NAIOP Event Showcases Three of Boston’s Top Developers

This post comes from BLDUP (bldup.com) reporting on the NAIOP Massachusetts event on September 13, 2018: Development Unicorns: Neighborhood Game Changers.

Elisif_20180913_2045See photos from Development Unicorns: Neighborhood Game Changers. Credit: Elisif Brandon

The developers of three of Boston’s most changed neighborhoods, Fenway, Assembly Row, and Seaport Square came together last week for NAIOP’s panel discussion, Development Unicorns. If the catchy title didn’t grab your attention the insight provided by these forward-thinking developers certainly will. The event opened with a keynote from David P. Manfredi, Elkus Manfredi Architects, that highlighted the 8 Place Making Principles these neighborhoods have in common.  Mr. Manfredi also spoke about the important changes at work in each of these neighborhoods; public investment in infrastructure, skillful placemaking, flexibility and evolution along with density and walkability.  While the architecture of each area is different they all share these characteristics which have played a large role in the success of the projects.

After Mr. Manfredi’s introduction, the expert panel took the stage moderated by Sara Cassidy of AEW Capital Management.  Representing Federal Realty Investment Trust, the minds behind Assembly Row, was Donald Briggs, Executive VP of Development. Mr. Briggs mentioned that as a realty investment trust Federal Realty had the large balance sheet to a take risk on a piece of land in Somerville that had been tied up in a 6-year lawsuit.  He also discussed how the Assembly Row site is much closer to Boston than many people originally realized making it a great location for a development opportunity.

Steve Samuels, Chairman & Principal at Samuels & Associates discussed how his company “stumbled” into the Fenway neighborhood as it was being held hostage by Fenway Park.  His team had to convince people one use at a time to come to Fenway for something other than baseball. The final panelist was Yanni Tsipis, Senior VP-Seaport at WS Development.  WS has been involved in the Seaport since 2006 when it was just a wide open lot with great water views. Mr. Tsipis noted this blank slate provided an interesting opportunity for the development team and once momentum swung in their direction his team decided to triple down and buy out their remaining partners in the Seaport Square area.

The developers had their own story to tell on how the pieces of each neighborhood came together.  The Fenway, Mr. Samuels mentioned, was already a great neighborhood but it had no core. His team worked to build relationships with stakeholders in the area and then began to buy up lots one at a time.  They then rezoned each lot, again piece by piece, leading to a very slow process. Assembly Row also started off slow, as Federal Realty stepped into a deal that had been stalled with that 6-year lawsuit.  However, settling the lawsuit did have a positive outcome as Mr. Briggs pointed out, it pushed his team into embracing office space. Although not part of their original plans the offices turned out to be a very positive driver of growth.  In the Seaport it was very important for WS Development to ensure the area developed a sense of place very early on in the process. As Mr. Tsipis pointed out the neighborhood is still growing, with only about ⅓ of the planned construction now complete.

Other key points echoed across the panel were the importance of responsiveness to the market and also ensuring public realms and first floor retails spaces are unique and inviting to the neighborhood. Mr. Briggs suggested it is always prudent to entitle more square footage which allows for flexibility and optionality.  Federal Realty sacrificed density at the beginning of their project to build on a horizontal context and are now moving to build high rise projects. In the Fenway, The Samuels team had to find the right balance between old and new architecture.  Ultimately their goal for the area is to be ⅓ office, ⅓ residential, ⅓ retail but as Mr. Samuels quickly mentioned the market will drive these decisions.

In Seaport Square, WS has devoted time and energy to planning the public spaces and also programming around these areas as these events organically bring people together.  Mr. Briggs agreed, pointing out that he believes creating fabric in architecture, space between buildings is more important than buildings themselves.

When discussing retail spaces all agreed it was most important to get the first floor spaces right to command a premium above. With the continued success of these three neighborhoods, the insights from the panel were certainly valuable as the city’s development boom continues.

 

20 years later, Brownfields Act remains a pioneering policy

This op-ed originally appeared in Viewpoint on bizjournals.com on September 13, 2018. The joint op-ed was authored by Ned Abelson, attorney at Goulston & Storrs and co-chair of the NAIOP Brownfields Committee, and by David Begelfer, NAIOP Massachusetts CEO and an active participant in the passage of the Brownfields Act. 

Twenty years ago this summer, Gov. Paul Cellucci signed into law the “Brownfields Act,” establishing new incentives and protections to encourage parties to clean up and redevelop contaminated property in Massachusetts. This law provides comprehensive liability relief and financial incentives to attract new investment in these properties while ensuring a safe and effective cleanup. Simply put, without the passage of the Brownfields Act, many communities that are now thriving would be filled with vacant and contaminated properties.

Suburban Office Park

A Brownfield site is blocked from productive use because of potentially hazardous contaminants. Prior to the passage of this law, developers considering cleaning up and then redeveloping such a property often concluded the effort was simply too risky, too expensive and too time-consuming to offset future profits from leasing the property to retailers, businesses and residents.

A model for states across the country, the Brownfields Act allows innocent Massachusetts real estate owners and operators to apply to the Department of Revenue for a state income tax credit to offset the net cost of the cleanup. Any party that contaminated a property or owned the property at the time of contamination is not eligible for the tax credit. Depending on the extent of the completed cleanup, the taxpayer may apply for a credit equal to either 25 percent or 50 percent of the cleanup cost. If the site has an Activity and Use Limitation, or AUL — typically a use restriction placed on title as part of the cleanup process — then a 25 percent credit would apply; if no AUL, then eligibility increases to 50 percent. Without this tax credit, many contaminated properties would remain a public health risk and there would be no incentive to clean up and return these sites to productive use.

The credits have provided critical additional funding for community development corporations, or CDCs, and other community-based organizations. And a change to the law in 2006 has helped nonprofit organizations, which were previously not able to use all of their credits, to sell or transfer the credits to others. In recent years, the state Department of Revenue has distributed between $28 million and $61 million annually in Brownfields tax credits, benefitting between 40 and 80 development projects each year.

The Brownfields Act was created through a unique collaboration of Massachusetts policymakers and a truly diverse set of stakeholders. Developers, town officials, environmentalists, business association representatives, scientists and many others spent hundreds of hours negotiating the details of this landmark legislation.

For Massachusetts residents and businesses, the benefits have been significant. By cleaning up these sites, public health conditions improved, local communities were revitalized, housing was built in vacant areas, new jobs were created, and municipal real estate tax revenue grew. For developers and their partners in engineering, construction and architecture, redeveloping a former industrial site no longer posed a financial or legal death sentence.

For a very modest investment by the commonwealth, billions of dollars of investments have been made throughout the state, benefitting its citizens and municipalities. We commend the Legislature’s work this session to provide for a five-year extension of the Brownfields tax credit in the Housing Bond bill, signed by Gov. Baker on May 31. Twenty years later, the Brownfields Act’s approach to economic development and public health policy continues to be bipartisan, beneficial, bold and, most important, very successful.

 

BLDUP Spotlight and Q&A – David Begelfer, Reesa Fischer and Tamara Small of NAIOP Massachusetts

This post comes from BLDUP.com: BLDUP Spotlight – David Begelfer, Reesa Fischer and Tamara Small of NAIOP Massachusetts

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Last week NAIOP announced that David Begelfer would be retiring after more than 27 years leading the organization. NAIOP’s Board of Directors voted Reesa Fischer, currently Chief Operating Officer, and Tamara Small, currently Senior Vice President of Government Affairs, to co-lead the association. Fischer will serve as Executive Director with operational, financial, programming and membership/marketing oversight. Small will serve as Chief Executive Officer with oversight of the organization’s government affairs and lobbying activities, public relations, and research. BLDUP sat down with the three industry leaders to discuss the transition and NAIOP’s goals for the future.

BLDUP: For our readers that are not familiar, what is NAIOP?

Tamara Small: Officially NAIOP is The Commercial Real Estate Development Association. Long ago NAIOP stood for National Association of Industrial and Office Parks. It was then changed to National Association of Industrial and Office Properties.  In 2009, the national organization recognized we represented so much more than industrial and office properties.  They did not want to lose the brand recognition that NAIOP had so they kept the acronym, but changed what it stood for.  We now represent office, retail, mixed-use, multifamily, lab and institutional space here in Massachusetts. We are the largest of all the NAIOP chapters at nearly 1,700 members.

Reesa Fischer: Our membership is made up of a variety of industry leaders.  While we are primarily (60%), owners, developers, and operators, the other 40% is made up of attorneys, brokers, and everyone else who supports the commercial real estate industry.  This variety of folks involved in the organization is also a big differentiator for NAIOP.  We operate based on a 3 legs of the stool principle, government affairs advocacy, events/education & networking.

BLDUP:  What is NAIOP forecasting for the Boston market?  Are there any trends you are seeing?

David Begelfer: What I see as our greatest risk going forward is probably not a recession, at least locally.  The Boston market is quite strong and we do not see a lot of oversupply or speculative projects.

A serious downturn does not look like it’s in the cards for the next 2-3 years but we do anticipate somewhat of a slow down because of our success. There are two major components exceeding inflation, land cost and construction costs (the biggest part being labor costs) and these two issues affect development.  We have a very tight market with regards to the construction industry and the number of people and subcontractors.  We also have barriers for entry for companies and individuals to move in from out of state because of the high cost of living.  We are seeing inflation in costs of land/construction because of our dynamic economy. Because of this, we are already starting to price out residential rent projects, pushing them toward condos.

Another aspect of this looming problem is the limited capacity of skilled unemployed workers that can fuel the market going forward.  We have relied upon immigration from out of the country for the last 25 years of growth.  Immigration is starting to have some cracks for various reasons (policy, political, practical economic).  We have concerns that the constant flow is drying up and Massachusetts has always had a problem with net migration out of the state.  The bottom line, as I see it, is that we are at a greater risk from our success than from a possible recession.

BLDUP:  David, What is your proudest achievement as outgoing CEO of NAIOP?

David Begelfer:  It is very hard to choose one particular moment, but if I had to take an overview of the past 27+ years, I’m very proud of the “secret sauce” of NAIOP.  From the start, the secret sauce was to integrate the top professionals and engage in our organization primarily in government affairs and advocacy.  It’s very difficult to handle the wide range of issues that we deal with, regulatory, legislative, judicial, policy and then within each of those baskets another array of issues from environmental, transportation, economic, building codes, all across the map.  The only way we have been able to handle this and provide expert feedback is the unbelievably involved professionals who work with us. This has allowed us to expand the breadth and depth of issues that we deal with and we have done it in a way that we can give something back. We can’t pay for this counsel but instead, we offer networking, connections, and leadership opportunities to add value to our relationships and provide a win/win for everyone involved.  The involvement and growth of volunteerism within the organization is the greatest success I could imagine.

Additionally, we have been able to bring some of the top people in the industry onto our staff.  One of the reasons this is a seamless transition is that others have developed expertise within our organization. It was very easy to choose Reesa & Tamara to move forward into the leadership of the organization.

Reesa Fischer: I feel it is important to mention David’s ability to embrace change.  Most trade associations are very stagnant and very conservative.  They do what they do and as long as it’s not broken they don’t fix it is. One thing we value at NAIOP (and it’s why I love working here) is that embracing change is what it’s going to take to stay competitive.  We like to think of our organization as a disruptor and we are always trying new things that people wouldn’t necessarily expect from a trade association.

David Begelfer: We are always looking to see what can be changed and done differently.  There is no complacency in this organization. People talk about having periodic strategic plans; we strategically think about our organization throughout the year.  That may cause more work, but it keeps us relevant. You can’t fight change you have to embrace it!

BLDUP: Government affairs and advocacy is a big part of what you do. How do you work to accomplish your advocacy goals?

Tamara Small: We have our eyes and ears on anything that would have an impact on the industry and we weigh in wherever appropriate – whether it’s legislative, regulatory or judicial advocacy.  The process is a very collaborative one.  We have over 200 people on our Government Affairs committee and a very active board of directors who provide input. This expertise allows us to provide real-world examples that illustrate the impact of any proposed changes.

As an example, we just wrapped up the legislative session which ran from January 2017 through July 31, 2018.  There were about 8,000 bills filed this session and we tracked hundreds of them, provided testimony, served on legislative task forces and met with legislators.  Clearly, no legislator can be an expert on every single issue. So, for those issues that are of interest to us, we provide substantive, factual information on how the bill would affect the commercial real estate industry – and often the greater overall economy. Through this approach, we have built strong relationships with legislators and regulators.

A good example of how NAIOP handles advocacy would be a provision of the economic development bill that was signed into law by Governor Baker on August 10. The bill includes language that will bring clarity to the development process for properties along railroad rights of way. The process had been a source of frustration to the development community for many years. So, through our government affairs committee, we drafted a legislative fix and worked for 8 years to educate lawmakers on the need for the change. Through the leadership of key legislators and MassDOT Secretary Stephanie Pollack, we were able to work together on language that was signed into law. It will bring transparency and predictability to the development process – two things that are critical for any real estate project.   Talking about railroad rights of way may not be the most exciting topic, but it is one of those things that will affect important transit-oriented projects throughout the Commonwealth.

BLDUP:  What is the next legislative issue you will be focusing on?

Looking ahead, our three areas of focus will be: Housing, Transportation, and Climate Resiliency

We believe that climate resiliency is a top priority for the industry. It’s an economic development issue.  We were very supportive of the climate change legislation that passed this session. The bill that was passed requires the Commonwealth to develop a climate adaptation plan, complete vulnerability assessments at the state and local levels, and identify how the public and private sectors can work together to really think through what climate change means for the real estate industry and for the greater economy.

Another broader economic development issue that we are passionate about is the need for more workforce housing.  We were very supportive of Governor Baker’s housing bill.  We worked with all of the business groups as well as the Mass Municipal Association to try and get that passed in the final hours of the legislative session, but unfortunately, it didn’t make it. In my mind, it would have been the most significant housing bill in years.  We also thought it was very significant that we had such a broad coalition of support for the first time in 30 years of discussion around this issue. We are going to continue to push for this in the next session, which kicks off in January.

Our third big area is transportation. We will continue to advocate for an efficient, world-class transportation system in MA.  We need the type of system that allows people to get in and out of the city and to expanding areas with ease.  We are going to be looking at that in the next legislative session to ensure we can expand on existing capacity.

BLDUP:  Reesa & Tamara what are your goals for the NAIOP in next 5-10 years and David what would you like to see continue after you retire?

David Begelfer: I do think that NAIOP is going to continue to sit on the same 3 legs of the stool, advocacy, education, programming/networking.  Every member gets something from one or all of these areas.  We need to take a look at new technology, be proactive, be entrepreneurial, be thoughtful, and stay in touch with members and their needs.  We also want to offer new platforms for information.

One thing that is NOT going to be happening, is people are NOT going to be totally virtual. They want to meet face to face. That’s never going to change.  You will always need networking.

We have also taken a look at online learning and have seen a much greater demand for face to face learning but in a tighter timeline.  We are moving into podcasts.  That seems to be a very popular way for people to get information while driving, walking, or spinning. It’s hard to plan for the future when technology is changing so quickly.  Right now we have a partnership with the MIT Center for Real Estate that enables us to see what is on the cutting edge of the industry.  We just need to continue to keep an open mind.

Reesa Fischer: It’s about expanding the information and knowledge the we can provide the members and providing them with different options of delivery. People are just so busy and not everyone can come to a site event.  Some people prefer podcasts or live webinars.  We need to expand our information and methods of delivery to stay relevant.

We have also seen a huge demand for professional development skills that are outside of the industry.  The membership is looking to be able to provide skills for their talent.  Talent is a big issue right now, retaining and obtaining.  Learning professional skills while networking and engaging with people in the industry is a unique opportunity we can provide our members.

Tamara Small:  We are nothing without members. We look forward to working with our many member-driven committees and continually seeking feedback directly from the industry.  As Reesa and I transition to our new roles, we will be sitting down with our leadership and members to do our own focus groups in order to understand what they need. We look forward to growing and expanding with them.

Reesa Fischer:  Yes, we are very externally focused!

BLDUP:  What is the last book you read that you would recommend and why?

Reesa Fischer: The Road to Recognition by Seth Price.  Seth is a local guy who runs Placester and did a keynote at one of our marketing conferences.  The book is about building your personal brand which plays into a corporate brand: being authentic, setting up expectations, meeting expectations.  Detailing ways to keep you competitive either personally or professionally. It’s how I look at our organization so that we can continue to be important in the industry.

Tamara Small: Starting Small and Making It Big: An Entrepreneur’s Journey to Billion-Dollar Philanthropist by Bill Cummings.  It is interesting to hear his rags to riches story and his unbelievable drive and entrepreneurial spirit that have helped create his company.  The book provides history about the CRE industry but also an inside look at one of the most entrepreneurial people I’ve encountered.  He is also someone who has really devoted a good part of his career now to charitable endeavors and that is very admirable.

David Begelfer: Leonardo da Vinci by Walter Isaacson.  It’s astounding the genius that was there but not just genius: the genius was combined with unbelievable curiosity.  Almost anything he saw he wanted to look further into it. It’s frightening that a lot of what he discovered was never published and lost for hundreds of years. People would rediscover these things hundreds of years later.  He discovered something about how the heart works but it was not actually verified until 1970. He was way ahead of his time. It is a very fascinating read and again it was not just intelligence but a need to be entrepreneurial and also a great observer and creative.

BLDUP:  It is important to note that despite the CRE industry being primarily male, NAIOP’s new leadership team is female.  Tamara and Reesa what are your thoughts on this.

Reesa Fischer:  Just a little history, when I started here 8 years ago, the percentage of women in the industry and in NAIOP was significantly lower.  It is really exciting to see that women have very quickly been getting involved.  Our female membership rates have gone from around 10% up to 28-30%.

About 7 years ago we started an annual event, the Women of Influence luncheon. It sells out 200+ tickets every year with wait lists of people.  I think the pipeline is filling up as young women are starting to come into the industry and seeing there are a variety of ways to get involved, not just brokerage but in the development world as well.

Women are very organized and project management focused and very collaborative and that is what this industry is.  It’s about time women recognize they can actually play an important role. We are also more women in senior roles and running companies.

Our Distinguished Real Estate Award recipient this year is Related Beal, run by Kimberly Sherman Stamler.  Our President-elect for next year is also a woman so the top 3 levels of our organization will be female.  We are very excited to feel like we are following the trend and blazing new trails for women in the industry.

Tamara Small:  Going forward we will operate under a collaborative leadership structure which we found is much more common with women.  Reesa and I have worked together for so many years and we both have our own unique strengths so we are excited to continue this and take NAIOP to the next level.

David Begelfer: We have not said we want to have women run the organization, we have put into place the best people we have for the position and they happen to be women.  They are stepping up and being chosen to lead because of their skills.

BLDUP:  David, to conclude on more of a personal note, what are your plans for your new free time?

David Begelfer:  I have a lot of interests to stay active and involved in the industry.  I love to travel, play golf, those are wonderful things, but I don’t see that as sufficient to keep me alive and well and excited about my future. I’m looking into opportunities that will allow me to keep active and participate in this active industry. I am mostly looking forward to being a member of NAIOP and getting all the value that a member gets from being involved.

Legislative Wrap-Up: NAIOP Fights for Industry Through Final Hours of Session

MAStateHouse_GrayIn the early hours of August 1, Massachusetts legislators adjourned a busy two-year legislative session in which lawmakers introduced 4,861 bills in the House and 3,128 bills in the Senate. NAIOP Massachusetts and its Government Affairs Committee members worked tirelessly to represent the interests of the commercial real estate development industry. NAIOP applauds the leadership of the “big three” – Governor Charlie Baker, House Speaker Robert DeLeo, former Senate President Harriette Chandler, newly elected Senate President Karen Spilka, as well as committee chairs and legislators who pursued a wide-ranging agenda. For the remainder of 2018, the legislature will meet in informal session, but during those sessions bills need the unanimous approval of the limited number of members attending to be approved. Any member of the legislature can prevent a bill from advancing simply by objecting.

While NAIOP advocates on hundreds of bills, here are the must-know highlights of the 2017-2018 legislative session and what they mean for CRE:

Railroad Right of Way Reform Passes in Economic Development Bill
In a win for NAIOP Massachusetts’ advocacy, the economic development bill approved by the House and Senate reforms the current railroad right of way statute (MGL 40/54a) that has created uncertainty and delays for projects on former railroad rights of way. The language in Section 10 of H. 4868 removes the confusing “land appurtenant to” language from the review process; directs MassDOT to establish guidelines, timeframes, and a determination of inapplicability option for unimpacted land; and brings certainty to landowners and lenders while protecting properties of importance to the Commonwealth’s future transportation needs. The final language was based on a stand-alone bill filed at the request of NAIOP by Rep. Joe Wagner and was the result of years of discussions between NAIOP, MassDOT and the legislature. The economic development bill also includes $250 million for the MassWorks program and $75 million for workforce skills capital grants, as well as many other bond reauthorizations designed to spur economic development.

VERY special thanks to Secretary Pollack, Rep. Wagner, Rep. Strauss, Sen. Boncore, Sen. Lesser, legislative leadership, and NAIOP members for their work on this issue. The bill is now before Governor Baker and is expected to be signed very soon.

Flawed Zoning Bill Defeated
NAIOP and all real estate groups in the state, as well as the Mass Municipal Association, opposed H. 4397.  The bill was a top priority for planners and environmental groups and contained anti-growth concepts including eliminating the Approval Not Required (ANR) process, reducing the scope of zoning “freeze” protection under current law only to the particular subdivision plan that is submitted rather than to the “land shown on the plan,” authorizing the use of impact fees without limitation, and mandating inclusionary zoning without incentives. NAIOP educated lawmakers on the numerous provisions of the bill, which would have hindered housing production in Massachusetts.  We are very pleased this very flawed bill did not advance.

Housing Production Bill Left on the Table
NAIOP strongly supported H. 4290, which was filed by Governor Baker and given a favorable report by the Joint Committee on Housing.  That bill allowed cities and towns to adopt zoning best practices by a simple majority vote, rather than the current two-thirds supermajority.  This would have been allowed in situations where the zoning change encouraged more concentrated development including the adoption of 40R “Smart Growth” districts or starter homes, reduced parking requirements, allowing accessory dwelling units, and reducing minimum lot sizes.  The bill was supported by a broad coalition of business groups, the Massachusetts Municipal Association, and the real estate industry.  We are disappointed that the bill did not receive a vote.  Governor Baker has encouraged the legislature to move the policy during informal session (now through December).  NAIOP will continue to work with the Administration and the legislature to promote policies that encourage the production of housing.

Vicarious Liability Bill (Wage Theft) Does Not Pass
NAIOP was part of an 18-member coalition of business groups opposing flawed wage theft legislation containing vicarious liability for businesses that employ entities that commit wage theft (S. 2546). It would have targeted innocent, law-abiding businesses and held them responsible for the actions of other businesses. This would have applied stop work orders and penalties to the lead company who would have had no way of knowing about such a violation.  The Senate passed the bill, but it was not taken up in the House.  NAIOP, which served on a working group with legislators and the proponents of the bill (labor interests), will continue to advocate for fair and balanced solutions to wage theft that go after those who are breaking the law, while opposing proposals that target law abiding businesses.

Balanced and Effective Approach to Climate Change Passes
NAIOP supported the environmental bond bill and climate change resiliency legislation (H. 4835), which passed both chambers and is now before Governor Baker for his signature. It directs state agencies to draft a comprehensive climate adaptation plan and evaluate the Commonwealth’s adaptive capacity to respond to climate change. The Plan will be updated every five years, ensuring a focus on climate change resiliency beyond the current Administration. NAIOP was strongly opposed to other climate change legislation (CAMP – S. 2196)  that would have required “all certificates, licenses, permits, authorizations, grants, financial obligations, projects, actions and approvals issued by a state agency or state authority” to be consistent to the maximum extent practicable (MEP) with a plan.  NAIOP opposed the language because “consistency” would have been open to interpretation and the term “maximum extent practicable” was not defined and therefore set the stage for legal challenges against projects.  We are pleased that the final environmental bond bill does not include this language and NAIOP looks forward to working with the Administration to develop this important plan.

Housing Bond Bill – Brownfields Tax Credit Extended
Earlier in the session, Governor Baker signed the Housing Bond Bill (H. 4536), which included one of NAIOP’s top legislative priorities – a 5-year extension of the Brownfields Tax Credit. The bill authorized $1.8 million in new capital spending for the production and preservation of affordable housing with an extension of the Low-Income Housing Tax Credit and an increase in the annual allocation to $25 million. For more information, read our blog post, Brownfields Tax Credit Extension Signed into Law.

NAIOP is grateful to Senator Rodrigues for his leadership on this issue and applauds the housing bond bill conference committee members (Reps. Honan, McGonagle, Hill and Sens. Boncore, Keenan, O’Connor) for championing the Brownfields Tax Credit, which increases housing, creates new employment, and enhances local and state tax revenues by restoring blighted properties to productive use.

Community Benefit District Legislation Falls Short of Approval
Legislation (H.4546) that would have authorized Community Benefit Districts did not receive final procedural support in the legislature after initial approval in the House and Senate. Community Benefit Districts (CBD) impose assessments on property owners, in addition to property taxes, to fund supplemental services. A CBD may be established only if the property owners in the district who sign the petition to create the CBD will pay more than 50 percent of the yearly assessment. Like last session, NAIOP opposed the CBD framework based on the issue that it would impose additional fees on property owners who may not have supported the creation of the district in the first place. Many other advocacy groups and legislators recognized the potential problems with the CBD framework and stopped the bill from becoming law.

Water Banking Fees Defeated
NAIOP strongly opposed Act Providing for the Establishment of Sustainable Water Resource Funds. House Bill 2116 would have provided communities with the authority to create water banks – essentially an impact fee that unfairly targeted new development and focused on environmental mitigation and water conservation measures rather than water infrastructure upgrades or capacity issues.

Job Site Roster Bill Defeated
Senate Bill 1019, An Act relative to transparency in employee benefits reporting in private construction, would have affected projects with 10 or more residential units or commercial projects of 5000 square feet or more by requiring that a roster of employees and independent contractors on a jobsite be publicly posted.  The legislation required a certificate of compliance with no mechanism for applications and issuance, and no timeframes.  Given the extremely fluid nature of a job site, combined with the project delays and costs associated with this legislation, compliance with such a requirement would have been nearly impossible.

Special thanks to all NAIOP members who provided input and expertise on the wide range of issues NAIOP pursued this session. NAIOP will now begin drafting its legislative agenda for the 2019 – 2020 session by meeting with members to determine how to best advance the goals of the industry.

Legislative Update: Issues Affecting CRE on Beacon Hill

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Coasting past a February 7th deadline to advance, retract, or postpone action on the 7,300 bills filed this session, Massachusetts legislators are now meeting through July 31, at which point they will break for the summer and the fall campaign cycle.

As NAIOP expected, several opportunities and threats made it through the deadline set for legislative committees to report out bills to the legislature, including the following:

Housing Choice Initiative

Having unveiled the Housing Choice Initiative with broad-based support in December, Governor Baker used his January State of the Commonwealth speech to highlight the Administration’s plan to spur housing production. The Governor’s legislative package, supported by NAIOP, received a favorable report from the Joint Committee on Housing in February. H.4075 is expected to now move to the House Committee on Ways & Means. Under the legislation, numerous local zoning changes, including the adoption of a 40R district, reduced parking ratios or mixed-use zoning, among others, would require only a majority vote of the local legislative body instead of a supermajority. NAIOP believes this bill, combined with the Housing Choice Designation for municipalities that prioritize housing production, and the Housing Bond Bill (referenced below) are important tools for addressing the Commonwealth’s housing crisis. NAIOP will continue to work to advance this much-needed legislation.

Problematic Zoning Legislation

Smart growth advocates and environmental groups remain committed to Senate Bill 81 and House Bill 2420, the zoning bills that are strongly opposed by the real estate industry. Both of the bills were granted an extension order to March 7. NAIOP, working with a broad real estate coalition, continues to educate lawmakers about the problematic provisions of the bills – particularly language that would hinder the production of housing in Massachusetts. Now that new Senate President Harriette Chandler has indicated that affordable housing is a top priority, NAIOP is advocating that the Governor’s approach is the best path forward for the Commonwealth and will continue to oppose any efforts to combine the Governor’s bill and the zoning bills.

Wage Theft

Wage theft is a serious matter and those who intentionally violate wage theft laws should be held accountable. Unfortunately, two wage theft bills (Senate Bill 999 and House Bill 1033), while well-intended, go after employers who are following the rules and doing the right thing. The bills penalize those who inadvertently do business with a firm that has committed a wage violation, through the imposition of vicarious liability (something that no other state imposes). The legislation would affect anyone involved in construction and development, but it would also have a huge impact on all businesses. It would apply equally to hospitals, universities, and businesses, large and small, that outsource aspects of their operations to other companies or “contractors.”  The financial impact could be severe. Both of the bills were given an extension order until March 7.

NAIOP is part of a large business coalition that is deeply concerned with the impact these bills could have on the Massachusetts economy. Senator Jason Lewis and Representative Paul Brodeur created a wage theft working group, which includes representatives from both sides of the issue. The group has met several times and we will continue to offer up alternative solutions to addressing the issue of wage theft and we will continue to oppose any wage theft bill that would include vicarious liability.

Housing Bond Bill & Brownfields Tax Credit

In January, the House passed a $1.7 billion housing bond bill, which contains numerous provisions supported by NAIOP.  It includes an extension of the soon-to-expire Brownfields Tax Credit and extends the authorization of other tax credits including the state’s Low-Income Housing Tax Credit and the Community Investment Tax Credit.  The bill is now before the Senate Committee on Bonding, which held a hearing on it last week. NAIOP will continue to advocate for quick passage of this important legislation.

A potential economic development bill, an omnibus energy bill, and countless other bills are also on NAIOP’s radar. In the next five months, NAIOP will continue to fight for legislation that encourages economic development and supports the commercial real estate industry.  If there are issues of interest to you or your firm, please contact NAIOP’s Government Affairs Team.

My Top Ten Predictions for 2018

2018 image

The CRE industry kept smiling through 2017! Is anyone talking about innings anymore? We just keep doing deals.

So, here are my predictions for the coming year:
1. Amazon will pass on Boston for a campus, but leave us with a great consolation prize.
2. No Turnpike air rights project will start construction (ditto for 2019).
3. Fed. interest rates will be up 75 basis points by end of year.
4. In Boston, more condos will be permitted than rental apartments (other than the neighborhoods).
5. An office or lab lease will hit $100 per square foot in Cambridge.
6. Construction costs, on average, will be up 7%.
7. More than one million SF of commercial space will commence on spec.
8. The 128 office market will show more transactions (both numbers and SF) than the downtown market.
9. Foreign buyers will begin to acquire major CRE property outside of Boston/Cambridge.
10. And, yes, the Patriots will do it again.

Below were my predictions for 2017. Not the best batting average, but here is to a New Year!
1. Cap rates will finally start to rise in the Boston/Cambridge markets.
2. A new Fortune 500 corporate HQ will relocate to Boston.
3. Apartment construction starts will drop in downtown Boston.
4. The Dow Jones Industrial Average will finish the year down.
5. Fed interest rates will be raised twice.
6. Foreign investment will increase as a percentage of total CRE sales in Boston.
7. There will be a noticeable business migration from 495 to 128, 128 to Boston, and Cambridge to Boston.
8. Drones will pilot consumer product delivery.
9. An infrastructure bill will pass Congress and be signed by the President.
10. No viable candidate will step forward to run against Mayor Walsh.

To win over Amazon, it’s all about the people

This post originally appeared in the Boston Business Journal.

Since Amazon announced its plans to open a second headquarters location, the region has been abuzz, but, to date, the focus has been on real estate. Where can 8 million square feet of space be developed? Does it need to be in one location or multiple sites?

Amazon, however, is not really looking for space. It is looking for people. These are the skilled workers that fuel the local economy, due to the region’s exceptional ability to attract students and immigrants.

So, while we are spending so much time and effort to present the best site for Amazon’s real estate decision makers, we had better be equally as focused contemplating the human resource side. Where will Amazon’s workers come from? Will they be relocating from other areas around the country?

Reality paints a different picture. Other than the post 2009 recession years, Massachusetts has experienced consistent net domestic migration. We are currently close to full employment. There are few workers available and qualified for the jobs that are currently open. Therefore, it’s more likely that these Amazon workers will come from other local companies. The critical question is how will those companies survive and grow with an even tighter job market? Will they, in turn, be forced to relocate?

To make matters even more complex and challenging, there is a multiplier effect with a company like Amazon establishing a major local presence. Other companies will look to locate near this “mother ship” and many of the service companies in the area will have to bulk up to handle the additional demand. As a result, there may be a need for upwards of 150,000 more positions to fill over the next 10+ years.

The dog that chases the car, but then catches it, had better have a plan for what happens next. If we are serious about getting Amazon to choose Massachusetts, let’s strategize about what it would take to actually increase our labor force. As with the Olympics, planning for the possibility of success can be a beneficial, long term, strategic exercise. In any case, we should prepare ourselves for sustainable growth, whether, or not, any individual company locates here.

Three strategies for retaining more skilled workers and attracting others to come here should be pursued. The first deals with the issue of the high cost of living. The second is job training/retraining. The last is immigration policy.

The primary component of the cost of living is housing. We need to produce more affordable, urban housing, and also open up opportunities for “starter homes” for families in communities that are accessible to the new jobs and with good school systems. Schools, commuting time, and affordability are what drive home purchases (particularly for families). Unfortunately, local zoning in most of the Commonwealth discourages multi-family housing, as well as smaller, denser single-family homes.

As for job training, we will need to adapt our institutions and training pathways to help workers acquire new skills. We have not been sufficiently agile to respond to the needs of those businesses that are expanding and hiring. Even a college degree is not sufficient to guarantee a new job in the new economy. New training methods that can be adapted and adjusted in short order will be needed to fine tune a prospect’s skill set to match a company’s requirements. Lifelong learning that is priced right, available on demand, and responsive to the changing needs of the workplace must become the norm.

Finally, we have benefited greatly by the historic flow of immigrants. Were it not for immigration, we would not have accommodated the strong economic growth over the last 20 years. Local and state leaders must flex their political muscles to ensure that our national policies do not impede the beneficial impact that comes from a wide range of skills entering and fueling our economy.

Yes, we can benefit from a thoughtful strategy to attract Amazon to our region. But, over time, we will be well served with a realistic plan to increase our skilled workforce that will be the honey that easily attracts many more companies to locate and expand here.