NAIOP Policy and Trends Watch

The Commercial Real Estate Development Association

NAIOP Policy and Trends Watch

Thank You Governor Patrick

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Deval_PatrickAfter eight years of leadership, later today Governor Patrick will take the Lone Walk and return to the private sector. In addition to the fact that during the past 100 years only one other governor of Massachusetts (Dukakis) has served the Commonwealth for eight uninterrupted years, Governor Patrick leaves behind a long list of accomplishments that have made Massachusetts a better place to live and work.

The Governor was one of the best salesmen/spokesmen for the Commonwealth that we have had in recent history. He traveled across the state and to numerous countries on trade missions. Having joined him on the mission to Israel, I can personally attest to the positive reactions he received from countless encounters with political leaders and business representatives. Many business partnerships have resulted from these missions and we have never seen such a spike in direct flights to and from Boston and many global markets.

The Patrick Administration supported business growth, with a particular focus on the life sciences and renewable energy sectors. This resulted in a substantial surge in employment growth, making Massachusetts a national leader in these emerging fields.

Governor Patrick also oversaw one of the first top-to-bottom regulatory reevaluations for all state agencies. Nearly 2,000 regulations were reviewed to determine which regulations should be rescinded or modified. In addition to this review, a system was put into place requiring that draft regulations go through an extensive vetting process and review by A&F, the Regulatory Ombudsman, and lastly, the Governor. As a result, MassDEP led the way on regulatory reform by establishing a target list of 21 different reforms within the Department. Most of these resulted in regulatory changes that will make a substantial improvement on the cost and time for the regulated community, without diminishing environmental protection.

While Governor Patrick worked to ensure government operated at “the speed of business,” he also never lost sight of the fact that he represented all of the citizens of the Commonwealth. People mattered to him and he learned from their stories. Their experiences shaped his leadership and policy priorities. Today’s column in The Boston Globe by Shirley Leung is a perfect example of this.

So, after eight years, we thank you Governor Patrick for your unwavering commitment to the people of Massachusetts and we wish you all the best in whatever the future may hold.

My Top Ten Predictions for 2015

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2015It is that time of year when we try to look forward and plan accordingly. For the commercial real estate industry coming off a rather good year, we have to wonder if we are at the top or still growing?

Here are my predictions for the coming year:
1. Foreign buyers will outspend domestic investors for Boston and Cambridge properties and will make a dent in some communities along 128 (e.g. Burlington and Waltham). They will also be a major buyer of Boston condos.

2. Boston properties will be seeing a record number of office properties changing hands with some of those properties having already transferred ownership within the last 3 years.

3. No surprise that office rental rates in Boston and the surrounding areas will be increasing. I predict a minimum of 10% over this year. Apartment rents will continue to rise with some resistance in the newest buildings.

4. The Wynn Casino construction project will not be starting in 2015.

5. There will be one speculative office building announced in Cambridge, that’s it.

6. Design firms will have their busiest year renovating spaces and providing greater efficiency for existing tenants.

7. Construction costs are going to be up substantially, especially in downtown Boston, with greater difficulties getting multiple competitive subcontractor bids.

8. Boston will experience a major hurricane this coming Fall with substantial flooding due to storm surge.

9. The Federal Reserve will finally raise rates.

10. Boston will be selected by the US Olympic Committee to represent the US bid for the Summer Olympics.

NAIOP Congratulates Brian Golden

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GOLDEN_HEADSHOT

Boston Mayor Martin Walsh today announced at a Greater Boston Chamber of Commerce event that Brian Golden has been appointed as the new Director of the Boston Redevelopment Authority. Brian, who previously served as the Acting Director, has worked at the BRA since 2009.

NAIOP has worked with Golden over the course of the past year and we are very pleased to see his work recognized with this promotion. Starting with an initial audit of the agency, he has been acting on the recommendations to streamline operations and make the agency more fiscally responsible. We understand that he is promoting a more in-depth outside review of the BRA establishing a new strategic plan for the agency.  We wholeheartedly support such a process and look forward to working with him and his team as it is implemented.

NAIOP congratulates Brian Golden and applauds Mayor Walsh for selecting such strong and capable leaders to help him make the City of Boston a great place to live and work!

Progress with Boston’s Permitting

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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.

Next governor needs transportation vision

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This article originally appeared in the online CommonWealth Magazine.
The below version includes post-election updated information.

By most accounts, the Patrick transportationadministration and the Legislature have moved the needle forward on the issue of transportation. They know that investing in transportation infrastructure is critical to our state’s economy, quality of life and industrial competitiveness.

However, many aspects of the Commonwealth’s transportation system have already approached capacity constraints with increasing delays on congested highways and transit systems. At the same time, demand has increased and is predicted to continue over the coming years with no major increases in capacity coming soon. Without additional investments in our infrastructure, further declining services, increased travel times, and a degraded environment will be the future of the Massachusetts transportation system.

In 1970, Governor Frank Sargent created the Boston Transportation Planning Review that analyzed and redesigned the entire area-wide transit and highway system. It provided a blueprint for transportation policy and investment that we have been effectively following for the last 40 years.

In 2013, the Massachusetts Department of Transportation outlined the investments needed to stabilize today’s transportation system and proposed designing a system for the 21st century. Working together, the Massachusetts Legislature and the Patrick administration created and provided funding for a transportation plan that responded to years of deferred maintenance, underfunded transit operating costs, and delayed mass transit and regional transportation improvements. The funding focused primarily on bringing the Commonwealth’s existing transportation infrastructure into a state of good repair.

Unfortunately, the funding that was put in place fell short of what is needed to truly meet the existing and future transportation needs of the Commonwealth’s residents and businesses. What has been missing from the conversation of late is visionary thinking and a more expansive understanding of why investments in transportation are so important to the future of our state. With one of the highest housing costs in the nation, a solid transportation network that can expand access to a larger and more affordable housing market is critical to the success of our economic development centers.

Across the country – from the Research Triangle in North Carolina to the Texas Medical Center in Houston – state governments and private industry are investing in systems and incentives designed to replicate the Commonwealth’s innovation economy. Though Massachusetts has strengths in higher education, strong academic medical centers, and a historic commitment to innovative technologies, transit and access are weak links and a potential liability for recruiting and retaining a qualified workforce – and the companies that create those jobs.

As Governor-elect Baker begins to outline the issues that will be critical for the next four years, we assert that a top priority should be the establishment of a new long-range statewide visioning and planning effort for transportation. This will require strong leadership to take the bold steps necessary to establish a vision and make it a reality. To successfully implement such an initiative, we’d propose a few guidelines:

• Connectivity is key: With several strong innovation, life science, and health care clusters that are major economic engines for Massachusetts, creating a reliable network of roads and transit is necessary for improving the flow of ideas and people.

• Out-of-the-box thinking is vital: Aligning transportation programs with energy and environmental goals, focusing on seamless connections between air and rail, bus and subway, and making transportation information an integral part of our hand-held knowledge system are all planning efforts that can begin early in a governor’s term and be implemented over the next decades.

• Embracing multiple modes of transportation and access is essential: A 21st century statewide plan must include not only roads, bridges, and public transit, but also bicycle and pedestrian needs, as well as enhanced information sharing through technology.

• Public private partnerships can extend the reach: Innovative partnerships between the public and private sectors must be part of a long-term plan that addresses the needs of businesses and residents alike.

Long-term planning and continued investments in a modern, integrated, multi-modal network are critical to our global competitiveness. Massachusetts cannot lose out to those states that know that transportation investment equals economic growth.

David Begelfer is CEO of NAIOP, the commercial real estate development association, and Marilyn Swartz-Lloyd is CEO of MASCO.

NAIOP Congratulates Governor Charlie Baker

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karyncharlieCongratulations to Governor-Elect Charlie Baker and Lt. Governor-Elect Karyn Polito for winning the gubernatorial race.

NAIOP looks forward to working with the Baker-Polito Administration to move the Commonwealth forward and expand economic opportunities, so that all the residents of the state will have the chance to participate in our future successes.

NAIOP would also like to thank Attorney General Martha Coakley for her leadership and dedication to public service. We have enjoyed working with her and wish her the best in her future endeavors.

A Mayor for All

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menino_409Today is a sad day for the City of Boston. Mayor Menino cared passionately about his city and his 20 years as Mayor were proof of his determination to make Boston and its residents better. He was known for his involvement in the numerous large developments constructed during his tenure in the Back Bay, Financial District, and, more recently, the Seaport.  He took a “hands-on” approach to the permitting and, many times, the actual design of the high-rises (remember 101 Huntington?). But, he was also knowledgeable about the smallest projects that were proposed in the neighborhoods, from Brighton to Dudley Square. It seemed that no project was too small for him because he viewed development as an integral part of the local economy and community.

However, it was not only the built environment that caught the Mayor’s sharp focus.  He was, after all, the Urban Mechanic. There wasn’t a major business that did not know of his commitment to finding summer jobs for the kids of Boston. Reducing crime, improving education and, above all, making personal connections with so many of the City’s residents are what made him a Mayor we will never forget. We are so lucky to have benefited from his leadership, dedication and love for the City of Boston.

Trends + Technology Marketing Conference: “It’s not the what, it’s the why”

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The following blog post was written by Danielle Simbliaris, Marketing Manager at Campanelli.

Elisif_20141022_5979Strap a GoPro to your dog to show perspective apartment tenants what a “day-in-the-life” of your pet is like, test out a virtual space via Oculus Rift, turn flat floor plans into a 3D interactive experience, drive tech-tenants to Fenway by bringing the sausage man to Kendall Square. These ideas and more were discussed during Wednesday’s Trends & Technology Marketing Conference as we dove below the surface level to discuss how marketing is driving transactions nationally and in the Boston market.

Andi Simpson, Director of Marketing & Corporate Communications for Federal Realty Investment Trust as well as Stephanie Williams, Senior Vice President of Planning & Advisory Services of Bozzuto Management Company presented a resonating quote, “It’s not the what, it’s the why”. Whether you are talking about retail, multi-family or office space, tenants are driven to make decisions based on why it will benefit them, not by what is being sold. As commercial real estate sales people, marketing professionals and owners, we are not selling a building of concrete and glass – we are selling a way it makes a tenant feel when they are there, a commute that may be convenient or not, an amenity package that can retain employees and keep apartment renters happy, a dog park that will make pet owners content. Michelle Mastrobattista, Director of Digital Communications at Solomon McCown demonstrated a recent social media campaign launched by her team for 101 Tremont (Paradigm Properties) where the account is written from the perspective of “Boston’s smartest entrepreneur”. She explained, “People use social media to communicate with other people, not buildings.”

So then the question becomes: what new, great, amazing tools do we have to sell that “why” to tenants? Rob MacLeod, Founder & President of Neoscape showed us ways we can bring a building to life via video using a combination of photography, 3D visualization, music and incredible editing that creates a visceral reaction from viewers. Moderator, Krista Bourque, Senior Associate for ADD Inc Branding Iron as well as Deniz Ferendeci, Senior Manager of Building Services at Dyer Brown Architects showed us many ways we can bring our buildings, fit plans, stacking plans and neighborhood to life with 3D, interactive imagery. Barbara Hicks, Senior Associate and Director of Marketing & Media at Margulies Perruzzi Architects as well as Tina Snyder, Director of Marketing at The Bulfinch Companies, Inc. both use video in e-blasts and marketing materials to retain the attention of clients and tenants. A recent video e-blast sent by Hicks helped Margulies Perruzzi land a meeting with a new perspective client that ultimately led to a $40M+ project partner.

Now we have some great new tools, and we are implementing fresh new ideas, but what does the future of real estate marketing hold? Moderator Linda Swain, SVP of Marketing for JLL showed a video of the professional in 2020 filled with Google Glass providing constant data, computers reminiscent of those in Avatar and iPad tours for constant connectivity. During the RE:Tech Demo Day, founder Ash Zandieh discussed the recently huge influx of real estate start-ups and introduced us to companies that will advance the way we access buildings, organize leasing and deal data for analysis, communicate with the community before developments begin and help us to go green.

View event photos

A Parking Spot in Boston – The New Endangered Species

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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

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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.