COVID 19 Update: Governor Signs Bill Tolling Local Permits and Other Issues Affecting CRE

Governor Signs Bill Tolling Municipal Permits

Today, Governor Baker signed H.4598, An Act to address challenges faced by municipalities and state authorities resulting from COVID-19. This bill addresses many challenges faced by local governments throughout the Commonwealth during this time and includes language that addresses the tolling of local permits and is supported by the Mass Municipal Association, NAIOP MA, and the Home Builders & Remodelers Association. The language, found in Section 17 provides necessary relief to cities and towns that, due to disruptions caused by the state of emergency, are unable to timely process and hear permitting applications. At the same time, these changes balance the needs of residents and developers by ensuring that their current permits are no impaired by the emergency declaration. 

House Passes Commercial and Residential Eviction Moratorium

On Thursday, April 2, the House passed H. 4615, An Act providing for a moratorium on evictions and foreclosures during the COVID-19 Emergency . The bill enacts eviction moratoriums for both commercial and residential tenants. The bill now moves to the Senate.

Small Business Administration Clarifies Paycheck Protection Program

Late yesterday, the Small Business Administration (SBA) issued an interim final rule that provides additional guidelines and requirements for its Paycheck Protection Program (PPP) aiding small businesses affected by the COVID-19 crisis. The interim rule provides increased clarity on several key issues. It specifies underwriting expectations and allows lenders to rely on borrower documentation for loan forgiveness without verification – if the borrower attests that it has accurately verified the payments for eligible costs. This provides increased protection for lenders should borrowers misrepresent information. Additionally, the guidance states that after seven weeks, lenders may request that SBA purchase the expected forgiveness amount of PPP loans. It also allows banks that are already certified as 7(a) lenders to begin approving loan applications with SBA delegated authority starting today, April 3.

Cambridge Issues Construction Guidance for Still-Active Sites

On the evening of April 2, the City of Cambridge released guidance for currently active construction sites. The guidance does not change the types of construction activities covered by the existing moratorium, issued on March 18. All contractors undertaking construction projects that have received approval from the Inspectional Services Department or the Department of Public Works to work during the Moratorium shall follow the City’s COVID-19 Construction Guidelines, and are strongly urged to review the Commonwealth’s COVID-19 Guidelines and Procedures for all Construction Sites and Workers. Inspectional Services or Public Works Departments may shut down job sites that are found to be in violation of the City’s COVID-19 Construction Guidelines.Additionally, larger construction sites may require more elaborate reports and worker training plans.

COVID-19 UPDATE: MAYOR WALSH EXTENDS ORDER PAUSING NON-ESSENTIAL CONSTRUCTION WORK IN THE CITY OF BOSTON

The following is a press release from the Office of Boston Mayor Martin J. Walsh (March 25, 2020)

BOSTON – Wednesday, March 25, 2020 – Due to the public health emergency caused by the spread of COVID-19 (coronavirus) Mayor Martin J. Walsh today announced he is affirmatively extending the City of Boston’s order to pause non-essential construction for City of Boston permitted sites. Mayor Walsh first announced this order on March 16, 2020, and sites should have been locked down for safety by March 23. Due to the public health emergency in Boston and across the Commonwealth of Massachusetts, this pause is still in effect until further notice.   

“The safety and health of construction workers and all residents of Boston is my first priority, and I am not willing to put that at risk as the virus spreads throughout our communities,” said Mayor Walsh. “Large gatherings such as those at construction sites have been proven to escalate the spread of the virus, and Boston must do everything in its power to flatten the curve, and stop the spread of coronavirus.”   

Mayor Walsh is working with various partners including construction firms and the building trades to determine protocols that would allow these sites to safely re-open in Boston.    This policy only applies to projects permitted by the City of Boston. The City will still allow work that is essential to the safety and well-being of Boston’s residents at this time, particularly work related to the COVID-19 public health crisis.  

In addition to these construction projects, the City will, on a case-by-case basis, review requests for exemptions to the temporary construction moratorium. These may be granted by the Commissioner of Inspectional Services (ISDCommissioner@boston.gov) for building-related work or the Commissioner of Public Works for street-related work. These will be granted if they support increased public health and safety and precautions are taken to mitigate the risk of exposure to COVID-19 among workers.    

Additional details about the order can be found on boston.gov. The guidance order is available online.  

###

COVID 19 Update: Baker Issues Guidance Overturning Local Construction Moratoriums

Today, March 25, Governor Baker issued guidance clarifying that the March 23, 2020 Order “Assuring Continued Operation of Essential Services in the Commonwealth, Closing Certain Workplaces, and Prohibiting Gatherings of More than 10 People” supersedes and makes inoperative any order or rule issued by a municipality that will or might in any way impede or interfere with the achievement of the objectives of this order. “Construction Workers who support the construction, operation, inspection and maintenance of construction sites and construction projects” are deemed essential.

Therefore, “the Order provides that all construction projects are to continue operations during the state of emergency, but to do so with allowance for social distancing protocols consistent with guidance provided by the Department of Public Health. Local policies, regulations or directives that provide otherwise are in direct conflict with the Order and should be withdrawn.”  

NAIOP had urged the Administration to issue guidance given the lack of uniformity across the Commonwealth on this issue and we are grateful for this clarity.  

Goulston & Storrs Files Amicus Brief on Behalf of NAIOP Massachusetts in Murchison v. Sherborn ZBA

Brief Urges SJC to Reject Appellate Court’s Decision on Standing

BOSTON, MA – Law firm Goulston & Storrs recently filed an amicus brief on behalf of NAIOP Massachusetts, The Commercial Real Estate Development Association, in the case of Murchison v. Sherborn ZBA.  The amicus brief urged the Supreme Judicial Court to overturn the lower court’s decision, which sided with the plaintiffs in the case.

NAIOP chose to pursue this opportunity because of concern that the Appeals Court’s decision in this case will, if allowed to stand, chill the development of commercial, industrial, and residential projects statewide by eliminating a meaningful requirement that plaintiffs in zoning cases must establish their standing with admissible evidence of harm to their interests protected by zoning.

“We are grateful to the incredible team at Goulston & Storrs for their work,” said Tamara Small, CEO of NAIOP Massachusetts. “Meritless appeals of zoning decisions are used all too frequently to delay and kill beneficial development projects. The decision in Murchison v. Sherborn ZBA will have far reaching implications for our industry. Making it easier for plaintiffs who are not injured to pursue zoning appeals will worsen the current housing shortage, hinder economic development projects, and eliminate a critical standing doctrine. For these reasons, we hope the SJC will overturn the Appeals Court decision.”

The Goulston & Storrs team involved in the matter includes Gary Ronan and Alana Rusin. 

Oral arguments will be held Thursday March 5.

###

NAIOP Contact: Anastasia Nicolaou / 650-380-9440

About NAIOP

NAIOP Massachusetts, The Commercial Real Estate Development Association, represents the interests of companies involved with the development, ownership, management, and financing of commercial properties.  NAIOP’s 1,700 members are involved with more than 250 million square feet of office, research & development, industrial, mixed use, multifamily, retail and institutional space. In addition to providing education and networking opportunities, NAIOP advances the interests of the industry and advocates for effective public policy. For more information, visit www.naiopma.org.

About Goulston & Storrs

With over 200 lawyers across multiple disciplines, Goulston & Storrs is a real estate powerhouse with leading-edge corporate, litigation, tax, and private client and trust practices. We employ a team approach that values client outcomes first and foremost. The firm’s dedication to providing prompt, practical legal advice, cost-efficiently and tailored to our clients’ business needs, has resulted in Goulston & Storrs being acknowledged for excellence by leading industry, client, and peer rankings including Chambers USA, BTI’s A-Team for Client Service, and U.S. News & World Report Best Lawyers. Goulston & Storrs is an Am Law 200 law firm with offices in Boston, New York, and Washington, D.C.

What Does 2020 Hold for CRE in Massachusetts? Companies Incorporate Real Estate as Recruitment Tool

By: Tamara Small, CEO of NAIOP Massachusetts

The following first appeared in Banker & Tradesman on December 29, 2019.

The end of 2019 marks more than 10 years in the current real estate cycle. As we enter a new decade, now is a good time to take stock of current market conditions and make predictions for 2020. 

Experts are predicting continued, moderate, growth for 2020. Nationally, investor appetite for real estate remains strong and active in all sectors – retail, industrial, lab, office and housing. National vacancy rates are not showing signs of oversupply, and banks are remaining disciplined and conservative in their lending practices.  

While slow and steady job growth is expected, trade wars, political uncertainty and a labor shortage pose the biggest threats to continued economic growth. Market fundamentals remain strong, but such threats should be monitored closely given their potential to dramatically impact the market. 

Access to Talent Drives Market  

The Greater Boston market had an exceptionally strong year in 2019 with record rent growth and tenant demand. Boston remains one of the top markets for foreign investment. However, while continued growth in 2020 is expected, threats exist.   

Construction and land costs continue to soar, weakening returns and potentially threatening the feasibility of new projects. In the third quarter of 2019, Massachusetts real gross domestic product declined 0.2 percent according to MassBenchmarks, while U.S. real gross domestic product grew by 1.9 percent. A labor shortage, which is only expected to continue, is viewed as the single largest threat to the Massachusetts economy.  

At the recent NAIOP/SIOR Annual Market Forecast, which featured leading real estate experts who provided an analysis of the 2019 statistics and predictions for 2020, the need for access to a talented workforce – and what this means for real estate – was a major theme.   

Historically, tenant space was viewed as a cost center by employers, but it is now being used to attract and retain talent. While WeWork’s business model may have been flawed, it did have a dramatic impact on tenant expectations. Whether it’s beer on tap, game rooms or state-of-the-art fitness centers, employers are now using their space to gain a competitive edge when it comes to getting the best talent. This can be seen in the suburbs as well as Cambridge, Boston and surrounding markets, and it will continue in 2020. This all translates into a rising need for new or renovated space and an average tenant improvement allowance average of $5 per square foot. 

Looking Ahead to 2020  

As we enter a new decade, the Boston market remains strong with opportunities opening up beyond the urban core. Limited supply and high demand for lab space are fueling growth. With East Cambridge lab vacancy rates now at 0.8 percent, life science projects are moving forward in Watertown, Alewife, Allston/Brighton and Somerville, as well as Dorchester, the Seaport and South Boston. Cambridge’s success will also create opportunities for well-located suburban assets, particularly transit oriented development projects with the right amenity base.   

Unprecedented growth is expected to continue in the industrial sector. According to Rick Schuhwerk, executive managing director at Newmark Knight Frank, every $1 billion in online sales translates to 1.25 million square feet of new warehouse demand. The demand for “last-mile” facilities near high-density urban centers is driving up values. In the last five years, rents in core urban industrial space have more than doubled. In 2020, with online sales only expected to increase, vacancies will drop and rents will continue to rise. Spec developments are expected as well as a western migration of industrial space.  

On the housing front, according to Kelly Whitman, vice president of investment research at PGIM Real Estate, opportunities exist to upgrade and develop larger suburban apartments. Suburban apartment annual rent growth continues to outperform the urban, and, given changing demographics, a shift away from small units in the suburbs is expected. As the housing crunch continues, these areas outside of Boston’s core are vital to easing the pressure and providing middle income housing.  

On Tap on Beacon Hill 

Finally, while national economic and market indicators tell us that continued growth is expected next year, legislative and regulatory proposals at the state and local levels have the potential to significantly impact the market and should be watched closely. 

Housing: More housing production is needed to keep up with increased population growth. H.3507, An Act to Promote Housing Choices, is targeted at lowering voting thresholds in key zoning votes, allowing for increased production of housing. If it is not passed before the end of the legislative session, anticipate a continued tightening of the housing market, statewide. 

Transportation: NAIOP believes that a functional, accessible transportation system is key to continued development and investment. As area residents and business owners know, congestion has gotten worse in Greater Boston. The Baker-Polito Administration recently filed the Transportation Bond Bill, (H.4002), outlining a capital plan for addressing gaps in transportation infrastructure statewide. Other legislative proposals to address transportation are expected in 2020.  

Fossil Fuel Bans: A number of communities are considering bans on natural gas connections in all new construction, which will likely halt development entirely. While addressing climate change must be a priority, it is critical that policymakers employ achievable measures that are grounded in the reality of today’s technologies, without blocking housing production.  

The Legislature Is Hitting the Halfway Point: What Does That Mean for Commercial Real Estate? From Housing to Climate Change, Key Issues Are on the Table

The following column was published in the September 15 edition of Banker & Tradesman.

With the 2019–2020 Massachusetts legislative session approaching the halfway point, it is a good time to take stock of where things stand and what legislative proposals could affect the commercial real estate industry.  

The current legislative session began in January 2019 and will conclude on July 31, 2020. With more than 7,000 bills filed to date – and more expected – Massachusetts legislators have the ability to make dramatic changes affecting every aspect of society.  

As legislators consider proposals affecting commercial real estate and economic development, in general, they must also consider the economy for the year ahead. The Greater Boston market is currently viewed as a stable market for investment; and while vacancy and unemployment rates remain low, warning signs of a coming economic downturn are on the horizon.  

The pace of economic growth in Massachusetts has not kept pace with that of the nation over the past year. In the second quarter of 2019, Massachusetts GDP grew at a 1.4 percent annualized rate, while U.S. GDP grew at a 2.1 percent rate. In addition, in August, the 10-year Treasury yields fell below the rate on 2-year notes for the first time since 2007. This inverted yield curve has been an indicator of coming recessions for the past 50 years.  

This, combined with escalating trade wars and geopolitical uncertainty, highlight the need for careful consideration of the potential statewide impact of legislative proposals.  

While it is nearly impossible to predict how the session will end, legislative leaders have expressed an interest in tackling some significant policy issues including tax revenue, housing and climate change. Given the impact these issues will have on commercial real estate, the details matter. 

Transfer Taxes  
Revenue has been a popular word on Beacon Hill in recent months, with numerous transfer tax proposals filed. The bills all seek to create revenue for a variety of funding priorities, including affordable housing, climate change, education and transportation.  

However, the transfer tax is not the best approach to adequately address these issues, particularly since the revenue will be pegged to the real estate market. 

With anticipated market instability, these taxes many not serve as a stable funding source. If passed, they will increase the cost of housing and commercial development, which has the potential for negative ripple effects throughout the economy. 

Climate Change  
Given the environmental, public health, safety and economic development threat posed by climate change, legislation on this issue is expected this session.  

The House passed H. 3846, An Act Relative to GreenWorks, in July. It is a $1.3 billion energy and resiliency bill designed to offset climate change, creating a new grant program for cities and towns throughout Massachusetts to fund projects focused on climate resiliency. It is modeled after the successful MassWorks infrastructure program and builds on the Environmental Bond Bill passed in 2018.  

Climate change affects all residents of the commonwealth. Therefore, the burden for addressing this issue should be shared.  

Unlike transfer tax proposals, which only target a subset of the population and may drive up the cost of housing, GreenWorks is a far more equitable approach and should be a top priority for the legislature.  

Housing  
Finally, one of the most significant economic issues in need of legislative action is the current housing crisis.  

The supply of housing is not keeping up with demand, which in turn is driving up rents and home sale prices. An Act to Promote Housing Choices (H.3507) provides a clear framework for cities and town to encourage new housing production.  

The bill, which has the support of the Massachusetts Municipal Association, the real estate industry, affordable housing groups like CHAPA and business leaders, allows cities and towns to adopt zoning best practices by a simple majority vote, rather than the current two-thirds supermajority.  

Whether it’s senior housing or multifamily housing, countless units are never built because of the need for a supermajority vote. Given the broad support for this bill, the legislature needs to act on this legislation in advance of spring town meetings, where countless projects will be up for review at the local level.   

While these are only a few of the issues expected to move this session, it’s clear that decisions made at the State House over the next 10 months will have a significant impact on the real estate industry for years to come. NAIOP will continue to work with legislators to ensure that the economic impacts of legislation are considered and that Massachusetts remains a great place to live and work.  

Seaport by Foot: Walking Tour Recap

Every year, NAIOP takes its members on a walking tour that explores the latest real estate development projects in a specific neighborhood. This year, NAIOP members toured the Seaport, where they had the chance to see recently opened buildings and get an invaluable sneak peek of what’s to come. A still evolving neighborhood, the Seaport has seen incredible investment in everything from office and lab space, to residences along the water, and innovative retail. The district is 23-acres of mixed-use zoning, including 10 acres of open space, and has become a new hub of commerce, culture, and innovation in the City of Boston.

Icon Theater

The sold-out walking tour kicked off at the Icon Theater. The group got a lesson on the history of the neighborhood from David Martel of Newmark Knight Frank, and an important reminder that what is happening in the Seaport now is the result of over 30 years of work from visionaries, investors, and developers who came together to transform the Seaport into what it is today. Yanni Tsipis of WS Development discussed the billions of dollars of public investment, including the Harbor cleanup and Big Dig, that catalyzed the growth of the Seaport. He also discussed his firm’s massive, transformative development, Seaport Square, including the forthcoming 88 Seaport, a mixed-use retail and office project, and 111 Harbor Way, future home to Amazon.    

121 Seaport Boulevard

The group then headed to 121 Seaport, home to PTC’s global headquarters and Alexion Pharmaceuticals. Developed by Skanska, the project officially opened earlier this year. Carolyn Desmond of Skanska discussed the development of this 17-story, 450,000 square foot elliptical tower, which included the discovery of a long-buried ship during construction! Marc Margulies of MPA then covered the cutting-edge design of the PTC headquarters.  The building’s unique shape provided increased opportunities to build out a truly unique space for the offices, providing optimal light and functionality.  Attendees then toured the PTC office, including its incredible rooftop terrace.

Photo of 121 Seaport
Bruce T. Martin Photography 508-655-7557 btm@bruceTmartin.com 154 East Central St Natick MA 01760

Harbor Way

Outside of 121 Seaport, Martin Zogran from Sasaki discussed his firm’s work to create an expansive public realm program, which weaves together a unique fabric of residences, offices, shops, restaurants, civic uses, and hotels.The master plan is designed to encourage walkability and alternative mobility options with 39% of the total project area being exclusively devoted to pedestrian-only open space. As an example, a tree-lined pedestrian path, Harbor Way, punctuated by plazas and amenity spaces serves as the district’s cultural corridor and north-south connector between the Institute of Contemporary Art (ICA) and the Boston Convention and Exhibition Center (BCEC). Their work will bring a diverse mix of uses, pedestrian-oriented public space, and greater coherence and connectivity to the Seaport.

Photo of Harbor Way

EchelonSeaport

A quick walk across the street brought attendees to EchelonSeaport. Developer Michael Schumacher of The Cottonwood Group and Phil Casey of CBT gave an overview of this 1.33 million square foot community, featuring two condominium towers and one multifamily tower with 60,000 square feet of indoor and outdoor residential amenity spaces. The design, focused on the intersection of art and commerce through the lens of luxury hospitality, will include significant public space and promises to be a striking addition to the Boston skyline. With amenities for both towers ranging from pools to private dining rooms, EchelonSeaport promises to provide residents with much more than just a place to live.

Rendering of EchelonSeaport

The St. Regis Residences, Boston

Attendees then went to the former Whiskey Priest location, which will soon be the St. Regis Residences, Boston. Sean O’Grady of Cronin Development and Rebecca Eriksen of Elkus Manfredi Architects discussed the project, which broke ground in Fall 2018. The project faced a unique caveat in initial design – the property borders the Harbor on two sides. Rising to the challenge, the latest residential waterfront development in the Seaport promises to evoke nautical themes in every aspect of its architecture and décor. Currently slated to open in early 2021, the 114 residences will provide a highly curated experience, featuring signature design, dramatic views, an 8,000+ square foot bistro with additional terrace space, on-site spa, and other luxury amenities.

Rendering of The St. Regis Residences, Boston

Thomson Place

From there attendees went to the Seaport’s Fort Point Channel, where Jamie Carlin and Paul Connolly of Crosspoint Associates discussed the future of Thomson Place – a renovation and reinvigoration of one of the area’s historic warehouses. Scheduled to open in Fall 2019, the project will include office, retail and mixed-use space. Currently home to Trillium Brewing, Bartaco, and a new public plaza, the project brings new energy to the neighborhood, while preserving its historic character.

Rendering of Thomson Place

Networking

The group wrapped up the day at The Grand for a networking cocktail hour sponsored by WS Development. Attendees had the opportunity to chat with brokers, project teams and each other to wrap up a successful tour with a well-deserved cocktail in hand. Plans are already underway for next year’s tour. We look forward to seeing you then!