Progress with Boston’s Permitting

doitThis week, Mayor Marty Walsh announced that the City of Boston’s Department of Innovation and Technology has selected a software contractor to upgrade the City’s permitting and licensing system. The City currently issues 60 different types of permits, totaling approximately 86,000 permits annually.

In recent months, the Mayor has shown his commitment to improving the permitting process through hosting the City’s first-ever “Hubhacks Permitting Challenge” to reinvent the City’s online permitting experience. The City also created a streamlined ZBA process for small businesses and 1-2 family owner-occupied residential applications and doubled the hearing capacity for ZBA applications.

We applaud the Mayor for making permitting a priority. We look forward to seeing the improvements to the BRA Article 80 permitting process, especially as it relates to new commercial development.

A Parking Spot in Boston – The New Endangered Species

The Boston Globe recently ran an article, Spaced Out Downtown: Quest for parking in Boston worse than ever (October 4, 2014), observing that parking is becoming an endangered species in Boston, particularly in the Seaport.

It is very clear that the Seaport area is in the process of transitioning from servicing commuter parking for downtown Boston, to providing parking for its new residents and businesses. One of the culprits is the city’s parking freeze. With a parking inventory freeze in the Seaport, long-term availability of satellite surface parking is at odds with the construction of high-rise apartments and offices. As the amount of commuter parking diminishes, the stress on businesses in the downtown business district may get to the breaking point if employees find it difficult to find reasonably priced parking.

The most common reaction is that limiting parking will just accelerate the move to mass transit. If we had an effective, efficient transit system, that might be a reasonable answer. Unfortunately, the MBTA is operating at capacity during rush hours, satellite parking at transit stops is limited, and the condition of our trains and buses is questionable.

If we want to increase ridership and decrease vehicular commutes, let’s go “all in” and invest in a mass transit system that will be the envy of the rest of the country. However, in the meantime, let’s reevaluate the city’s parking freeze policy (one of the very few left in this country.)

Boston May Be Hurt By Its Development Successes

construction-tools

Construction costs have been increasing steadily over the last four years, up 8% from 2011 to 2013 and they are on track for, at least, another 4% this year. That is good news for labor, but it may not be so good for future development. Material costs are also climbing with structural steel and reinforcing bars up double digits over the last 12 months. There are substantial increases projected for other building materials like gypsum, cement and lumber.

The explosion of construction has left some developers finding it more difficult to even attract bids from some subcontractors. After being burnt in the last downturn, many subcontracting companies scaled back and have chosen not to take the risks of accelerated expansions of their companies.

With new developments projected to start this year and next, and additional large scale projects on the drawing boards or in permitting, the demand for labor and materials will only increase, pushing costs up even higher.

What many developers are nervous about down the road is the start of the mega projects. The convention center expansion and the Winn casino in Everett are sure to “suck the oxygen” out of the construction environment.

Unfortunately, at some point the construction costs are going to make a number of commercial and/or multi-family developments infeasible. In a free market, one would expect labor to move into the area when demand is strong and supply limited. Unfortunately, our high cost of living (especially housing) will severely limit that correction in the market. The last recession brought down construction costs. Let’s hope we can find a different solution this time around.

Developers take steps to reinvent suburban office parks

The following article was written by Jay Fitzgerald and appeared in the July 27, 2014 edition of The Boston Globe:

When the exodus to the suburbs got underway more than a half-century ago, employers followed, and the office park was born. But today, as younger workers return to the city, and employers again follow the labor, these isolated campuses of low-slung buildings, parking lots, and company cafeterias face challenges, from new competitors to aging facilities to high vacancy rates.

As a result, owners and developers across Eastern Massachusetts are seeking to reinvent the suburban office park, taking a page from urban revitalization that transformed old mill and factory buildings into mixed-use developments of housing, retail, and office spaces. In communities such as Burlington and Marlborough, developers are adding restaurants, hotels, and other amenities, as well as housing, to compete with the “live, work, play” attraction of the city.

In Marlborough, for example, Atlantic Management Inc. of Framingham purchased the former Hewlett-Packard campus three years ago to launch a more than $200 million rehab of the 110-acre site, which dates back to the 1960s. The project is well underway, with Atlantic refurbishing the two office buildings, while AvalonBay Communities of Virginia, which purchased 26 acres at the site, builds 350 luxury apartments.

Atlantic Management also plans to develop a 153-room hotel and 50,000 square feet of retail and restaurant space that may one day include a farmers market. Already, this redevelopment of the Marlborough Hills office park has attracted a major corporate tenant, Quest Diagnostics of New Jersey, which plans to locate more than 1,000 lab workers there later this year.w

“The number-one challenge for many companies is how to attract talent,” said Joseph Zink, chief executive of Atlantic Management.“Companies need to attract talent and this is one way to do it. I think we’re going to see more of this in Massachusetts.”

Suburban office parks across the nation are trying to respond to tenants insisting on more amenities, said David Begelfer, chief executive of NAIOP Massachusetts, a real estate trade group. In Massachusetts, there’s no precise figure on how many office parks are undertaking renovations large and small, Begelfer said, but “it’s dozens of them and they’re easily spending billions of dollars.”

“The market is demanding it,” he said.

Commercial real estate specialists say the trend in office park redevelopment is driven by two forces. First, property owners need to renovate aging, outdated buildings, some of which are a half-century old. Second, they must meet increasing competition from Boston, Cambridge, and other nearby urban communities.

Along Interstate 495, the vacancy rate for Class A offices is hovering at nearly 18 percent, compared with 11.5 percent in Boston and less than 6 percent in Cambridge. Commercial rents are depressed. Offices lease for only $20 per square foot in the region, less than half of what similar space fetches in Boston and Cambridge, according to Jones Lang LaSalle, a commercial real estate firm.

The site of the former headquarters of data storage giant EMC Corp. in Hopkinton is an extreme case of a struggling suburban property. The 160,000-square-foot building, just off I-495, has sat empty for 13 years, ever since EMC moved to newer offices elsewhere in town, said Steven Zieff, a partner with Hopkinton’s Crossroads Redevelopment LLC.

Crossroads has an option to buy the 38-acre property, which also includes four one-story buildings, and hopes to redevelop the site into a mixed-use complex of housing, retail stores, restaurants, and office space.

“People are looking for something different,” said Zieff. “It’s the entire ‘live, work, play’ environment that people want. They don’t want to go to just an office park with a cafeteria and parking lots.”

Along Route 128, the situation is not nearly as dire, with the office vacancy rate between Woburn and Needham running at 6.4 percent, below Boston’s. Rents near that stretch of the highway are rising as the economy continues to improve, averaging about $34 per square foot, about $20 less than office space in Boston and Cambridge.

But office park owners still feel pressure from intensifying competition with cities. In recent years, a number of suburban companies have moved to Boston or Cambridge, including ad firm Allen & Gerritsen, which moved to the Seaport District from Watertown. Biogen Idec soon will move from a Weston office campus to a new headquarters under construction in Kendall Square.

At the 13-building New England Executive Park in Burlington, the vacancy rate is 10 percent, with tenants that include tech firms BAE Systems, Charles River Systems, and Black Duck Software. Still, National Development, the park’s owner, is convinced it needs improvements to stay competitive.

Later this year the firm plans to start a major overhaul that includes demolishing an office building — all 13 buildings were built between 1969 and 1986 — and constructing 300,000 square feet of new development. The new additions will include a 170-room hotel, three full-service restaurants, and new retail and office space.

“We’re seeing this great rush to the city [by tenants],” said Ted Tye, managing partner at the Newton-based National Development. “What that’s doing is forcing suburban properties to stay on their toes. And we’re responding to that.”

National Development, however, won’t add housing to its New England Executive Park mix. Tye said he’s not convinced that housing within office parks is a smart idea. Some towns might end up getting financially hurt because commercial and industrial properties are usually taxed at higher levels than residential properties, he said.

He added that it’s also hard to duplicate urban settings within suburban parks if they’re not near public transit and don’t have easy pedestrian access to offices. “This is a source of some disagreement within the industry,” he said of housing’s role in office park redevelopment.

In contrast, Nordblom Co., owner of Northwest Park in Burlington, is a firm believer in “live, work, play.” Three years ago, it launched a massive $500 million project to redevelop about half the 285-acre office park to include 600,000 square feet of retail space, 300 new apartments, a 225-room hotel, and 3.5 million square feet of new or refurbished offices.

Todd Fremont-Smith, senior vice president of Nordblom, said the redevelopment, which could take another 10 years to complete, has already attracted new office tenants, a steakhouse restaurant called The Bancroft, and a new Wegman’s supermarket, which opens in October.

“By mixing the uses, you have a more dynamic environment — and it’s more rentable,” Fremont-Smith said. “People are seeking urban-like amenities where they work. I think we’re going to see more of this at both office and industrial parks. People want it.”

View the original article here.

Zoning Legislation Will Hinder Housing Production In Massachusetts

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

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

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

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

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

 

Patience Not Panic Needed with BRA

A recent Globe article stated that three months into Mayor Walsh’s term, “the pipeline of major new (development) proposals has slowed to a trickle.” The implication is that the transition from the Menino Administration has left the Boston Redevelopment Authority rudderless.

I disagree. The final days of 2013 cannot be viewed as the norm for the Menino Administration. Virtually any developer with a project was aggressively pressing for its approval prior to year’s end. The BRA, most likely, set a record for the number of projects permitted.

Given that the Walsh administration has begun an in-depth audit of the BRA, it does not seem unreasonable that city leaders be given time to properly review the current process and propose needed changes in how projects are reviewed and permitted.

Less than 90 days have passed since Mayor Walsh took office. The last mayor had 20 years to shape the BRA’s review process. Before anyone questions the competency of the Walsh Administration, they should allow city leaders to get to know how the city operates and give them adequate time to make changes that could result in a stronger, more vibrant Boston.

NAIOP Responds to Boston Globe Article

A February 23 article in The Boston Globe gives the impression that the development community encouraged the Massachusetts Department of Environmental Protection (MassDEP) to reduce standards for site cleanups to allow for faster approvals for developers. On the contrary, no part of the commercial real estate community either initiated or encouraged a review of the lengthy list of cleanup standards. The regulatory changes that are about to be released are a part of an agency-wide review, made all the more important by the need for this agency to be more efficient, given its limited resources.

In 1983, the legislature established an oil and hazardous waste cleanup program, Chapter 21E, formalizing the process for MassDEP to manage disposal sites. But with too few cleanups, unclear rules, delays in Department approvals, and insufficient resources, the cleanup process for contaminated sites quickly bogged down.  In response to this situation, the legislature overhauled Chapter 21E and the promulgation of regulations under the Massachusetts Contingency Plan (MCP) in 1993 created a new privatized, risk-based program. It eliminated the MassDEP backlog and allowed the Department to focus on the most complex sites.  Within the first two years of the program’s implementation, there were more than 3,200 permanent site cleanups. The success of this program made it a national model.

The MCP requires contamination to be cleaned up to a level that protects people and the environment, taking into account both the present and future use of the site. MassDEP developed conservative, detailed, contaminant-specific lists of both reportable concentrations and cleanup standards, based on the toxicity and mobility of the contaminants involved. Risk characterizations are used to determine whether detected contaminants pose a threat to human health or the environment and whether further comprehensive response actions are required.

The recent changes to these standards include some values that were increased, but also others that were decreased.  Each change was based on the latest scientific literature.  If MassDEP establishes a value based on science, does it not have the responsibility to adjust it either up or down, as the availability of new data dictates?

Massachusetts residents and businesses can and should continue to rely on a proven and protective program based on legitimate technical considerations. Emotional criticisms of every change in these standards are not conducive to the objective, science-based decision-making that has allowed Massachusetts to achieve a stellar track record in the successful transformation of blighted, contaminated sites into safe and productive community assets.