Where is Housing for the Middle Income Family?

Thomas Grillo did an excellent job on BBJ’s recent article, “The story behind Greater Boston’s housing bottleneck”.

As rightly pointed out, communities have tightened permitting, making it harder to build and meet the demand for housing in general, and moderately priced and affordable units in particular. Zoning requirements have become more onerous with local rules and special by-laws, making the development process longer and more unpredictable. Interestingly, the municipalities and planners are crying out that they do not have enough control and want new land use reforms. However, there is currently a serious lack of permits issued for housing for families and these changes would actually hinder the production of reasonably priced housing.

Many communities have some of the strictest zoning in the region, with large minimum lot sizes, restrictions limiting multi-family housing, and unworkable cluster zoning ordinances. Opportunities for young families to rent a moderately price apartment or find a reasonably priced starter home is virtually impossible. The Massachusetts economy cannot fully expand without the support of its highly talented college graduates. Unfortunately, as the recovery continues nationally, local business leaders are finding it more difficult to attract the best talent when competing with other states. Economic development professionals across the country are already starting to attract young families out of our region and into areas that are more affordable, leaving us, yet again, with the risk of a declining skilled workforce.

The strangest trend to occur in housing production is that children have become society’s “toxic waste”! Many housing proposals that would attract families with school age kids are denied at the local level. More and more municipalities are fighting the permitting of three or four bedroom apartment units, or even requiring 55 and older residency age restrictions. If it appears that developments will bring children into the community, they are fought aggressively by the local boards. Even towns where the school populations are predicted to decline are reluctant to allow apartments that accommodate two or more children.

We are losing our 25 to 34 year olds at a faster clip than we are growing our total population. Our future is our young families and their children. Once and for all, we need to develop a serious policy that allows for the construction of family-friendly apartment housing and of smaller, denser, affordable, single family starter homes.

The future of our economy and our workforce depends on it.

Zoning Legislation Will Hinder Housing Production In Massachusetts

In response to the June 2, 2014 Boston Globe editorial, “Sprawl takes a fall?,” NAIOP Massachusetts submitted the following Letter to the Editor: 

A recent Boston Globe editorial titled “Sprawl takes a fall?” urges the Legislature to pass zoning legislation with the incorrect assumption that the bill will result in the production of more reasonably priced housing. Unfortunately, the legislation would actually hinder, not encourage, the production of this much needed housing.

The bill makes a number of changes to the zoning law, Chapter 40A, which would apply statewide. However, many of the other changes would apply only in “opt-in” communities.  Key parts of the bill would limit predictability and add financial risks for expanding businesses in the Commonwealth. For these reasons, all of the industry trade groups in the state representing builders and developers strongly oppose this legislation.

The lack of workforce housing is a barrier to economic growth, limiting the ability of business leaders to attract the best talent when competing with other states with lower costs of living. Instead of passing this very problematic bill, we urge the Legislature to work with the Administration, municipalities and the business community to create a new program that truly encourages the production of denser and more affordable housing.

David I. Begelfer
NAIOP Massachusetts, The Commercial Real Estate Development Association


The Changing Face of Downtown Boston

The following blog post was submitted by Ally Quinby, Account Executive at Solomon McCown.

Real estate professionals gathered last week to discuss the significant transformation happening in our city’s core. The office, retail and residential sectors are all growing and working together to create a true 24/7, live, work, play environment in downtown Boston.

Even with the boom in the Seaport, Downtown is seeing an influx of new office tenants who want to be in the heart of the city. David Greaney of Synergy Investments told us that of the 70 leases his firm has completed this year, 59 of them were located downtown. And these tenants are looking at more than just the office space. Mark Smith said that Equity includes the amenities of the surrounding area on tours with potential tenants. He also told the room that tenants want comfortable, communicative environments.

All these companies have employees who want to be within walking distance of work. Despite the thousands of apartment units that are planned and currently being constructed, Bill McLaughlin of AvalonBay Communities said that the demand is there because young people aspire to live in the city; we are well-positioned to absorb the deliveries we will see in the next five to six years.

Retail is growing too. Andrea Matteson of CBRE/Grossman Retail Advisors highlighted Walgreens, Equinox, Scholars and the coming Legal Seafoods as game changers who have helped Downtown Crossing look better than ever. She said that first floor tenants are key in providing character for downtown buildings.

Foreign investment and continued development make Boston one of the U.S.’s most dynamic cities, and our panelists agreed that downtown is going to be an integral part of Boston’s growth in the coming years.

2013 Bus Tour Recap: The Suburban Transformation

The following blog post was submitted by David Fleming, Principal at PACE Communications Group, a marketing and PR firm that specializes in commercial real estate and retail.Elisif_20130501_0150

Three signs that spring has finally arrived in Boston: 1) green grass on the Esplanade, 2) the Red Sox back at Fenway Park, and 3) NAIOP MA’s Annual Bus Tour. The 11th edition of the tour took place on Wednesday as more than 250 people aboard five buses toured properties along what is suddenly one of the hottest stretches in commercial real estate in the region: the Route 128 Corridor from Needham to Lynnfield. Here’s a summary:

Elisif_20130501_0115Kickoff at Needham Crossing

  • Needham’s Economic Development Director Devra Bailin, discussed efforts to rebrand the former New England Business Center as Needham Crossing
  • Justin Krebs and Mark Roopenian described two of Normandy Real Estate Partners’ projects along the route:
    • Center 128, which will redevelop Needham’s former New England Business Center into an 825,000-square-foot “super-park,” including a Marriott Residence Inn Hotel
    • Station at Riverside, which will transform MBTA’s Riverside Station into a mixed-use development featuring 295 apartments, a 10-story 225,000 square foot office building, and a 20,000 square foot retail village
    • Mike Wilcox of The Bulfinch Companies discussed development at Needham Crossing and the branding and leasing efforts at Atrium Center. Wilcox concluded with an exciting Atrium Center video that you can see here.
    • In his market overview, Jeremy Grossman of CBRE/Grossman Retail Advisors noted the “flight to quality” among retailers, New Urbanism, the continued expansion of restaurants, the intensifying battle among grocers, and the strengthening of regional markets such as Chestnut Hill, Lynnfield, and Northborough as key trends

Elisif_20130501_0215Bus Tour Highlights

Six tour buses, escorted by members of the MA State Police, traveled along Route 128 beginning in the Needham/Newton area and ending in Lynnfield. Here are a few highlights:


Elisif_20130501_0268Lunch and Learn at MarketStreet Lynnfield

The tour stopped in Lynnfield for lunch at MarketStreet Lynnfield, a 680,000 square foot mixed-use development currently under construction. Inside a space that will become a Shoe Market store, WS Development’s Tom DeSimone and National Development’s Ted Tye shared details of the joint venture scheduled to open in August 2013.

When complete, MarketStreet Lynnfield will include 395,000 square feet of shops and restaurants, 80,000 square feet of office space, 180 residential apartments known as Arborpoint at MarketStreet, and the 9-hole King Rail Reserve golf course.

Elisif_20130501_0282Voices on Tour

I caught up with a few people on tour. Here’s what they had to say:

  • Tom DeSimone, partner, WS Development: “There’s no better way to understand real estate than to actually be there. The NAIOP Bus Tour gets you closer to the real estate by providing an introduction. Then you can go back and look at whatever may have peaked your interest.”
  • Ted Tye, managing partner, National Development: “It’s great to people out here having a nice day, getting out from behind their desks, and seeing some projects that are being built. And, it’s incredible that in 2013 that we actually have things being built.”
  • David Chilinski, co-founder and president, PCA: “The best part of the NAIOP Bus Tour is that you really get a sense of what’s happening and, importantly, what’s new in the marketplace.  We all know the tried and true properties, but the tour lets you see new projects as well as cases where people are reinventing or adding to projects. That’s the importance of this tour.”
  • Sarah Walker Weatherbee, managing director, Keller Augusta: “You get a sense of history as well as what the future holds for the Boston-area markets like the ones we saw today. And, the networking that the Bus Tour enables is unique to NAIOP—that really makes the day exceptional.”

While here, please read David’s important post below about National Development’s Roseann Sdoia, who was seriously injured in the Boston Marathon bombings. David includes a link to
Roseann’s Recovery Fund for those who wish to donate toward expenses for Roseann’s treatment and recovery.

Grim Optimism for Real Estate and the Economy

Goodwin Procter’s Real Estate Capital Markets Conference was recently held in New York City in partnership with Columbia Business School.  GP-REConferenceAn exceptional group of speakers discussed the real estate markets, investments, and the economy.

The keynote presentation was delivered by Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, and now a Professor of Economics at the University of Chicago’s Booth School of Business. Goolsbee spoke with “grim optimism” about the US economy.  The US has the most productive work force in the world and low energy and new-energy sources will benefit our growth.  Relative to the rest of the world, our fiscal imbalance is manageable. All in all, he believes that the next six to twelve months will be a bumpy ride, but prospects in the long-run look good.

The following are a few interesting observations made during the panel discussions:

  • Demographics are playing a key role internationally, especially in the US. Effects of this will be seen in an increased demand for apartments, senior housing, and retail.
  • With accounting standards likely to change in the future, as relating to corporate leasing and ownership, more businesses will likely choose owning large amounts of their space.
  • Retail sales continue to be impacted by online competition, but retail is still a growing market. The future may move towards more hybrids that have both online and storefront locations.
  • Office space needs are dropping in terms of space requirements per new job. However, there is a sense that over time businesses will start to swing back towards a need for greater space.
  • Multifamily housing rents are back to pre-recession highs and it is likely that rents will experience slower growth going forward.
  • Record amounts of capital were raised both in the public and private markets last year. With less growth worldwide, real estate is very attractive to investors.  Investor interest is focused on yields and risk management. Where in the past, “cash is king”, now, “cash flow is king”.
  • Rates should not be rising in the short term, but that is a big risk for all asset classes. The markets could wake up to a starting spike in rates that, in hindsight, will have seemed inevitable.

NAIOP Raises $151,500 for Heading Home

This post was submitted by Marc Margulies, principal at Margulies Perruzzi Architects and president of Heading Home’s Board of Directors

On June 6th, NAIOP Massachusetts held its 24th Annual Charitable Golf Tournament to benefit Heading Home, raising $151,500 to support programs to end homelessness in Greater Boston. This record-breaking sum is the largest in the tournament’s history, bringing the total donated to Heading Home to more than $1.85 million. The commercial real estate community should be proud
that its steadfast commitment to Heading Home reaps real rewards for homeless families.

In 2011, Heading Home helped more than 2,000 homeless people in Greater Boston by providing them a place to call home and opportunities for self-sufficiency. Two-hundred and fifty units of housing have been created since 2006, with 61 new units created in the past year alone.  More than 400 volunteers annually commit their time and energy to Heading Home, and the commercial real estate community provides a large number of those volunteers. The monies raised by NAIOP will continue to support Heading Home’s programs to end homelessness locally.

Andrew Hoar, president of CB Richard Ellis/New England and chair of the 2012 NAIOP Massachusetts Charitable Events Committee, led the effort to make this record-breaking donation possible. Andy has been on the Heading Home Board of Directors since 2007, and he, his wife, and his firm are longtime contributors to the organization. Andy’s efforts this year hit the fundraising goals out of the park!

Another ardent Heading Home supporter who deserves special recognition is NAIOP Massachusetts CEO, David Begelfer. David has been actively involved in the struggle to end homelessness for more than 24 years, and started the annual NAIOP golf tournament to support Heading Home. In 2010, David received the Bob Ray Partnership Award from the Massachusetts Housing and Shelter Alliance for his commitment to ending homelessness. His support of Heading Home, including serving on the organization’s Advisory Council, has been unwavering through the years.

Since the first NAIOP Golf Tournament that raised $5,000 for Heading Home, the commercial real estate industry has continued to come together to show support for homeless families and individuals. Thank you to NAIOP’s member volunteers, staff, and generous donors who helped to raise this record-breaking donation for Heading Home. It is only through their support that the tournament is able to raise funds needed to help Heading Home accomplish its goal of ending family homelessness.

View pictures from the event.

Getting Real in Affordable Housing

The following blog post was submitted by Anne Baker, Account Executive at Solomon McCown.


It’s all about perception versus reality.

That was the takeaway message from NAIOP’s Affordable Housing: Challenges and Initiatives panel on May 23.  The panel included Howard Cohen, Chief Executive Officer at Beacon Communities; Lawrence Curtis, President at WinnDevelopment; Tony Fracasso, Senior Vice President at MassDevelopment; Bart Mitchell, President & CEO at The Community Builders, Inc.; Jeanne Pinado, Chief Executive Officer at Madison Park Development Corporation; and was moderated by Solomon McCown CEO Helene Solomon.

The meeting was kicked off by Aaron Gornstein, the newly appointed undersecretary for the Department of Housing and Community Development (DHCD).   Gornstein outlined his plans for DHCD, emphasizing that the agency is planning ahead for growth in the state.  Streamlining the permitting process, giving support to promising communities, marketing the opportunities available to developers and building needed infrastructure are all essential elements of Gornstein’s affordable housing plans.

But while some may only see affordable housing as a social issue, Gornstein was clear that the high cost of living in Massachusetts has serious long-term ramifications for whether businesses decide to locate here and that the construction of affordable housing creates needed jobs.

False perceptions were also a constant theme throughout the panel discussion. The public is not aware that family homelessness is a relatively recent problem and that it’s easily solved through the construction of affordable housing, Pinado said.  Mitchell and Fracasso both emphasized the creative financing options that are available to affordable housing developers who are looking for them.

Curtis argued passionately that while the construction of affordable housing is important, it alone can solve the housing gap in Massachusetts; we must work together for the preservation of existing low-income and affordable housing.  Cohen also noted that while many upscale communities fight affordable housing developments out of a fear for negative impacts on their school systems, there is little evidence to suggest that is reality. It’s all about overcoming how local communities often approach affordable housing and making the case that inclusion will benefit us all.

View video of Affordable Housing panelists.

Kids Are Not Toxic Waste

There have been many studies on the state of housing in the Commonwealth.  What is very clear from these, and the numerous opinion pieces on the subject, is that we have very high barriers to the development of housing in general, and affordable and family housing, in particular.  What is also apparent is that the economy cannot fully recover without the support of highly talented, college graduates that continue to leave the state.

Paul McMorrow wrote a column in The Boston Globe on April 24th that lays out the problem.  Massachusetts has not been able to keep up with the current housing demand.  This results in slower job creation and volatile housing prices.  As Paul points out, without sufficient supply, the recovery is going to result, once again, in an explosion in housing prices.  According to a report by the Donahue Institute at the University of Massachusetts, if the current pace of development is maintained, there will be a deficiency in our housing stock of 46,000 units.  We are already seeing this problem with an inadequate rental stock, driving rents to record highs.

The problem is rooted in several areas that include “home rule,” large lot requirements, lengthy permitting, frequent appeals, and an anti-children attitude.

  • The economic needs of the Commonwealth have been stymied by local regulations that continue to encourage large, expensive homes and discourage the production of more affordable “starter” housing.
  • With minimum lot requirements in many towns of 1-2 acres, it is very difficult to economically justify building smaller scaled homes.  (Few of these municipalities even offer cluster zoning.)
  • Permitting requirements have become more onerous with local rules and special by-laws making the development process longer and more unpredictable.
  • Even with local approvals, there are the frequent appeals that delay the start of a project by 1-2 years (sometimes effectively killing the project.)
  • Lastly, many housing proposals that would attract families with school age kids are denied at the local level.  The often heard justification is that adding any number of children to the system will break the back of the school budget.  Oddly, this argument occurs in communities that project future reductions in the school age population.  Frequently, it seems that communities would be more welcoming to an asphalt batching plant than to new children.

As Paul McMorrow so eloquently states, “The state’s technology sectors demand steady supplies of young talent. But over the last decade, while the Massachusetts population was growing at a meager 3-percent clip, it lost 9 percent of its 25- to 34-year-olds. These are the recent college graduates and young families that the state’s economic future is built on. They’re also the population that’s most sensitive to the state’s deeply ingrained affordability crisis. And they’re voting with their feet.”

Our future is our young families and our children.  It’s time we stop viewing children as the equivalent of toxic waste and start building the housing we need.  Otherwise, we will only have ourselves to blame for a failed economy.

The Future of Multifamily

This blog post was submitted by Allyson Quinby, Account Executive at Solomon McCown & Company.

On Wednesday, April 4, industry experts gathered at Boston’s Seaport Hotel to discuss the future of Boston’s apartment market at NAIOP’s Future of Multifamily breakfast program. The panel featured experts in the industry including, Raymond Torto, Chief Global Economist at CBRE; Kent Larson, Principal Research Scientist at MIT Media Lab; Julie Smith, President of The Bozzuto Group; Simon Butler, Executive Vice President at CBRE New England; and James Gray, Principal at ADD Inc,  as moderator. View panelist video.

Torto kicked off the panel and set the table for the discussion by explaining that from 2007 to 2012, there was an influx of graduating students in Boston. That, compounded with the fact that more individuals chose renting over homeownership skyrocketed Boston to the 7th largest multifamily market in the country—and counting.

Butler expanded on the supply side of the multifamily trend. According to Butler, Greater Boston’s supply of multifamily housing will continue to increase over the next three years.  Currently, there are only a handful of residential construction projects underway in Boston and Cambridge metro areas. However, by 2014 these projects will be completed and almost double that number will be in the pipeline.

Smith addressed the demographic of individuals influencing the multifamily boom. Similar to Baltimore, New York and DC, Boston’s market is made up of single people, divorcees, and those in the 25-40 age group moving into the urban area and opting to rent over buying. Additionally, there is a demographic of individuals between the ages of 50 and 60—frequently empty-nesters—who are moving into luxury apartments. While varying in age, these demographics both expect hotel-like lobbies, energy-efficient appliances, common spaces and fitness centers all within a 30-minute commute to work.

Larson rounded out the panel by wowing the audience with his answer to the growing demand for personalized, high-quality and affordable units. Through the use of robotic walls, smaller apartments can now have multiple functions turning a full dining room into a bedroom with a touch of a button. MIT is providing the technology for these transformable environments that meet the popular need for spaces that can serve as the home and the workplace.

The factors that sustain the multifamily boom are just as interesting as the factors that led to this real estate trend. Rooted in job growth and urbanization, and perpetuated by the growing number of individuals opting to rent over homeownership, the emerging multifamily trend requires architects, developers and marketers to develop new strategies for building and filling these units.

If You Build It, They Will Come: Demand Exists for More Multifamily Housing in Greater Boston

A recent article in The Boston Globe talked of the recent surge in apartment construction, identifying 11 developments either under construction or about to receive final approvals. Although not as many, there are also large multifamily projects underway in the suburbs, including John M. Corcoran’s development in SouthField (the former Weymouth Naval Air Base) that Rick High described at NAIOP’s recent lunch program.

Some skeptics believe that the weak economy and high supply will result in an oversupply of multifamily housing. I disagree. There is no doubt we have room in the market for quite a few more projects, both in Boston and the surrounding communities.

Since the recession began in 2009, the vacancy rates for rental housing have plummeted and, not surprisingly,  the rents have pushed upwards.  Boston now has one of the lowest vacancy rates in the country. With higher rents and interest rates remaining historically low, new multifamily developments are finally viable.  Though the costs of housing production in Massachusetts are still among the highest in the nation, due in part to labor costs, these projects are profitable (by some rather thin margins, though.)

If you believe the increased demand is only due to the burst of the single family housing bubble and the resulting foreclosures, you need only look at the other drivers in this area. The research firm REIS has reported that the net absorption in this market is the highest on record since it started tracking the data in 1980!

As reported by Cushman & Wakefield, there are a number of factors contributing to the growth of the rental housing market in the Boston area:

  •  Job Growth: With a conservative 35,000 jobs a year projected to be created, there will be an additional 35,000 households over the next 5 years;
  • Change of Ownership: 87,000 rental households are needed to fulfill the demand created by the shift in ownership from single family to rental;
  • Increase of Echo Boomers (ages 21-34): 27,000 rental units are needed to satisfy the demand created by this generation. Approximately 75% of this population are renters and this demographic is expected to grow by 2.2% over 5 years.

Bottom line – that’s a lot of demand!  And even with all of the construction planned, the vacancy rate is still projected to drop.  Certainly good news for developers and the Massachusetts economy!