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.

Choosing Massachusetts for Business: Key Factors in Location Decision Making

Zakim_SkyA study commissioned by the non-partisan economic development organization, MassEcon, and conducted by the UMass Donahue Institute‘s Economic and Public Policy Research group, was recently released. The good news is that the vast majority of companies that chose Massachusetts as a place to expand their business would do it again. This consensus was largely based on Massachusetts’ innovative economy, industry clusters, and skilled workforce.

As with all good news, there are some troubling challenges and concerns that were voiced by the businesses about future growth in the Commonwealth:

  • TRANSPORTATION: Companies in Greater Boston are concerned about highway congestion and public transit capacity, while businesses outside the urban core worry about a shortage of public transportation. MBTA reliability is vital to the ability to attract and retain workers, expressing concerns that not enough is being done to accommodate a growing population.
  • HOUSING: The availability and affordability of housing was a significant concern statewide, a challenge to attracting and keeping employees, especially younger employees. Costs in Greater Boston, in particular, are inordinately high, limiting options for low and middle-income workers.
  • BUSINESS COSTS: In general, for companies locating in Greater Boston the advantage of skilled labor outweighed various higher business costs; but labor, health care, and energy costs were identified as challenges to business in Massachusetts. Business costs seemed to be of less concern to those companies that considered and compared other states than to those already doing business in the Commonwealth. Companies engaged in manufacturing were more sensitive to cost challenges of health care and energy than companies in Greater Boston.
  • QUALITY OF FUTURE LABOR SUPPLY: Although more than 90 percent of survey respondents said the availability and quality of the workforce were important to their decision to locate in Massachusetts, some companies are struggling to find enough technically trained workers and those with middle-level skills. Continuing to produce talented labor must be a priority for the state, respondents indicated.
  • ECONOMIC DEVELOPMENT ASSISTANCE: While over half of the businesses surveyed were solidly favorable about the effectiveness of economic development officials in helping them become established in Massachusetts, others reported that the system is confusing.  Some said they sought a “roadmap” with which to navigate the various economic development organizations.

The Commonwealth has been experiencing one of the best periods of economic growth in its recent history. The problem with success is that it sometimes breeds complacency. If we are to maintain and enhance our position as one of the best locations to grow a business, we had better heed the warnings and fix our own house before it begins to lose its luster against all the many worldwide competing centers for growth.

NAIOP Mourns the Loss of Howard Elkus

elkus

The  real estate industry is mourning the loss of an extraordinary professional, Howard Elkus, who passed away April 1st in Palm Beach, Florida. Howard co-founded the firm Elkus Manfredi Architects in 1988 in Boston, specializing in workplace design, large-scale developments, and urban planning. Under his and David Manfredi’s leadership, the firm has worked on signature projects throughout the United States and around the world.

Probably, no other firm has had such an impact on the cityscape of Boston over the last 10 boom years, while also spearheading major global commissions.

On its website on April 3, the firm released a statement:

“It is with great sadness that we share news of the unexpected passing of Howard Elkus. We grieve the loss of Howard as a co-founder of our firm, as a visionary architect, as a mentor, and as a friend. We extend our condolences to his wife, children, and immediate family. Information regarding conveying condolences and participating in remembrances is forthcoming. Our sincere appreciation for your concern and expressions of sadness.”

Howard was warm, creative, caring, and loved what he did. All of us who had the privilege of working with him will feel his loss on a daily basis, but we will always be reminded of his influence as we walk the city he loved.

2016 Greater Boston Real Estate Confidence Index

­This post originally appeared on Solomon McCown’s blog.
Greater Boston’s real estate market has been on a bender – record-shattering sales, huge demand for office space in key submarkets such as Kendall Square and the Seaport and massive amounts of new luxury residential filling up in record time. But will these trends continue?

Solomon McCown and NAIOP Massachusetts teamed up on our first Real Estate Confidence Index to check the pulse of the industry and see if this run will continue – or are we “in the seventh inning?”

From a pool of more than 200 real estate industry respondents, 63 percent feel the Boston market is still rising (either quickly or slowly) and only ONE percent thinks we are already on the decline. Just about a third of respondents (31 percent) say we’ve plateaued. A whopping 76 percent have a positive outlook for our city just one year from now, with almost 56 percent continuing to be confident for the next three years.

See below to dig in on the confidence factors for the submarkets, new vs. existing construction and specific sectors. How confident are you? Let us know in the comments below, or on Twitter at @SMCRealEstatePR or @naiopma.

confidenceindex2016

NAIOP Mourns the Loss of Frank Wuest

NAIOP, its leadership, and its members all Wuest_Frankmourn the loss of Frank Wuest, a long time friend, past President, and avid supporter of NAIOP. We will miss his friendship, enthusiasm for life, and his upbeat attitude. To his family and friends, we give our deepest sympathies.

Frank Wuest died on Saturday, August 13, while participating in a fundraising swim in Narragansett Bay, Rhode Island. An avid and skilled swimmer, Frank was 56 years old, a native of Greenwich, CT, graduate of the University of Connecticut and Harvard Business School, and was President of Marcus Partners, having established a successful career in real-estate investment and development.

Passionate about Boston, its people, and its landscape, Frank loved leading the development of vibrant, mixed-income, mixed-use communities. His work included well known developments such as University Park at MIT and Radian in the Leather District of Boston, which he completed while at Forest City Enterprises, where he was for many years president of the Boston office and Head of the Science + Technology Divisions. He served on both the executive committee and board of directors of A Better City as well as the international advisory board of Harvard Business School’s Real Estate Academic Initiative. Mr. Wuest was the Vice Chair of the Advisory Board of the Boston District Council of the Urban Land Institute (ULI) and was a past President and long time member of the Board of Directors of the Massachusetts Chapter of NAIOP, the Commercial Real Estate Development Association. His kindness, intelligence, generosity, and quick smile will be missed greatly.

Frank became a committed long-distance swimmer in 1998, and was a beloved member of the Cambridge Masters Swim Club at Harvard. He was the recipient of many awards including United States Masters Swimming (USMS) Long Distance All Star, USMS Individual All-American, and many USMS Top-10 swims. Earlier this summer, Frank completed a 10,000M swim for time and was the top male finisher in the annual Charles River Swim.

Frank inspired those around him to do their best. A champion of family and time together, he never let a summer go by without a family reunion. He is survived by his wife, Lyn Duncan; two children, Sam Wuest and Allie Wuest and their mother MJ Vigneau; two stepchildren, Micki Duncan and Elias Duncan; his parents Gail and Frank Wuest of Connecticut, two brothers, Kirk of California and Chris of Connecticut, and his sister Avery Horne of Connecticut.

Funeral Mass and Life Celebration

A funeral mass will be held Saturday, August 20 at 11:00 am at St. Paul Church, 29 Mt. Auburn St., Cambridge, MA. An event celebrating Frank’s life will be held immediately following the mass at the Harvard University Murr Center. Because there is no parking at St. Paul Church, parking will be provided at the Harvard Stadium lot next to the Murr Center at 65 North Harvard St, Boston, MA 02163. Shuttle buses will provide transportation between the Murr Center and St. Paul Church before and after the service.

Immediately following the funeral Mass a luncheon reception and celebration will be held at the Harvard University Murr Center Hall of History, adjacent to the parking noted above.

In lieu of flowers, donations can be made to the Frank C. Wuest Memorial Fund, established through Fidelity’s Charitable Gift Fund. Details can be found below.

——————————————————————————————————————————

Frank C. Wuest Memorial Fund
Make checks payable to:
The Fidelity Charitable Gift Fund
Memo:  The Frank C. Wuest Memorial Fund, Giving Acco
unt #1098999

Checks need to be able to be drawn on a US Bank and should be in US Dollars.
We cannot accept cash like instruments (bank checks, cashier checks, money orders, postal orders, etc.)

Regular Mail Address:                                       Overnight Delivery Address:
Fidelity Charitable Gift Fund                        Fidelity Charitable Gift Fund
Mail zone:  KC1D                                               Mail zone KC1D-FCS
P.O. Box 770001                                                100 Crosby Parkway
Cincinnati, OH 45277-0053                           Covington, KY 41015-9325

Questions?
If you have any questions about the donation process, please call Fidelity Charitable Gift Fund at 1-800-952-4438 or visit www.FidelityCharitable.org. Please reference “The Frank C. Wuest Memorial Fund”, Giving Account #1098999.

The Fidelity Charitable Gift Fund is a 501c-3 tax-exempt organization. Its federal Tax Identification Number is 110303001.

ViewPoint: A new stretch energy code is not justified

This OpEd appeared in the Boston Business Journal on June 3, 2016.

In March 2015, Governor Charlie Baker signed Executive Order 562, initiating a comprehensive review process for all regulations. Only those regulations which are mandated by law or essential to the health, safety, environment, or welfare of the Commonwealth’s residents would be retained or modified, making Massachusetts a more efficient and competitive place to live and work.

Agencies must demonstrate, in their review, that there is a clearly identified need for governmental intervention; the costs do not exceed the benefits; a regulation does not exceed federal requirements; less restrictive and intrusive alternatives have been considered and found less desirable; and the regulation does not unduly and adversely affect the competitive environment in Massachusetts.

Based on these specific criteria, the business community is concerned that the Board of Building Regulations and Standards (BBRS) is currently considering a new Stretch Energy Code as it develops the 9th edition of the statewide building code. Besides the fact that this Stretch Code undermines the statutory requirement that there be a uniform State Building/Energy Code, there is no good reason for it. This proposed energy code is unnecessary and fails the regulatory review standards, and the Baker Administration and the BBRS should not advance it.

The Stretch Energy Code was originally adopted in May 2009, despite strong opposition from the business community.  The code required commercial and residential construction in those communities that voted to adopt it to be approximately 20% more energy efficient than the statewide code. The new stretch energy code would require a 15% increase in energy efficiency over the current code. The Stretch Code has caused confusion among local building inspectors and developers.  Due to this and several other reasons, a new version of the Stretch Energy Code has never been adopted, even when the statewide code changed.  In fact, at the close of the Patrick Administration, the BBRS voted not to advance a new draft of the Stretch Energy Code.  However, in April 2015, this decision was reversed.

Massachusetts is already the most energy efficient state in the nation, with the most aggressive energy efficiency targets.  Furthermore, Massachusetts will be one of only a handful of states in the nation to adopt the 2015 International Energy Conservation Code (IECC) statewide.  Since the Green Communities Act requires the adoption of the latest IECC (every three years), the Commonwealth’s position as a national leader in energy efficiency will be ensured even without a Stretch Code.  Anything beyond that is overly burdensome and creates a significant competitive disadvantage for Massachusetts.

It is important to note that there is no statutory requirement to adopt or update a Stretch Energy Code.  There is no mention of it in any statute, and it is only the Department of Energy Resources’ (DOER) policy that encourages the creation of this code.

According to DOER, the changes to the Stretch Code would take effect automatically in stretch code communities without any local vote.  Many municipalities had no idea they would be subject to an automatic upgrade.

The business community continues to support a uniform statewide building and energy code.  We believe a new Stretch Energy Code is unnecessary, will hinder economic development, and would impose an unfair and difficult burden on local building officials and the construction industry.  We urge the Baker Administration and the BBRS to eliminate the Stretch Energy Code, once and for all, and acknowledge the latest version of the IECC as the only energy code in Massachusetts.

David Begelfer is the CEO of NAIOP Massachusetts, the Commercial Real Estate Development Association.

As Boston Proposes CPA, Issues to Consider

The Boston City Council’s Committee on Government Operations scheduled a public hearing for Tuesday, March 29 to discuss the city’s adoption of the Massachusetts Community Preservation Act (CPA). If approved by the City Council to move forward, the question would be put to the voters of Boston on this November’s ballot. This would result in a 1% property tax surcharge on commercial and residential properties starting in fiscal year 2018 (with the first $100,000 in value exempt as well as a 100% exemption for those who qualify for low-income housing or low or moderate income senior housing). Communities that adopt the CPA can decide on the distribution of funds across the three areas covered under the CPA, as long as each area – open space, historic preservation and affordable housing – receives at least 10 percent of the total available.

The Mayor has released a comprehensive housing plan for Boston, including objectives to produce 53,000 new units of housing. The report, Housing a Changing City – Boston 2030, estimates the CPA would generate $20 million annually, including state matching funds, of which 50% or $10 million would be dedicated to new housing funds. There is no question that Mayor Walsh and his team are very committed to providing affordable and middle income housing, as confirmed by the various initiatives the Administration has advanced in recent months.

The business community is also concerned about the lack of workforce housing.  Without housing that can be affordable to working individuals, couples and families, the region will not be able to maintain the exceptional economic growth it is currently experiencing. However, as City Council considers putting this on the ballot, a few questions should be asked and answered:

  • How much of these funds will end up supporting middle income housing? With a statutory requirement that housing produced under the CPA be for persons and families whose income is less than 100% of the AMI, it is unclear how middle income housing would be created. Furthermore, the independent CPA committee that will oversee the use of CPA funds is free to spend these funds in any of the three prescribed uses (beyond the 10% statutory requirement).
  • There is no requirement for the City to detail exactly how the CPA funds will be used to attain its goals. One would think that the days of throwing money at a problem and hoping for a good outcome are in the past. The MBTA operated like that for years, and we are seeing the results very clearly. What exactly is the plan to produce more affordable and workforce housing with this additional revenue?
  • How much of an impact will the CPA make? Preliminary estimates show that if half of the CPA funds ($10 million) were used for traditional affordable housing, there would only be 40-50 units built in a year. That is helpful, but is it worth it to impose new taxes on residential and commercial properties? The last time the CPA was proposed in Boston, it was estimated that the business community would be paying 81% of the total, as a consequence of real estate tax classification and the residential exemption. In addition, the City has also increased the requirements for new developments under the Inclusionary Development Policy and higher linkage payments for new commercial development are coming.

As a result of the recent building boom, the city’s revenue from real estate taxes is the largest in history. While having more money from the CPA for the City sounds great, the costs and benefits must be weighed before making this decision.