NAIOP/SIOR Annual Market Forecast Remains Positive

This guest blog post was written by Mike Hoban of Hoban Communications.

Elisif_20171129_1972Fueled by one of the strongest economies in the nation, the Boston commercial real estate market should continue to thrive for the foreseeable future. That was the conclusion of the enthusiastic panel at the 2017 NAIOP/SIOR Annual Market Forecast held last week at the Westin Waterfront Hotel before a crowd of 450 CRE professionals.

Moderated by David Begelfer, CEO of NAIOP Massachusetts, the panel included Molly Heath, Executive VP, JLL (Cambridge); Ben Sayles, Director, HFF (Capital Markets); John Carroll, Executive VP, Colliers International (Suburbs); Ron Perry, Principal, Avison Young (Downtown); and JR McDonald, Executive Managing Director, Newmark Knight Frank (Industrial). Barry Bluestone, Professor of Public Policy at Northeastern University and Senior Fellow at The Boston Foundation, set the table for the program with an economic forecast that – with one major caveat – bodes well for the long-term health of Greater Boston CRE.

Bolstered by the highly educated workforce provided by the educational and medical institutions located in Greater Boston, the Massachusetts economy has outperformed the U.S. economy nearly every year since 2009. GDP growth for the Commonwealth has generally been in the 2.5 to 3.0 percent range since 2010, a figure that is significantly above the national average of 2.0 during that period. The Bay State has added 355,600 jobs since the recession (including 62,500 last year), an 11.2 percent increase since 2009. The 4.2 percent unemployment rate has led to virtual full employment, and with the tight labor markets, average wages are beginning to increase, albeit slowly. And none of the factors that typically contribute to a slowdown are in evidence.

Elisif_20171129_1971But despite the positive outlook, there is a looming threat to the overall health of Greater Boston economy, he cautioned. “The housing stock is limited and growing too slowly to meet the demand, and as a result, home prices and rents continue to rise,” said Bluestone, who is one of the co-authors of the Boston Foundation’s 2017 Greater Boston Housing Report Card. The price of housing is pushing workers farther away from the urban core, causing housing prices in traditionally affordable communities to escalate, as well as putting a strain on an overburdened public transit system. The Housing Report Card estimates that the region will need an additional 160,000 housing units by 2030 to accommodate its expanding population (an additional 342,000), “and that is going to be a challenge,” Bluestone concluded.

Elisif_20171129_1988JLL’s Heath led off the program with an overview of the Cambridge office and lab markets. “The Cambridge market is one of the strongest markets that we track globally at JLL, and it continues to be driven by this incredible demand from the tech and life science clusters,” she stated, adding that the demand is coming not only from organically grown companies, but outside firms seeking to establish an R&D presence in close proximity to MIT, Harvard, and the educated workforce. With a vacancy rate below 3.0 percent, there continues to be upward pressure on rental rates, with office (by 13 percent) and lab (23 percent) soaring well above previous highs. Achieved rents for office space in E. Cambridge are now in the low $90’s (gross), with lab space in the low $80s (NNN). And due to the lack of supply in the market, “we really do believe that there is room (for rents) to run,” said Heath.

Elisif_20171129_1992Colliers’ Carroll reported that “the suburbs are alive and well”, as the market has added over five million SF of positive absorption since the downturn. There has also been a steady increase in rent growth in the Class A office market, approximately 10 percent since 2009, with new construction in Waltham achieving rents in the low $50s. The Class B market is not faring as well (although there is some rent growth occurring in select markets), with some of the older building stock being slated for repositioning or demolition to make way for senior living, hotel and other non-office uses (including 450,000 SF of properties in Chelmsford). One particularly bright spot is the emergence of biotech in the suburbs. The Gutierrez Company is currently constructing a five-story, 350,000 SF building for EMD Millipore (2018 Q3 completion) in Burlington, Alkermes is “close to signing” a lease for a 250,000 SF build-to-suit in Waltham, and Waltham-based Tesaro is in the market for a 300,000-500,000 SF suburban campus.

Elisif_20171129_2005Citing the enormous amount of commercial, residential, retail and restaurant development underway in the Seaport and other Boston locations, Avison Young’s Perry observed that “Boston is clearly a different city today than it was even five years ago.” The in-migration to the city by firms seeking talent continues, he said, citing the recent relocations by Reebok, PTC and Alexion to the Seaport, as well as Amazon’s establishment of a Boston presence with the 150,000 SF lease at 253 Summer St. and Rapid7’s relocation to North Station. Demand remains strong Downtown, with over 4.5 million SF of requirements in the market, including nine companies seeking 100,000-500,000 SF. CBD Class A rents range from the mid $40s to the mid $80s (Back Bay high-rise), and vacancy rates in the top floors of the towers (10 percent) are nearly in equilibrium with the lower floors (9.4 percent), as tech companies continue to absorb space on the lower tiers.

Elisif_20171129_2006NKF’s McDonald reported on the industrial market – the newfound darling of investors and developers – noting the transformational effect that Amazon and e-commerce has had on the product type. With 12.8 percent average annual returns to investors over the last five years, industrial has outperformed both retail (12.1) and multifamily (9.9), driven by feverish demand for “last mile” properties located in urban and infill submarkets. That demand has driven rents “way beyond the norms” of what had traditionally been $5 to $6 psf to the “high single digits and low teens” for buildings such as 480 Sprague St. in Dedham, a 234,000 SF warehouse that straddles the Boston line. And warehouse space located within the urban market, such as 202 Southampton St. in the South End (which lacks basics such as air-conditioning), is fetching $20 psf, based solely on location.

Elisif_20171129_2017HFF’s Sayles addressed the ‘When will the cycle end?’ question early on his presentation. “End of cycle concerns have largely abated,” he reassured the gathering. “Nobody is really talking about that right now, instead, what people’s biggest concern is, ‘If I sell, what am I going to do with that capital?” He expects pricing for assets to remain flat in the near term with cap rates trending downward. Financing for assets is up by 17 percent from Q3 2016 to Q3 2017, but investment sales for that period declined by approximately 8.0 percent as buyers are choosing longer term holds. Sales volume for Boston is expected to be approximately $13 billion for 2017, with foreign capital again accounting for a significant portion of those transactions.

Begelfer was in full agreement with Sayles’ assessment of the cycle concerns. “Boston is pretty unique. There are only a handful of cities around the country that are experiencing this kind of strong growth,” he observed. “Any slowdown that we see is probably not going to come from the economy, it will be from the cost of construction and land costs, or the pricing of assets. It won’t be caused by a recession, but by our own success,”

GOLF FOR GOOD: NAIOP Raises $200,000 for Heading Home

checkNAIOP Massachusetts held its 29th Annual Charitable Golf Tournament on June 22nd, raising $200,000 to support Heading Home, Inc.’s programs to end homelessness. The amount brings the total amount donated to Heading Home to more than $2.9 million and maintains NAIOP’s role as Heading Home’s largest corporate donor. Heading Home’s mission is to end homelessness in Greater Boston by providing a supported pathway to self-sufficiency that begins with a home, together with critical services such as life skills, financial literacy, and job training. To learn more about Heading Home and the vital services it provides, please visit www.headinghomeinc.org.

Our industry continues to come together, in good times and bad, to show support for the homeless families and individuals served by Heading Home. We are especially proud of our member volunteers, our staff, and our generous donors who helped us reach our goal for this donation. Special thanks goes to our Golf Committee and John Myers of Redgate, in particular, who chaired the event committee.

Held at a new location this year, The International, this signature CRE tournament drew nearly 270 golfers from all sectors of the commercial real estate industry for a day of fun, networking, and fundraising. The International is a golfer’s paradise that features two award-winning 18-hole golf courses, including The Pines, designed by Robert Trent Jones.

NAIOP Massachusetts thanks this year’s many sponsors and donors who gave so generously to this event, particularly Redgate, who served as Platinum Sponsor; Gold Sponsors National Development, New England Development and Newmark Grubb Knight Frank; and Pin Flag Sponsor Callahan Construction Managers. It is only through their support that the tournament is able to raise funds needed to help Heading Home accomplish its goal of ending family homelessness.

We are already looking forward to June 14, 2018 for another great tournament and, together, taking one more step towards ending homeless.

6 Steps to Building a Career in Commercial Real Estate

100_0642On February 24th, NAIOP Massachusetts hosted a career panel where dynamic young professionals from the Developing Leaders program offered helpful advice on how to jumpstart or further a career in Commercial Real Estate. Speakers included Molly Davis, Associate Director at Newmark Grubb Knight Frank; Katie Grimes, Business Development Associate at Red Thread; Chris LaFrance, Associate Director of Acquisitions at Intercontinental Real Estate Corp.; Tucker McCrabb, Research Analyst at AEW Capital Management; Jennifer Price, Assistant Vice President at Colliers International; and Sarah Weatherbee Walker, Senior Director at Keller Augusta Partners, who moderated the program.

100_0652At the event, Keller Augusta Partners shared these tips below for college students who are interested in a career in Commercial Real Estate.

The Commercial Real Estate industry is very competitive. Successful candidates must be able to demonstrate experience and interest in the CRE field early and often. Here are some helpful ways to break into the industry:

  1. Coursework
    • Be sure to do exceptionally well in real estate classes (impress your professors!) and maintain high GPA
    • Highlight significant projects or case work from your courses on your resume
  1. Internships
    • Full time summer positions
    • Part-time /semester opportunities
    • Contract work
  1. Industry Professional Organizations
    • Seek out a student membership or student rate for attending events
    • Join committees to make more meaningful connections, don’t just attend events
  1. Leadership Roles within On-Campus Organizations
    • The event planning process is a great reason to reach out to industry professionals
    • This becomes an excellent resume talking point
    • If your school doesn’t have a group, create one!
  1. Networking
    • Utilize your Alumni, Personal & Professional network to build up your industry contacts
    • Be specific about your job search & career objectives during networking/outreach conversations
    • People want to help but being vague puts more work on them
    • Create your 2-minute elevator speech and practice it!
  1. Skills
    • Academic performance (GPA/Test Scores) is highly regarded at top firms
    • Strong emphasis on quantitative skills across many positions

100_0659Below are some additional resources available from NAIOP Massachusetts.

Student Association Membership (SAM) program
Open to any full-time student who is not otherwise employed in the industrial, office, multifamily, mixed-use or related commercial real estate industry. Must present a valid school ID and current full-time schedule.

Benefits include: free admission to networking events and educational programs, opportunities to meet industry leaders and decision makers, access to NAIOP’s national database, special Student Association Membership (SAM) Career Dinners and informational interviews.

University Membership
Available to colleges and universities offering undergraduate programs in real estate and includes up to 25 student memberships.

NAIOP Massachusetts Job Board
Includes full-time jobs and internships. Open to all, NAIOP Members can post jobs for free.

100_0657View all photos from the event.

Speaking of Real Estate

NAIOP Massachusetts is kicking off a video series we will be calling “Speaking of Real Estate”.

The idea behind this effort is to interview leaders in the commercial real estate industry, including developers, owners, investors, as well as some of the heads of the major professional service firms that support our business.

We are starting with a very candid discussion between Tom Alperin, President, National Development and Marc Margulies, Founder and Principal, Margulies Perruzzi Architects. They cover a range of topics that include affordable housing, new design considerations, shared economy, and looking to the future for the industry.

We plan on bringing you the opportunity to hear from individuals that are in the forefront of creating our new urban and suburban “live, work and play” environments. Who are some CRE leaders you would like to hear from in this series? Let us know in the comments section below.

Event Recap: Leadership Lunch + Learn at 101 Seaport

The following blog post was written by Chloe Louise Bouscaren, Marketing and Business Development at CBT Architects.

“An Inventive Setting to Spark Inventive Thinking”

IMG_20151111_122627151On Wednesday, Nov 9th NAIOP hosted a Members-Only Leadership Luncheon at 101 Seaport Boulevard, the new home for PricewaterhouseCoopers, a multinational professional services network. PwC relocated 3000 employees from 125 High Street to Boston’s Seaport District. Shawn Hurley, the Executive Vice President and Regional Manager of SKANSKA USA Commercial Development hosted NAIOP on the building’s 7th floor, the only space that has yet to be leased. Shawn was joined by Charley Leatherbee, VP of Development; Levi Reilly, Director of Development; and Patrick Sousa, Manager of Development, who all played important roles in the success of this high-profile project.

IMG_20151111_121118778The newly constructed 17-story, 440,000 RSF, LEED Platinum state-of-the-art office building was developed by SKANKSA USA Commercial Development Team in Boston. Highlights included a chilled beam mechanical system, triple glazing curtain wall, 300 underground parking spaces, world class retail by WS Development, expansive views of the harbor and Seaport, conference and training centers, and virtually column free floorplates. 82% of the building is occupied by PwC, tenants Red Thread and Skanska will be joining them soon. NKGF’s Dave Martel and Bill Anderson are responsible for the leasing and deal negotiation.IMG_20151111_120951643_TOP

Located on what will be the new Seaport Square Green, 101 Seaport connects directly to Fan Pier Park, creating a continuous public space that reaches Boston Harbor and connects to the Harborwalk Grand civic lawn to support active recreation and public events.CBT2

SKANSKA is also currently working a neighboring 17-story office tower, 121 Seaport, as well as Watermark Seaport, a 300-unit residential complex both on neighboring parcels.CTjJnD2VAAAiuyx.jpg large

For those who have yet to hear Shawn’s presentations on SKANKSA’s developments in the Seaport and beyond, his confidence and presence is unparalleled. Shawn has an innate way of making an audience feel comfortable and that day, we all felt we were part of something big. SKANSKA is clearly making development history in Boston and Shawn and his group are leading that charge the titans of the real estate industry. Hats off gents.

Quick Project Stats
Project Cost: $290M
Project Duration: 26 months
PwC Employees: 3000 (20% more people in 12% less space)
Designer / Design Firm: Jonathan McGuiness, Jacobs Engineering Group

NAIOP’s on-going Leadership Lunch and Learn series is open only to Members and offers unparalleled access to top local real estate leaders. Attendees get an inside look at the area’s most active CRE companies and hear about their latest developments, recent activity, upcoming projects, and more. Not yet a NAIOP Member? Join today!

Business Coalition Urges Governor and Legislature to Create World-Class Transit System

A broad coalition of 25 business associations representing large and small employers from a wide range of industries today issued the following statement urging the Governor and the Legislature to adopt the recent recommendations made by the Special Panel to Review the MBTA and to swiftly begin the task of fixing the state’s public transit system:

Business Coalition Statement in Support of a World-Class Transit System

The Challenge
The winter of 2015 highlighted the Commonwealth’s transportation vulnerabilities, particularly for the MBTA. While school and business cancellations, a dramatic drop in retail sales, and an increase in public safety risks result from many major winter storms, the complete shutdown of the MBTA followed by a prolonged reduction in services for the subways and commuter rails are not the norm.
The unreliability of our public transit system caused many businesses to lose substantial revenues from the loss of productivity due to delays and/or the inability of workers to get to work. Many hourly workers forfeited wages; many retailers forfeited sales; many restaurants forfeited patrons; and the Commonwealth forfeited the income, sales and meals tax associated therewith. A sub-optimal public transit system also caused roadways to be more congested than usual and commuting times to grow to unreasonable lengths for those who opted to drive or were transporting goods. The adverse financial impacts totaled in the billions of dollars. This is unacceptable and must not be repeated.

The Framework
Due to the urgency of fixing the MBTA and the need for the public transit system to be reliable and fully functional, the undersigned business organizations are requesting policy makers to address the following issues:
• Make the T a customer-focused organization that provides first-rate service and clear communication while instilling confidence in its ridership.
• Provide greater accountability and transparency for the T’s governance and management practices to ensure the entity is efficiently and effectively run while employing a productive workforce.
• Develop a long-term strategic and capital plan for the T that efficiently uses its resources to enhance the current capabilities and future needs of the T, businesses and workers, while providing sufficient funding to cover the costs.
• Overhaul the T’s procurement and maintenance practices so that the system is safe, reliable and in a state of good repair.
• Establish metrics, milestones and regular reporting to ensure proper implementation of the T reforms within a reasonable period of time.
• Ensure that the T balances its operating budget without the need for ever-increasing state assistance each year.

The Solution
The undersigned support this position and urge the Governor and the Legislature to act swiftly so we can begin the arduous task of fixing the state’s public transit system.

Following a thorough analysis of the various recommendations from the Governor’s Special Panel to Review the MBTA, and measured against the principles outlined above, we endorse the Panel’s proposal and urge the Legislature to adopt the plan immediately.

The following business organizations support this statement:
495/MetroWest Partnership
Affiliated Chambers of Commerce of Greater Springfield
American Council of Engineering Companies of Massachusetts
Associated Industries of Massachusetts
Associated Subcontractors of Massachusetts
Construction Industries of Massachusetts
Environmental Business Council
Greater Boston Chamber of Commerce
Greater Boston Real Estate Board
Massachusetts Biotechnology Council
Massachusetts Chemistry & Technology Alliance
Massachusetts High Tech Council
Massachusetts Lodging Association
Massachusetts Petroleum Council
Massachusetts Restaurant Association
Massachusetts Taxpayers Foundation
Massachusetts Technology Leadership Council
Massachusetts Business Roundtable
Metro South Chamber of Commerce
NAIOP Massachusetts, The Commercial Real Estate Development Association
National Federation of Independent Businesses
Neponset Valley Chamber of Commerce
North Shore Chamber of Commerce
Retailers Association of Massachusetts
South Shore Chamber of Commerce

Quotes from Business Coalition Members:
“The unreliability of the public transit system has caused many businesses to lose substantial revenues from the loss of productivity due to delays and the inability of workers to get to work,” said Richard Lord, President and Chief Executive Officer of Associated Industries of Massachusetts (AIM).

Eileen McAnneny, President of the Massachusetts Taxpayers Foundation, said, “Now that the breadth and severity of the problems confronting the MBTA have been revealed and the price of inaction is evident, we have a real opportunity to move forward with a plan for transforming the MBTA into a modern, world-class public transit system.”

“The transit system experienced a ‘stress test’ and failed. The time is right to not only fix today’s MBTA, but ensure that it will meet future demands,” said David Begelfer, CEO of NAIOP Massachusetts, The Commercial Real Estate Development Association.

“The MBTA is critical to Greater Boston’s economy. Workers, customers, patients, students and tourists depend on it every day. We need to take the T to the next level right away,” said Paul Guzzi, President and CEO of the Greater Boston Chamber of Commerce.

Transportation Transformation: Event Recap & Support for MBTA Reforms

On Thursday, April 9, NAIOP hosted the Transportation Transformation Conference, which featured federal and state transportation officials as well as national experts who discussed the role of transportation in a growing Massachusetts economy; new technology and other innovative solutions to transportation challenges; and what the future holds for the nation and Massachusetts.

The event was held the day after Governor Baker’s Special Panel to Review the MBTA released its detailed report on a plan of action to reform and improve the MBTA. MassDOT Secretary Stephanie Pollack discussed the report’s findings at the event. NAIOP supports the recommendations outlined in the report and looks forward to working with the Baker Administration, Legislature and the business community to create a reliable and safe public transit system.

The following is a guest blog and event recap by Fred Wagner, Principal at Beveridge & Diamond, former Chief Counsel of the Federal Highway Administration (FHWA), and moderator at the Transportation Transformation Conference. The post originally appeared on Enviro Structure.

TRANSPORTATION TRANSFORMATION RECAPThe NAIOP Massachusetts Transportation Transformation conference held on April 9 was one of those rare trade association meetings where you didn’t want the sessions to end.  Ideas flowed from the podium and from the audience faster than the New England melting snow flowed into the Charles River.

Perhaps unwittingly, transportation thought leaders from local, state and federal agencies echoed the philosophy of legendary architect Daniel Burnham (D.C.’s Union Station, NYC’s Flatiron Building):  “Make no little plans; they have no magic to stir men’s blood and probably themselves will not be realized.  Make big plans, aim high in hope and work, remembering that a noble, logical diagram once recorded will not die, but long after we are gone be a living thing, asserting itself with ever-growing insistence.”

Over 300 attendees heard Vinn White, Senior Policy Advisor to the U.S. Department of Transportation Secretary Anthony Foxx, describe the draft “Beyond Traffic” report  and how the challenges of demographic and technological trends will shape our transportation network looking 30 years into the future.  After showing this well-viewed YouTube video showing traffic flow in Ethiopia’s Meskel Square, he asked what these images of chaos had in common with what you’d see in Davis Square in Somerville, Massachusetts.  The answer?  People.  People living their lives, trying get to work, bringing kids to school, or visiting friends and family.  In short, Mr. White suggested, even if our major intersections thankfully don’t resemble the bedlam from Meskel Square, we may have more in common than we think.

Newly confirmed MassDOT Secretary Stephanie Pollack described how in her view, there was no such thing as a transportation plan that existed in isolation.  Rather, she wanted to know from communities what they thought their biggest challenges were, and then look to transportation infrastructure to help solve those challenges.  “Don’t just pull projects off the shelf that have been there for 30 years,” she has instructed her new staff.  “There’s probably a reason they’ve been up on that shelf for so long.”

Secretary Pollock’s views were supported by Jay Ash, the new Secretary of Housing and Economic Development in Massachusetts Governor Baker’s Administration.  He commented to the receptive audience how unusual it must be for them to hear a Transportation Secretary and an economic development executive being so much on the same page.  Secretary Ash reiterated how he had, over the course of his career in public service and in his new role, visited communities all over the Commonwealth with visionary plans.  All of them demanded to some extent an improved transportation network to convey people to new centers of commerce, education, or recreation.

Finally, Gabe Klein, the former head of Washington, D.C.’s and Chicago’s Departments of Transportation, and Harriet Tregoning, the Director of the U.S. Housing and Urban Development Office of Economic Resilience, both provided a glimpse into the future of urban/suburban transportation.  Pedestrians, bicyclists, streetcars, and yes, even automobiles, living in harmony, operating on re-engineered streets that provide safe and reliable means of mobility.

“Change is coming faster than we believe,” Mr. Klein predicted.  Autonomous vehicles could be a reality in less than 5 years, given the current pace of technological advances and investment by huge companies like Google and Amazon.  Parking downtown could be a thing of the past, as people share solar-powered, self-driving cars, moving seamlessly between work and errands, never really needing a place to leave an empty, under-utilized vehicle.  Imagine planning a new mixed-used development without the burden of complying with a parking ratio?  Not quite worthy of a John Lennon lyric, perhaps, but even so…

Gatherings like this serve as a reminder why all of us in the development sector love our work.  We get to “make big plans” and, with any luck, see them come to life.

View event photos