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.

Welcome to Your New Home, General Electric

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The Greater Boston region’s research and higher education institutions are the envy of most of the world. While financial incentives helped seal the General Electric deal, this was not a cost-driven determination. It was a desire by the company to be housed in an innovation ecosystem that can provide the highest levels of skilled talent and technology. And, as a company doing business worldwide, GE will become an integral part of the local culture that successfully produces new ideas, products and technologies.

Kudos to Governor Baker and Mayor Walsh! This is a clear endorsement for the Commonwealth’s and the City‘s ability to market the region and all it has to offer to a business that could have relocated anywhere in the country (even in locations that could have provided greater financial incentives). The Legislature also deserves recognition for the important economic development bills passed over the last 6 years, which provided many of the tools needed to attract and close the deal with GE.

We may not have an Olympics here in Boston to remind the world that we are a global leader, but we do have the vote of a $130 billion high-tech industrial company (the 8th largest U.S. corporation) who will bring over 800 jobs to the “Innovation” Seaport District. Welcome home, General Electric.

We Need Jobs, But Also Skilled Workers

computer_handsThe Boston Globe recently reported that “the state’s tech sector is growing fast, but a shortage of qualified workers is preventing Massachusetts from becoming the capital of the nation’s innovation economy”, according to the 2014 State of Technology Report released by the Mass Technology Leadership Council. “Creating the jobs isn’t the hard part – filling them is the hard part,” said Tom Hopcroft, chief executive of MassTLC. “We can’t find enough people with the skills to fill all of these tech jobs.”

These are not the only types of jobs that remain open according to this Boston Globe graphic, which shows that it is not just the high end tech jobs that are having trouble finding workers.

So, what is worse – not having the jobs, or not being able to provide the workers for those companies that are expanding? It should be the former.  Trying to create new jobs is not only difficult, but there is actually no proven way to do it.  If what we have is a gap in training, or the proper transportation to access trained workers, we should be able to remedy that.

Local and state government should be partnering with local community colleges, vocational schools, and universities to work directly with those businesses that are fortunate enough to be growing and hiring.  If we don’t fix this imbalance expeditiously, we may have bigger problems.  Companies will begin expanding elsewhere and, then not having any local jobs to fill would be a lot worse.

Where Did All the Parking Go?


The city-owned Winthrop Square Parking Garage, at 240 Devonshire Street, recently closed due to serious structural problems. Built in the 1960s, this Boston garage accommodated 550 cars at discounted rates from the much higher priced private facilities.

This now further exacerbates the commuter parking problem, already destabilized by the continuing loss of surface parking spaces due to the heated development activities in the Seaport area. Employers may soon start to hear the complaints, as workers begin to personally absorb these increased costs.

The “dirty secret” is that the only reason the Financial District’s parking freeze has worked for so long was that there was a large surplus of low-cost parking nearby.  The same goes for the Seaport’s parking freeze.  As more buildings eat up the surface lots, fewer spaces will remain – as demand increases substantially.

Commercial parking freezes are an ineffective means of providing cleaner air, especially when they are targeted exclusively at a particular municipality.  An unintentional result of a parking freeze is its negative effect on economic development, limiting the ability of new businesses to create jobs, existing businesses to expand, and leading, in many cases, to shifting growth to areas without such restrictions.

Maybe now is the time to rethink this outdated method of controlling auto emissions.

 

Massachusetts Community Colleges Need to be Up to the Challenge

The Massachusetts Community College system is getting some well-deserved attention in Governor Patrick’s State of the Commonwealth address, the recent Boston Foundation report, and various news articles and editorials.

Primary concerns voiced by many are their underperformance and the current mismatch between the skills taught through our state higher education system in general (and community colleges in particular), and the middle-skilled jobs currently unfilled or expected to be available in the coming years.

One clear indicator of the problem is that graduation rates at the state’s community colleges are very low, especially as compared to other systems across the country.

The Boston Globe editorializes that the community college system needs to focus on being a “springboard to a productive career,” preparing students for gainful employment, especially “in an economy where competition for jobs is fierce.”

“Everyone without a job in Massachusetts today is likely to need more education, more training, directly relevant to employment opportunities, before they find one.” With over 240,000 people unemployed in the Commonwealth, community colleges have a very large pool of potential students to help.

The question becomes: what needs to be done to bring the existing system of community colleges in better alignment with the needs of employers in today’s economy?

To start the process, in 2010 Governor Deval Patrick established the “Vision Project” initiative using data to align higher education with workforce needs, with the objectives of:

  • Improving college readiness;
  • Improving student completion rates;
  • Aligning degrees with workforce needs;
  • Improving student learning; and
  • Decreasing gaps between different groups of students

The Boston Foundation study (The Case for Community Colleges: Aligning Higher Education and Workforce Needs in Massachusetts) developed the following recommendations as a strategic blueprint for “building a system that effectively leverages the capacity of community colleges to be leaders in meeting the workforce needs of Massachusetts”:

  • Clarify the mission of community colleges, with a priority on preparing students to meet critical labor market needs.
  • Strengthen overall community college system governance and accountability.
  • Adopt performance metrics.
  • Better prepare students for community college-level work and graduation.
  • Stabilize community college funding.
  • Form a Community College Coalition.

Now is the time to focus on this critical component of the state’s economic development strategy, by boldly working to reform and strengthen the state’s community college system. We need to make it more accountable and performance driven as a strategic path for workforce development.

In a global economy, education will be the prime differential determining the winners and losers. We can and will rise to the challenges of tomorrow, if we make the right choices today.

Mass Historical Commission Needs Reform

The Massachusetts Historic Commission (MHC) is an unusual agency of government, in that it frequently acts as if it is not accountable to the Governor or the Legislature – only to the Secretary of State’s Office.  As such, it often acts alone and in conflict with the other arms of government.

While most government agencies at least aspire to provide a transparent, fair, and predictable process, the MHC operates in a “black box.”  Although the MHC has regulations for the review of properties listed on the State Register of Historic Places, those regulations are not even available to the public on its website.  Furthermore, the review of the 180,000 sites that get listed on the MHC Inventory of Historic and Archaeological Assets of the Commonwealth is unclear and unpredictable.  The MHC has no regulations for submittal requirements, review timing and deadlines, or Memoranda of Agreement (MOA) for such projects so proponents are left without direction.

Project proponents must also deal separately with the requirements of the Mass Environmental Policy Act (MEPA) process and the MHC, often on different timetables, resulting in significant delays.  MEPA virtually always reaches its decisions in 30 or 37 days, as required by its regulations.  However, the MHC is required to make a determination within 30 days, and that deadline is rarely met.  The MHC staff and Director often do not respond to written notices, requests for information, or requests for meetings.  Further, they sometimes simply do not return phone calls to developers, other agencies, or the public.

Until recently, this was a dirty secret.  No one wanted to come forward to complain about the unreasonableness of the MHC’s actions (or inactions) for fear of retribution on a future project.  However, the recent episode involving Meditech has finally shown a bright light on this problem.

Meditech proposed to build a $65 million business park on 138 acres in Freetown near the new Route 24 interchange, eventually employing 800 workers.  No government funds or tax benefits are being used.  This facility would be their second project in the SouthCoast in the past two years. The first, located in Fall River, employs 500 workers.

Although Meditech agreed to leave 117 acres of the site undeveloped, the MHC still required Meditech to strip two feet of the remaining 21 acres to be sieved and inspected by archaeologists. Not surprisingly, with this requirement deemed impractical by the project proponent, the MHC refused to meet with them or representatives from the administration or legislature to discuss and resolve this problem.

As a result, Meditech may be walking away from a project in which they already invested $2 million.  The project would have provided needed jobs in a high unemployment area.  In response, Senator Michael Rodrigues just filed legislation that would limit the powers of the MHC. The proposed law would enable businesses, like Meditech, to develop their properties with input from the MHC, but it would reconfirm the statutory authority of the MHC only to properties listed on the State Register of Historic Places.

It should not be necessary to pass laws to require fairness and transparency from a state agency.  However, in this case, this seems to be the only way.

“It’s Getting Better all the Time”, The Beatles

At the well-attended NAIOP Developing Leaders breakfast this morning, a panel presented “Booming In Beantown: Why Boston Remains One of CRE’s Hottest Markets.”

I was particularly interested in three slides that certainly left me and the other attendees sighing with relief about our future.  The first two slides were from Yanni Tsipis, Senior Vice President of Development & Consulting Services, at Colliers International.  The Market Forecast shows the historic run-up of the vacancy in Boston to a 10 year high of 16.6%.  However, they are forecasting positive absorption over the next four years, dropping the vacancy rate to 12.4%.  That might not be the low single digits, but it is in the range to start pushing up the rental rates.

The next slide should not come as a great surprise regarding the relative health of the commercial real estate investment market.  It does, though, show how bad off are the other regions of the country.  The delinquent or special service loans are under 5% for the Boston market.  However, take a look at some of the other metro markets like Phoenix, Riverside-Ontario, and Seattle.  New York and Washington, the other “stars” are a bit worse off than Boston.  It has been many a recession ago since we were not the poster child for being the worst affected region.

Finally, Peter Merrigan, President & CEO of Taurus Investment Holdings provided a chart showing Boston’s advantage in terms of employment gains.  This may be the first time Boston has ever been in any top grouping regarding employment (other than loss of.)  Not only is Boston ranked third with over 1.3% twelve month gains, but the Commonwealth is ranked fourth in actual raw employment numbers!

Bring out your old records and enjoy the refrain: “It’s getting better all the time.”  And hopefully for the foreseeable future too.