Author Archives: Tamara Small

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About Tamara Small

Tamara Small is the CEO of NAIOP Massachusetts.

Mandates Not the Tool to Increase Energy Efficiency in Commercial Buildings

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In a recent blog, How Many Miles Per Gallon Does Your Building Get? The Ratings Game Comes to Buildings, NAIOP member Seth Jaffe of Foley Hoag makes some observations about the recent report issued by the Institute for Market Transformation.  The report describes the existing efforts to rate the energy efficiency of commercial buildings in the country.

Although I appreciate the reasonable dose of skepticism that he expresses, I am a bit more doubtful of the intent of the pilot program originally drafted by our state Department of Energy Resources.  The DOER report, issued in December 2010, states that the intent of an energy rating program is to devalue properties that are less energy efficient (e.g. older building in Gateway Cities) so that there would be an “incentive” for owners to upgrade their buildings prior to financing or sale. This is not the same goal as providing information so that a building owner can make the best economic analysis to determine which energy efficiencies make financial sense.

The decision to invest in building upgrades is dependent on a number of factors including market rents, educated tenants, costs and benefits of efficiency measures, availability of capital, competition, etc.

New buildings are now much more energy efficient than their predecessors.  Developers over the past five years have produced many buildings with LEED certifications.  That said, we all know that the big challenge is with less efficient existing buildings.

However, the best incentive for upgrading that building stock will be an improving economy.  As demand for space increases, rents move up, energy costs continue to rise, and the price of efficiency technologies drop, we will see a major investment in building upgrades.

As we have said before, mandates are not the answer.  The market will lead the way and there is no doubt that, on this particular issue, regulators will do more damage trying to push businesses into expenditures ahead of their economic feasibility.

The Return of an Owner’s Market?

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It might be a sign that the commercial real estate industry’s recovery is beginning.  A recent article in Banker & Tradesman,  entitled High Rise Office Space Expected to Soar, describes a significant improvement in the industry bellwether of tower leasing. With vacancy rates around six percent in the “upper floor” market in Boston high rises, rents are beginning to push upwards.

This is obviously the premium space in Boston, but in the past it has been a good indicator of market recoveries.  There needs to be more business expansion with substantial job creation for this to spread to other Class A space in downtown and the Route 128 suburbs, but it is a start.

Brokers are now advising their clients to lock in their leases at the current rates.  It appears that the indecision that was evident in 2009 and 2010 is being replaced with timely transactions.  Whether these lease renewals are for current space needs or include expansion for future growth is the most important question.

The good news is that Massachusetts is one of the few states showing any job growth.  Let’s hope that this is the start of a more sustained recovery.

NAIOP Mourns Loss of Myra Kraft

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Myra Kraft passed away today, a tragic loss to her family, friends, and to our whole community.  Myra was one of those rare individuals who dedicated her life to making the world a better place.  Tikkun olam is a Hebrew phrase that means “repairing the world” and Myra Kraft took that obligation to heart through her active involvement in countless local and international causes.

The Krafts have led numerous missions to Israel, Eastern Europe, and Russia, and I was privileged to join them on the Governor’s recent trade mission.  It was clear to us all that the groundwork Robert and Myra have done over the years to establish close relations with Israel’s top leaders helped make the Governor’s mission a success.

Philanthropy was not a part-time job for Myra.  When she committed to an organization, she gave it her all.  Not only was she an excellent fundraiser for the agencies she supported, but she was a skilled leader, serving on the boards of numerous charitable organizations for many years.

This last battle was a personal one for her and was one of the very few challenges she could not overcome.  Her causes continue and we must all rise to the challenge to carry on her good work.  All of us in the business community send her family our deepest condolences.

MassDOT Needs Mullan

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President Truman was fond of saying “the buck stops here.”  Taking responsibility for problems that occurred within his administration was an important part of his leadership style. But taking responsibility did not mean his resignation or
impeachment; and that was a good thing for the country.

Secretary Jeffrey Mullan

Prompted by the appearance of a lack of transparency following the Massachusetts Department of Transportation’s (MassDOT) handling of a light fixture problem in a Big Dig tunnel, the Secretary and CEO of MassDOT, Jeff Mullan, has recently come under
fire.  The Secretary has taken responsibility for the problem and is working to resolve many of the challenges that come with merging multiple transportation agencies.

Let us not forget the size and complexity of MassDOT and this task.  It demands leadership and people skills, as well as an understanding of transportation policy issues, that few people have.

Secretary Mullan, who has been involved in Massachusetts transportation issues for more than 20 years, brings a business-like approach to state transportation. He was a key author of the massive transportation reform plan and has worked diligently to implement significant changes in culture and policy.

We cannot afford to lose such a committed public servant.  If I were the Governor, I would make it clear that his resignation will not be accepted.  There is much work to be done – from completing the massive overhaul of this agency, to investing in key transportation projects to spur economic growth, to completing the deferred repair of our aging roads and bridges.

Mr. Secretary, let the buck stop at your desk, but stick around and help the Commonwealth with your strong leadership, commitment, and willingness to be held accountable.

Direct Flights to Israel – Help Make the Case

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As loyal readers may be aware, NAIOP Massachusetts has been involved in efforts to strengthen economic ties with Israel.  A critical component is attaining nonstop air service from Boston to Tel Aviv. To make this happen, we need your help.   

Given how many opportunities El Al has to expand its service in the United States, we are eager to demonstrate that New England should be next on the list. We are working with the Governor’s office, Massport, and key organizations that generate large amounts of travel to Israel. We plan to make our case to El Al in the fall.

A local survey firm, Strategic Partners, has been retained by Massport to conduct a survey of businesses, organizations and individuals about their current and expected travel to Israel. If you and/or your company travels or might travel to Israel, we would like you to participate in this survey.

To opt-in to the survey, please click here. Once you have opted-in, the actual survey will follow in the coming weeks. With your help, we can make the strategic and business case to El Al about nonstop Boston-Tel Aviv service. 

Thank you for your support,
David

NAIOP Brings the Heat to End Homelessness

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Records were certainly broken at NAIOP’s Annual Golf Tournament benefitting Heading Home, held Wednesday.  Not just the 90+ degree temperatures or the countless number of water bottles consumed on the course, but a record that matters – money raised. This was the year that NAIOP passed $1,600,000 in total donations to Heading Home, raised over the tournament’s 23-year history.   

It was a proud moment when I presented Tom Lorello, Heading Home’s Executive Director, a super-sized check in the amount of $122,000, an amount I know represents their largest corporate donation, and which they have come to count on each year. 

David Begelfer (far right) and Tom Lorello (third from right), joined by volunteers and staff.

This money will help Heading Home fulfill its mission to end homelessness in Greater Boston by providing housing in conjunction with effective support services to help change the conditions that create homelessness. Tom and his staff have been pioneers in the Housing First movement, and they are seeing great results despite the continuing housing crisis that grips our state.

At the tournament, we shared a few facts about Heading Home and their clients that help tell the story about why we support their work:

Did You Know?

  • Average age of a Heading Home client is 8 years old
  • In Massachusetts each night there are 3,000 families without a home

In 2010, Heading Home:

  • Served 2,134 at-risk and homeless people
  • Placed 112 families and  58 individuals into permanent housing

The Heading Home Formula:

  • Housing + Job Training + Matched Savings Plans = Self Sufficiency
  • It works: 90% of Heading Home clients have remained permanently housed

Heading Home was the day’s big winner, of course, but tell that to the winners of NAIOP’s new Super Raffle, which offered over 30 prizes donated by local firms. Congratulations to John Bryer of DiMella Shaffer Associates, Inc. who won the grand prize of a Mini Cooper lease, Dante Angelucci of Leggat McCall Properties who won an entertainment center, and Steve Daley of AEW Capital Management who won a vacation cruise package!  (See photos, press release, and other resources)

None of this could have happened without the hard work of the Charitable Events Committee, led by Bob Hayes at KeyPoint Partners and Steve Brodsky at Synergy Investment & Development, along with the dedicated staff at Heading Home, NAIOP’s Board and staff, and of course, our many generous donors and sponsors.  Thank you to all who helped make this day truly one for the record books!

CMBS: Too Little, Too Late?

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At its peak in 2007, the Commercial Mortgage-Backed Securities (CMBS) loan market funded over $230 billion in the U.S. That market virtually dried up in 2009, with a more modest $11 billion.

However, it appears that the CMBS market may be showing signs of life with an estimated $50 billion expected to be funded by the close of 2011.

At a recent NAIOP program, Banking on Real Estate: Capital Flows and the State of CRE Lending, Stephen Holmes, Executive Director at Morgan Stanley, indicated that more than $1 trillion of CMBS loans will be maturing over the next five years, with $100 million coming due this year alone. Without a serious resurgence in this market, it is hard to know where these refinancing dollars will be found, especially with many of the assets over-leveraged based on today’s market values.

Not surprisingly, there has been a rise in the delinquency rates on CMBS loans, with more than 8% of current outstanding loans at least 60 days past due. Standard & Poor’s is currently expecting that rate to reach as high as 11.5% by year’s end.

The good news is that this important source of Wall Street financing is coming back.  Unfortunately, it might be too little, too late. (Read Banker & Tradesman’s account of the event here)

Massachusetts Needs Regulatory Reform to be Competitive

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A MassBenchmarks report from the University of Massachusetts shows the national economy grew by 3.2 percent in the 4th Quarter of last year, while the state’s grew by only 1.8 percent.  This comes after a stellar performance in Massachusetts with the local economy and job growth outpacing the nation since the 4th Quarter of 2009.

The take-away from this is something we already knew: Massachusetts is a unique place, but we are not so special that we can coast our way to recovery ahead of the nation.  Although this may be an economy “pausing to catch its breath,” as the report suggests, the real risk is that just like the recession of 2000, we end up falling short. 

Consider this a wake-up call.  We cannot afford to be complacent; we must go on the attack, doing everything in our power to make this region more competitive, more business friendly, and more efficient. 

If we are to be truly competitive, we must confront the cost of doing business in Massachusetts.  This includes the direct costs of operations (taxes, fees, insurance, utility costs), but also includes indirect costs of time and resources necessary to comply with the complex, multiple layers of regulations, policies, rules and guidance affecting all employers throughout the state.       

With fewer resources available, now is the time for government to do more with less.  We must be more efficient with resources within our regulatory agencies, and we must allow businesses to focus on job growth rather than wasting time managing redundant and often-outdated or ineffective regulations and rules.  For many years, cost-benefit analyses have been required of all agencies for new regulations, but this has never been taken seriously. The attitude seems to be that businesses are “lucky to be here” and can easily afford any regulatory imposition placed on them.  Government has the responsibility to protect the public, but to ignore the costs and the impacts they have on the economy is not protective of a public that is dependent on job revenue to fund its operations.

Things are improving, however.  In Governor Patrick’s second inaugural speech, he specifically mentioned this issue and the importance of job growth.  During the past 18 months, the Governor and his agency heads took a top-down review of new regulations, and we applaud them for that effort.  Now we call upon them to go further by reviewing our existing regulations to ensure that they are doing the job that they were intended to do; that they are consistent with the statutes authorizing them; that they are the most cost effective and efficient means to their goals; and that there are not better ways to accomplish what they do (e.g. privatization or self-certification).

We may never be the lowest-cost state, but let’s develop the reputation of being a state that understands the needs of business and works actively to make interactions with government as smooth and cost effective as anywhere else.

Commercial Real Estate Icons on the Leading Edge of Philanthropy

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Bill and Joyce Cummings

In an age when many Wall Street and other corporate leaders take such pride in reaching even greater heights of personal wealth, it is refreshing to hear about a different type of competition. There is a growing group of the wealthiest individuals in this country who are now competing to see who will become members in a new club of billionaires – those promising to give away half or more of their wealth before they die.

The “Gates/Buffet Giving Pledge” already has nearly 70 members in this prestigious, exclusive club. And now they have two new members – Bill and Joyce Cummings, the founders of Cummings Properties, headquartered in Woburn, Massachusetts.

Not that this should come as a surprise to anyone that knows this couple and their history of giving. Over the past 25 years, the Cummings Foundation has grown to be one of the largest philanthropic foundations in the state.

Bill and Joyce are shining examples of local entrepreneurs who believe in a strong economy that does not forget about those amongst us who are less well off. They have long been leaders, even in an industry that prides itself on its charitable giving and community service, and they certainly have raised the bar with this pledge. (Globe article here)

NAIOP Massachusetts is proud to have Cummings Properties on our Board of Directors, and we offer our heart-felt congratulations to Bill and Joyce for the well-deserved recognition they are receiving.

Demography is Destiny for Multifamily Housing

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This was the mantra shared by Dr. Barry Bluestone, founding Dean of Northeastern University’s School of Public Policy & Urban Affairs, at today’s NAIOP program, The Future of Multifamily – How Demographics Are Driving Development. Barry started off the program with a great presentation on the impact changing demographics are expected to have on Greater Boston’s housing market.  Given the national depression in home prices, it was surprising to see that our local apartment rents continued to rise after 2005 and, even with some adjustment due to the recession, today they are only 2% lower than their 2008 peak.  This is due in large part to vacancy rates that have remained stable at 6%.

Our rental housing market has remained strong for a number of reasons including: foreclosed homeowners reverting to rental housing; young families holding out for further drops in housing prices or being unable to make the necessary down payment due to new lending criteria; and increased student demand.

On the last point, due to the Boston area’s abundance of colleges & universities, the student population has increased by nearly 24,000 undergraduates and 22,000 graduate students since 2000.  And although the schools house over 100,000 undergraduates, nearly 180,000 live off campus. With graduate students, only 8% of them live on campus.

Bluestone was convinced that there are real opportunities for the private sector to provide the needed housing for both undergraduates and graduate students.  New housing alternatives for graduate students could include the creation of Multi-University Graduate Student Villages to help take pressure off the urban rental market and help retain young professionals in the city.

At the opposite end of the spectrum, Massachusetts is aging rapidly, with the Baby Boomers projected to represent higher percentages of the population over the next decade. There will be some great opportunities for multi-family housing during the next decades, with some empty nesters looking for smaller, easier to maintain housing, and others choosing to “age in place” in suburban, smaller units, while still others may look to more urban environments with more amenities provided by city life.

The panel that followed Dr. Bluestone included Larry Curtis, President, WinnDevelopment; Wendy Nowokunski, President, The Northbridge Companies; and Doug Straus, SVP, Director Residential Development, National Development.

Some key take-aways included:

  • For market rate housing, transit-oriented multi-family is highly marketable.
  • Be it subsidized, market, or senior housing, higher quality finishes are now expected as the norm.
  • Senior housing is not your “grandfather’s” housing – it is now varied in service delivery, including independent, assisted living, and memory care residences (diminished cognitive capabilities affects more that 40% of those over 85 living in senior housing.)
  • Even with state and federal subsidies, new construction is very difficult, leading to more interest from investors in repositioning older properties.
  • Green is becoming an expectation, but there is no clear standard as owners market their properties as green.  Some owners are focusing on very visible improvements (solar), while not pursuing the more energy saving upgrades.

It appears that the current strong attraction for rental housing in the investment markets is well founded and the prognosis for the future of this product type is a clearly bullish one.