NAIOP Pursues Ambitious Government Affairs Agenda in 2013

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The following appeared in the February 24, 2013 edition of Banker & Tradesman:

Cranes are once again dotting the landscape.  Boston, Cambridge and the suburbs are bustling with new economic development opportunities featuring office, retail, residential, lab, and mixed use projects.  Absorption rates are up and previously proposed developments are seeing new life.  The commercial real estate industry in Massachusetts is alive and well.  Through its government affairs efforts, NAIOP Massachusetts, the Commercial Real Estate Development Association, worked diligently in 2012 to stimulate the industry’s recovery.  Increasing predictability and eliminating red tape were top priorities. Advocacy-sm

As an example, NAIOP strongly supported the Jobs Bill, An Act Relative to Infrastructure Investment, Enhanced Competitiveness & Economic Growth in the Commonwealth, which was signed into law in August.  The law included many of NAIOP’s top legislative priorities including an extension of the Permit Extension Act.  Permits and approvals in effect at any time between August 15, 2008 and August 15, 2012 were extended by four years.  This affected all properties: commercial, housing, business expansions, universities, hospitals, and infrastructure projects.  The bill also made important improvements to District Improvement Financing and the Infrastructure Investment Incentive (I-cubed) program.  In addition, it created a new Local Infrastructure Development Program that provides developers and municipalities with a new tool for leveraging private funding to finance critical infrastructure projects.  The bill was the result of a close collaborative effort by the House, Senate, the Governor’s economic team, and the business community.

Looking ahead, NAIOP is gearing up for an action packed year.  The 2013 – 2014 legislative session kicked off in January and NAIOP filed numerous bills affecting the development, ownership, management, and financing of office, lab, industrial, multifamily, and retail space in Massachusetts.

A top priority for NAIOP is the extension of the Brownfields Tax Credit, which is set to expire this summer if no legislative action is taken.  This tax credit is a proven success.  It protects public health by providing an incentive to clean up contaminated land and redevelop formerly blighted sites into economically vibrant properties.  However, developers need certainty and predictability – especially when making long-term investments.  Without swift action by the Legislature to renew this tax credit, many new projects will not move forward.

NAIOP will continue to advocate for reform of the Facilities of Public Accommodation requirements under Chapter 91, the law governing waterfront development.  Existing law requires virtually all of the ground floor of a waterfront building to be accessible by the public.  This requirement results in countless vacant and underused spaces.  NAIOP’s bill would create more flexibility for ground floor uses, while continuing to create public access to the waterfront.

NAIOP will also pursue legislation that would create a single, uniform statewide energy code.  The bill would ensure Massachusetts remains a leader in energy efficiency while creating a level playing field for all communities.  Building on that concept, NAIOP will also be focused on climate change preparedness.  Given the impact of recent storms, the industry must be prepared for more frequent and severe weather events.  Practical steps are needed to shield existing properties and infrastructure from irreparable damage.  The Commonwealth’s economic survival is at stake.

On the regulatory front, NAIOP will continue to support the Patrick Administration’s massive, top-to-bottom regulatory review for all state agencies. NAIOP was part of the Business Regulatory Review Advisory Committee that recommended which regulations should be rescinded, modified, and or made more consistent with a national model or standard.  Earlier this year, Governor Patrick announced that 446 sets of regulations had been reviewed, leading to 286 opportunities for reform.  NAIOP looks forward to the continued implementation of this effort.  The Massachusetts Department of Environmental Protection is expected to finalize and implement 21 regulatory reforms in the coming weeks.  Also supported by NAIOP, the reforms will make a substantial improvement on the cost and time expended by the regulated community, without diminishing environmental protection.

While Massachusetts is doing well compared to the rest of the nation, the Commonwealth’s recovery is still fragile.  In 2013, NAIOP will continue to urge legislators and regulators to do all they can to ensure Massachusetts retains its competitive advantage.

Remembering Rodger Nordblom

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The real estate industry has lost another of its icons with the passing of Rodger Nordblom. Massachusetts has been blessed with a number of pioneers in the commercial real estate business who have had a major role in the sculpting of our cityscapes, creating workplaces for generations of innovative businesses that have grown here. Not only have these individuals been active participants in our economic development, but they have been civic and charitable leaders, giving of their time and resources to so many organizations that have impacted all of our lives.

Whenever you saw Rodger, he had a smile on his face and was always accessible.  We will all miss him.
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 Rodger Payson Nordblom

  • July 5, 1927 – February 10, 2013
  • Concord, Massachusetts

Rodger Payson Nordblom, 85, died peacefully while in Palm Desert, California on February 10, 2013. Born July 5, 1927, he was the son of Robert C. and Marjorie C. (Payson) Nordblom.

He graduated from Milton Academy, Milton MA in 1945, whereupon he served in the US Navy. Subsequently, he graduated from Harvard University in 1950, where he was captain of the ski team for 2 years. He married Mary Winder Crocker of Fitchburg, MA on September 9, 1949. Together they raised their five children in Concord MA, instilling in them their love of the outdoors, sports, and most importantly, family values. His beloved wife, Mary Winder, passed away on September 7, 2001 after 52 years of marriage. Traveling to California, he met Dawn Chandler whom he married on March 14, 2003. Together they traveled extensively to remote parts of the world and enjoyed 10 years of marriage.

Rodger was the third generation in Nordblom Company where he was President for twenty-five years. He was an outstanding leader in the Boston real estate industry as a pioneer in the development of commercial properties following the construction of Route 128 in the late 1950’s. Throughout the 1960’s and 70’s he developed millions of sq ft of commercial buildings in Greater Boston and was recognized by his peers as president of SIOR in 1977. Rod was always active in the Boston community, including his recent involvement with WGBH, Boys’ and Girls’ Club of Boston and the Museum of Science.

Whether parasailing on his 85th birthday or exploring remote villages in India, he embraced life with enthusiasm and an adventurous spirit. His positive outlook carried him graciously through life’s trials including his own health challenges. Rod was unfailingly fair and always was guided by what he believed to be right both in business as well as his personal life.

He was a mentor to many generously sharing his wisdom and experience therefore empowering those around him. As a result of his deep love for writing and photography, he also authored a number of books. Rod was a gentleman loved and respected by all and he will be best remembered for his kindness and generosity.

Rod is survived by his wife Dawn, her son Danny Chandler of Texas, her daughter Julie Chandler of Raleigh, NC and Rod’s five children, Anne Dodge of Manchester MA, Carolyn Los of Athens Greece, Win Nordblom of Ayer MA, Peter Nordblom of Cambridge MA and Lee Nordblom of Beverly MA and their spouses . He also leaves 19 grandchildren and 14 great-grandchildren as well as his sister June Robinson, her husband Dr. Jack Robinson and many nieces and nephews.

Gifts in his memory may be made to:
The Boys and Girls Club of Boston
115 Warren St.
Roxbury, MA 02119
www.bgcb.org

The Museum of Science
1 Science Park
Boston MA 02114
www.store.mos.org

Grim Optimism for Real Estate and the Economy

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Goodwin Procter’s Real Estate Capital Markets Conference was recently held in New York City in partnership with Columbia Business School.  GP-REConferenceAn exceptional group of speakers discussed the real estate markets, investments, and the economy.

The keynote presentation was delivered by Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, and now a Professor of Economics at the University of Chicago’s Booth School of Business. Goolsbee spoke with “grim optimism” about the US economy.  The US has the most productive work force in the world and low energy and new-energy sources will benefit our growth.  Relative to the rest of the world, our fiscal imbalance is manageable. All in all, he believes that the next six to twelve months will be a bumpy ride, but prospects in the long-run look good.

The following are a few interesting observations made during the panel discussions:

  • Demographics are playing a key role internationally, especially in the US. Effects of this will be seen in an increased demand for apartments, senior housing, and retail.
  • With accounting standards likely to change in the future, as relating to corporate leasing and ownership, more businesses will likely choose owning large amounts of their space.
  • Retail sales continue to be impacted by online competition, but retail is still a growing market. The future may move towards more hybrids that have both online and storefront locations.
  • Office space needs are dropping in terms of space requirements per new job. However, there is a sense that over time businesses will start to swing back towards a need for greater space.
  • Multifamily housing rents are back to pre-recession highs and it is likely that rents will experience slower growth going forward.
  • Record amounts of capital were raised both in the public and private markets last year. With less growth worldwide, real estate is very attractive to investors.  Investor interest is focused on yields and risk management. Where in the past, “cash is king”, now, “cash flow is king”.
  • Rates should not be rising in the short term, but that is a big risk for all asset classes. The markets could wake up to a starting spike in rates that, in hindsight, will have seemed inevitable.

The Time is Now – Investments in Transportation Critical to Economic Growth

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Transportation Secretary Richard Davey and Governor Deval Patrick recently unveiled the Administration’s 21st Century Transportation Plan.  This statewide plan would add $10 billion over the next 10 years to the state’s investments in roads, bridges, and transit – including critical upgrades to the existing system and expansion through select, high priority projects.

The plan calls for:

  • $1.18 billion in bridge repairs
  • $1.25 billion in hundreds of local and regional highway projects;
  • $930 million for Interstate 91 in Springfield and the Interstate 93 and 95 interchanges in Woburn and Canton
  • $430 million for bicycle and pedestrian improvements
  • $1 billion for Chapter 90 municipal road maintenance projects
  • $2.4 billion to purchase new cars for the T’s Red, Orange and Green lines (replacing cars purchased in the 60’s and 70’s!)
  • $850 million to replace MBTA and RTA buses
  • $300 million for MBTA power and facilities upgrades
  • expansion of commuter rail options that includes the South Coast rail extension ($1.8 billion), the Green Line extension ($674 million), and rail service between Springfield and Boston ($362 million), Boston and Hyannis ($21 million) and a connection between Pittsfield and New York City rail ($114 million), and an $850 million expansion of South Station.

The cost for all of this is about $1 billion per year over 10 years to get a modern, convenient transportation network to enable sustained economic growth across the Commonwealth.

I just returned from a trip to Korea and saw a truly modern, extensive, and reliable transit system.  Like Korea, the Massachusetts economy is fueled by a highly skilled mobile workforce, but without a first class transportation system, businesses will not be able to continue to grow.

Now is the time for all of us to get together and support these necessary investments.  There will be much debate on how to pay for all of this and the Governor will soon propose a menu of revenue options tapping a multitude of taxes and fees.  While discussion of these revenue sources is needed, it is critical that we move forward to ensure continued economic growth.  The time is now. Inaction is not an option.

Hurricane Sandy’s Message for Boston

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A recent Boston Globe Editorial, “After a near-miss with Sandy, more preparations are needed,” advocated for policy makers to focus on climate adaptation measures to protect Boston from future storms and flooding.  NAIOP wholeheartedly supports convening public and private interests to discuss short-term and long-term solutions that are practical and feasible.

An important first step would be to create incentives for building owners and developers that would make climate change planning part of their design process.  Focusing on carrots instead of sticks will be an important first step in changing the way some in the industry view this issue.  As an example, we should be encouraging, not penalizing, the relocation of utility spaces to upper floors.  This relatively simple step would have preserved many of the systems that were destroyed in New York and New Jersey.  However, current codes do not exempt these areas from the allowable building envelope, causing landlords to worry about losing rentable space to mechanical equipment.  A change should be made that would provide additional square footage for those developers that commit to doing this.

The Globe editorial suggested that restrictions be put on ground-floor uses in areas that will be prone to flooding.  However, as with the scenario above, it is critical that the impact of decreased rental income and increased construction costs be mitigated.   Furthermore, some of our current laws would prevent such a policy.  As an example, our Chapter 91 statute mandates the use of the first floor space for public access.

Yes, we need to find ways to efficiently prepare our coastal cities for the increased frequency of powerful storms, but we should also be ready to adjust our policies to incentivize the public and private sectors to make appropriate infrastructure and building redesigns, not penalize them with red tape and unnecessary costs.

Optimism: the way to start your day

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This post was written by Kimberly Sherman, and originally appeared on the Nickerson PR blog, CheersLive!

On Thursday November 29, 2012, over 400 attendees gathered at the Seaport Hotel Boston for the NAIOP/SIOR Annual Market Forecast, one of the industry’s leading market forecasts. Nickerson PR was the sponsor of the much-anticipated event. “Being knowledgeable as a peer in the field, helps Nickerson PR to provide a better service to our clients – we want to be a knowledgeable business partner to every client – not just a vendor. It was very important to sponsor such an event,” said Lisa Nickerson, Principal of Nickerson PR and Board Member SIOR New England.

Barry Bluestone NAIOP.jpgBarry Bluestone, Dean, School of Public Policy &
Urban Affairs at Northeastern University

David Begelfer, CEO for NAIOP Massachusetts moderated the program. The Keynote speaker, Barry Bluestone, Dean, School of Public Policy & Urban Affairs at Northeastern University, offered an optimistic and timely economic snapshot of our local real estate market. Bluestone’s economic overview mostly centered on why we will return to a 0.2% growth rate. He outlined six things we haven’t paid enough attention to.

1. The demographic boon is over
2. The plateau in educational attainment
3. Increase in inequality
4. Globalization and outsourcing
5. Energy and environment
6. Twin deficits

In closing, Bluestone firmly stated that to avoid this path, we would need major innovation and investment for large-scale ideas. He reminded us that the good thing is the US has accomplished this before, so we should have the confidence that we can do it again.

NAIOP Panel.jpg

Some of Greater Boston’s most active real estate professionals presented an analysis of the Massachusetts commercial markets, with a special look at the office, industrial and capital markets. Panelists discussed the drivers and fundamentals behind 2012 statistics, including emerging trends in specific markets, new growth areas and a general outlook for the future. Among these market experts were:

The majority of attendees I spoke to were pleased to leave the event with a feeling of optimism. In the words of market expert panelist Petz, “Boston is hot, we are lucky to both live and work here.”

Some take-aways from NAIOP Forecast attendees:

“It’s always great to hear lots of optimism about the direction of the commercial real estate markets for 2013 and beyond. Absorption rates are increasing significantly throughout the region which bodes well for the CRE market for years to come.” Bud LaRosa, Chief Business Performance Officer, Tocci Building Companies

“It was refreshing to hear Barry Bluestone speak to overcoming the fiscal cliff and offer insight as to why there is plenty of good news ahead for the real estate market.” Merrill H. Diamond, Founding Partner of DIAMOND SINACORI, LLC and IGNITION Residential, LLC

“With 7,500 new multi-family units planned and Boston supporting the effort, it’s nice to be assured that Boston real estate is hot right now.” Markell Blount, Partner, Sparta Consulting Inc.

“I am happily surprised by the level of optimism expressed today. The last few events have been more doom and gloom, so I’ll take this news any day.” Mark Glasser, Principal, Packard Design

Will We See More Development Over the Pike?

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A recent editorial in The Boston Globe spoke about the successful conclusion of the permitting for Fenway Center, the $450 million mixed-use project over the Mass. Turnpike.   The gist of the piece was that developing air rights is no easy matter.  Besides the very high cost of developing over an eight lane highway, there are the inevitable lawsuits that can stretch an approval process out by 2-3 years.  The Fenway Center case was finally resolved in appeals court.

Columbus Center, another very worthwhile project involving air rights, was not so lucky.  While the financial crisis played a role in its demise, one of the real reasons that it did not move forward was due to the lengthy delays caused by well over 100 public meetings.  No one can deny the appropriateness of having community involvement, but there must be some limit on that process.  Are the city and neighborhood really better off with the scar of an urban highway canyon dividing the Back Bay and the South End than it would have been with a mixed-use project including affordable housing?

The Globe said that “These projects shouldn’t be the last along the Pike.”  However, predictability and transparency are necessary before any developer will be willing to risk capital on a speculative urban development involving air rights.  A few suggestions:

  1. Establish some clear guidelines for developers interested in responding to RFPs for future air rights parcels;
  2. Set a limit on the number of public hearings with the appropriate neighborhood groups within a limited time period;
  3. Allow the developer to opt in to the Permitting Session of the Land Court for any appeals;
  4. Require appellants to post a bond if they choose to appeal the decision of the court;
  5. Allow developers to count some portion of the cost of the infrastructure associated with the air rights project as part of their community betterment payments.

Strategies for Today and Predictions for Tomorrow

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The following blog post was submitted by Ally Quinby, Account Executive at Solomon McCown.

NAIOP Massachusetts’ Smart Money in Real Estate event, on September 19, gathered together a distinguished panel of Boston’s real estate professionals to discuss the state of today’s market, as well as their predictions for the future.

To set the table for the event, NAIOP MA disseminated a poll to members regarding their current perceptions and future predictions. Doug Poutasse, Executive Vice President, Head of Strategy and Research at Bentall Kennedy, and moderator of the panel, leveraged the results from the poll during the discussion.

In regards to real estate investment, Jeff Furber, CEO of AEW Capital Management, listed the four qualities investors are seeking currently: Safety, Income, Control and Liquidity. Tier 1 core costal markets like Boston have been a major beneficiary of this fact due to the lack of risk associated with investing in stable regions.

Similarly, Jon Davis, CEO of The Davis Companies, believes there are many value-add opportunities in healthier cities, “Here in Boston, we are transforming neighborhoods. Take Kendall Square and the Fort Point Channel; there is so much vibrancy in these areas.”

According to one panelist, what the Boston area is lacking is supply of retail space. Despite the recent buzz around grocery-anchored retail centers, Tom DeSimone, Executive Vice President of WS Development, believes centers like this are “overplayed” and the increase in food sold outside grocery stores across the country, in retail shops like Wal-Mart, will be a problem in the future. In agreement, Mark Weld, Managing Director of Clarion Partners, said, “Distressed debt is aggregating in grocery-anchored retail centers across the country that people thought were on the path to growth.”

Looking forward, all the panelists agreed the looming effects of sequestration raise many questions for real estate professionals across the country. Despite the increased activity seen in markets like Boston, New York, San Francisco and Washington, D.C., uncertainty of this type has its effects. According to Jon Davis, “cleaning up from sequestration is the single biggest risk” we are facing today. There is no indication of whether or not Congress is going to be able to come together.

General sentiment among the panelists regarding the economic future was mild, noting there will not likely be significant improvement or dramatic decline in the state of the market.  Instead, all panelists agreed success today—and in the future—will rely heavily on partnering with the right people for leverage. Especially in times like these, what matters is one’s character and ability to execute.

Governor Patrick signs Jobs Bill into law

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The “Jobs Bill” – An Act Relative to Infrastructure Investment, Enhanced Competitiveness & Economic Growth in the Commonwealth – was signed into law August 7, 2012 by Governor Patrick.

As I was quoted in the Governor’s press release: “This bill is the result of a close collaborative effort by the House, Senate, Governor’s economic team, and the business community. Although the Commonwealth has fared better than most of the country, this wide-ranging bill creates a welcoming environment for innovation and growth. Combined with the ongoing, system-wide regulatory review process, Massachusetts continues to be attractive for business expansion.”

A summary of the various sections of the bill is available for review.  NAIOP is most pleased with the extension of the Permit Extension Act (Section 173 of Chapter 240 of the Acts of 2010).  Permits in effect or existence at any time between August 15, 2008  and August 15, 2012 will be extended by a total of 4 years (an addition of two years to the previous extension and four years for permits issued during the past two years). The extension will preserve state and local permitting decisions, allowing permitted projects to move forward without costly and time consuming delays to reissue permits. This impacts  all properties: commercial, housing, business expansions, universities, hospitals, and infrastructure projects.

In addition, the bill creates a new Local Infrastructure Development Program (Chapter 23L) that gives municipalities another tool for leveraging private funding to finance infrastructure improvements that are needed to support economic growth. It would fund infrastructure for homeowners and commercial projects without using local or state funds.  This is strictly a local municipal option to assist property owners who desire to finance infrastructure (e.g. roads, water, sewer, alternative energy, etc.)  The MassDevelopment-issued bonds would be secured and paid back by betterment liens on the benefited real estate.

Another win is the expansion of the successful I-cubed (Infrastructure Investment Incentive) program, which increases the number of projects per community from two to three. It also increases the available funding for the program from $250 million to $325 million.  It will add parking garages to the definition of public infrastructure improvements, and will include the taxes generated from construction jobs and purchases as part of the calculation for new state tax revenues.  I-cubed, which originally passed in 2006, was designed to finance significant new public infrastructure improvements necessary to support major new private development.

The Act will also streamline the current District Improvement Financing (DIF) program, by eliminating the required EACC review of DIF districts and development plans, which will make the program more accessible to cities and towns.

Although the Governor did veto the Brownfields tax credit extension, we are confident that the internal review of this program will result in its extension prior to its expiration a year from now.

This fall, NAIOP will be presenting a special Governmental Affairs educational seminar on this important economic development bill, as well as an update on the many regulatory changes occurring throughout the Administration’s various Departments. Keep an eye out for details!

BIDS: Taxation Without Representation

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The new “Jobs bill” recently passed by the Massachusetts House and Senate, and now awaiting the Governor’s signature, has a lot of “goodies” for economic development. However, there is a little surprise for businesses who are in, or might be in, a Business Improvement District (BID).

Currently, the BID law does not require every business in the district to contribute to the BID. However, with the new law, if 60% of the businesses in the district vote to form a BID, every business will be required to pay.

What this might mean is that existing BIDs (e.g. Downtown Crossing in Boston) and future proposed BIDs (e.g. Rose Fitzgerald Kennedy Greenway) will be able to force commercial landlords to pay into these districts.  If the city can convince/coerce 60% of the owners of a district to accept this, the others will have no say.  This can also lead to some interesting “Gerrymandering”, creating boundaries to capture large properties. Owners that may be further away from the core area will be obligated to new property tax surcharges to fund maintenance, security, and marketing initiatives for areas not necessarily benefiting these outlier properties.

That sounds like the situation with the current Downtown Crossing BID, and is part of the impetus behind this legislative action.  Some property owners further away from Washington Street, decided not to participate, to the consternation of the city.

What we may now see is new taxation for new services benefiting some, but paid for by many more.