipal leadership.
- Financial stability of the development must be proven.
- Lottery revenues need to be maintained.
- Job growth and economic development should be maximized.
- Small businesses and local tourism in the surrounding areas need to be protected.
- Revenues must be generated for the Commonwealth.
- Any potential negative consequences should be mitigated.
Steve sees this as a great opportunity to leverage what might be a $2-4 billion private investment into the Commonwealth for the public good. He also hopes that the individual project designs will enhance the culture, social values, and history of the local areas.
Finally, he pointed out that the Commission was just created. Four other members still need to be selected and an executive director needs to be hired before they can even begin establishing regulations and rules, or issue requests for proposals. He guessed that it would take 12-18 months to accomplish all of that with another 6-9 months, at the earliest, before an initial decision on a specific project could be made. The exception to that might be the one slot parlor, which could be on a faster track.
So, casinos are coming, but just not this year!
Time for Change at Mass Historical Commission
The spotlight story on the Massachusetts Historical Commission (MHC) appearing in the recent edition of MassINC’s CommonWealth magazine is not a surprise to anyone who has had to deal with this agency.
It is a shame that a well-respected, growing business like Meditech should have been treated in such a manner to cause them to question doing business in the Commonwealth. But this goes beyond this one company, and the outrage should not be focused only on the resolution of this particular site-specific problem.
The problems include the lack of transparency throughout the permitting process, the lack of regulations and timelines relative to the review of sites listed on the MHC Inventory of Historic Places, and the purposely limited opportunities to meet with this agency. MHC should begin by allowing full, convenient public access to all of its files, as most every other agency is required to provide. These issues must be addressed to provide for a fair and predictable system.
Without these changes, the MHC will continue to be viewed as a political tool, unaccountable to the general public.
A Giant Leap in Online Teaching
At the end of this past year, I had the pleasure of attending the Pioneer Institute’s Lovett C. Peters Lecture in Public Policy honoring Sal Khan, Founder of Khan Academy. The Khan Academy is a free, online education platform that has produced over 2,700 popular instructional videos, viewed 90 million times by students all over the world.
Listening to Sal Khan speak is inspirational. Here is someone born and raised in New Orleans, who earned three degrees from the MIT, an MBA from Harvard, and who then went to work as a hedge fund analyst. For family members and friends, Khan began tutoring using Yahoo!’s Doodle notepad. Once these lessons hit YouTube, their popularity soared and Khan quit finance and established the Khan Academy.
It is a not-for-profit educational organization with the mission of “providing a high quality education to anyone, anywhere.” I realize that this sounds a bit over-the-top, but it is very real and the Academy has developed a free on-line library with micro lectures via video tutorials teaching Mathematics, History, Healthcare & Medicine, Finance, Physics, Chemistry, Biology, Astronomy, Economics, Cosmology and Computer Science. The Khan Academy also provides a web-based exercise system that generates problems for students based on skill level and performance.
This project has attracted funding from the major names in technology and venture capital with donations from the Bill & Melinda Gates Foundation, Google, and John Doerr. Recent investments will allow the translation of this library into the world’s most widely spoken languages.
An exciting offshoot is Khan’s involvement with existing public schools. Khan wants to overhaul the traditional classroom by using technology to provide for basic teaching, allowing the teacher to focus on the individual students’ struggles. The tutorials allow the students to stay with a lesson until it is mastered, something that cannot be easily accomplished through an hour classroom lecture.
Have your kids “test drive” these video tutorials and see what happens. However, don’t miss the opportunity to experience for yourself the magic of these new-age, conversational tutorials with step-by-step doodles and diagrams using an electronic blackboard.
What Made CC&F an Incubator For So Many Development Companies?
At NAIOP’s recent program, Get Inspired with Gerald Blakeley and the Icons of Boston Real Estate, panelists and CC& F alumni discussed the culture at Cabot, Cabot & Forbes and why it resulted in launching the careers of so many of today’s local and national icons of commercial real estate.
View the video highlights.
Many younger real estate professionals may not realize that CC&F was the national pioneer of over 20 million SF of suburban master planned business parks. During the program, Gerry Blakely, CC&F’s former CEO, described his start leading the company. Back then, the land use for industrial properties was either building footprint or paved parking. Very different from today, there were virtually no setbacks, landscaping, or design covenants. CC&F’s new model was a commercial business park that established development restrictions and dimensional requirements more strict than the underlying zoning. Although few banks wanted to risk lending for such a radical and risky venture, CC&F was able to get started and soon proved the profitability of this new concept. In 1948, CC&F opened The New England Industrial Center – the country’s first master-planned business park. With the preservation of natural site amenities and consistent design standards, this facility quickly became a prototype for business parks that has been emulated worldwide.
CC&F was also responsible for creating millions of square feet of first-class office space across the country. Their Boston landmark properties include 60 State Street, One Boston Place, 100 Summer Street, and 28 State Street.
As Bill McCall, President of McCall & Almy, pointed out, the people that Gerry attracted to the company were the brightest around who all shared a strong drive to succeed. These were entrepreneurs taking charge of their own particular divisions within CC&F, whether it was for the industrial, office, or national build-to-suit markets.
The obvious risk was that they were hiring the kind of personalities that would ultimately want to do this work on their own behalf. Although that proved true for many of the alumni, the company benefitted from that intense, productive energy.
The list of CC&F graduates is impressive and includes: Don Chiofaro, President, The Chiofaro Companies; Ferdinand “Moose” Colloredo-Mansfeld, Senior Advisor, Cabot Properties, Inc.; Terry Considine, CEO, AIMCO; Arturo Gutierrez, Chairman, The Gutierrez Company; Mort Zuckerman, Chairman; and Ed Linde, former CEO, Boston Properties.
The legacy of Blakeley and CC&F lives on with so many of the alumni actively involved as leaders in our industry. At the conclusion of our program, NAIOP presented the chapter’s first ever Lifetime Achievement Award to Gerry Blakeley for his contribution to the industry and his impact on Greater Boston.
MassDOT Looking for Opportunities
On December 6, MassDOT Secretary and Chief Executive Officer Richard Davey spoke at NAIOP’s Government Affairs Roundup. He discussed a number of his priorities as Secretary. First and foremost, he is committed to supporting innovation within the agency. He is encouraging employees to do things differently and to come up with creative solutions to some of the challenges facing MassDOT. His energy and passion for the job are clear.
A top priority for the agency has been the implementation of the transportation reform legislation passed in 2009. The impetus for that bill was the mandate that there be reform before any discussion of new revenues. Although there was no discussion of new revenue streams at the NAIOP program, Davey made it very clear that MassDOT cannot continue to maintain current services (and certainly not expand services), given the significant reductions in budgets and staffing.
One particular area of discussion was the agency’s cataloging of its real estate holdings to determine what opportunities might be available, including public/private partnerships. NAIOP will be closely monitoring such opportunities. Another priority is electronic tolling. Currently being used in a number of other states, only e-tolls will be used on the Tobin Bridge starting next year.
His remarks also illustrated the need for a complete financial restructuring of the MBTA if it wants to continue to provide current services or consider any expansion plans. Debt is the major problem for the MBTA, with 50 cents of every $1 of revenue going to debt service.
Secretary Davey is optimistic regarding the future of MassDOT, but he is also a realist who understands that reforms can only get you so far. We encourage a rational discussion about the historic, existing, and future requirements for infrastructure. If we do not invest in our future, we will ultimately pay a higher price in lost businesses and jobs.
David Begelfer
Tamara Small
Reesa Fischer
