Air Rights Over the Mass Turnpike

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Could this be the right time to finally heal the remaining gashes to the Boston cityscape caused 45 years ago by the construction of the Mass Turnpike?  I am optimistic that the answer is yes. The Boston Redevelopment Authority has reopened the process to review certain air rights project proposals. Although the focus is on the sites at the corner of Boylston Street and Massachusetts Avenue, there are also two other major development sites that could and should move forward: the Kenmore Square project proposed by John Rosenthal and the former Columbus Center project.

There are no redeeming features to having a highway canyon in the middle of one of the most historic and architecturally vibrant cities in the country.  The neighborhoods that were split by this chasm deserve better and the city certainly could use some new, exciting, revenue enhancing developments.

There is no question that residents should have input into the process.  However, the city needs to be a strong advocate for these complex and costly developments to become realities.  Set guidelines that offer sufficient density to allow these projects to work financially and give investors sufficient confidence that they will get through the approval process in a timely fashion.

It’s time to heal the traffic wound and create a thriving community.

What’s the Impact of the US Debt Downgrade on CRE?

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Everyone is trying to determine the impact that the recent S&P downgrade will have on the economy, their businesses, and their  personal investments.  I personally do not think it will have a substantial impact beyond the stock market’s roller coaster ride over the next few weeks.  That does not mean I believe the economy is in good shape, far from it.  I think this particular event is a distraction from the anemic job recovery across the country (granted that Massachusetts is finally outpacing the rest of the country after being the poor performer in the last few recessionary recoveries.)  Add to that the financial disasters within the European Union states, and the political unrest from London to Damascus, and you do not come away with much optimism for the next few years.

As for commercial real estate, we are in the “people business” in that the only way we can fill our buildings is to have businesses employ workers and expand that base.  With the uncertainty in the marketplace, we are not seeing any great surge in employment.  Some of the recent drop in the unemployment rate was unfortunately due to unemployed workers who gave up looking for a job.  The question is how do the businesses in the Commonwealth feel about their prospects?  Prior to the S&P announcement, AIM’s business confidence index for Massachusetts remained neutral at around 50 points out of 100 (not very encouraging.)

However, in our industry there may be some winners.  Investment funds have purchased commercial properties at a discount these past couple of years and more properties may come up for sale (either willingly or forced by their bankers.)  There will be exceptions to the dismal economic forecast in all real estate market categories with build-to-suits leading the way (e.g. Vertex, Novartis, Liberty Mutual) and a number of multi-family apartment projects benefitting from a robust rental market
locally.  The Seaport District will be an important bellwether.  After years of waiting for its “turn” there is some real momentum with Fan Pier, Liberty Wharf, and talk of multi-family housing, a hotel, and long-awaited retail. (Save the Date – NAIOP will be hosting a conference on the Seaport’s development plans on September 21st.)

Today’s Boston Globe had a good overview of the industries in Massachusetts and their reaction to the downgrade.  As I indicated in that article, as the industry that houses these businesses, we are “holding our breath” for the time being and hoping that what modest momentum we have had in Massachusetts does not get slowed any further.

Mandates Not the Tool to Increase Energy Efficiency in Commercial Buildings

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In a recent blog, How Many Miles Per Gallon Does Your Building Get? The Ratings Game Comes to Buildings, NAIOP member Seth Jaffe of Foley Hoag makes some observations about the recent report issued by the Institute for Market Transformation.  The report describes the existing efforts to rate the energy efficiency of commercial buildings in the country.

Although I appreciate the reasonable dose of skepticism that he expresses, I am a bit more doubtful of the intent of the pilot program originally drafted by our state Department of Energy Resources.  The DOER report, issued in December 2010, states that the intent of an energy rating program is to devalue properties that are less energy efficient (e.g. older building in Gateway Cities) so that there would be an “incentive” for owners to upgrade their buildings prior to financing or sale. This is not the same goal as providing information so that a building owner can make the best economic analysis to determine which energy efficiencies make financial sense.

The decision to invest in building upgrades is dependent on a number of factors including market rents, educated tenants, costs and benefits of efficiency measures, availability of capital, competition, etc.

New buildings are now much more energy efficient than their predecessors.  Developers over the past five years have produced many buildings with LEED certifications.  That said, we all know that the big challenge is with less efficient existing buildings.

However, the best incentive for upgrading that building stock will be an improving economy.  As demand for space increases, rents move up, energy costs continue to rise, and the price of efficiency technologies drop, we will see a major investment in building upgrades.

As we have said before, mandates are not the answer.  The market will lead the way and there is no doubt that, on this particular issue, regulators will do more damage trying to push businesses into expenditures ahead of their economic feasibility.

NAIOP Submits Comments on Eastern Box Turtle Conservation Plan

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Last fall, revisions were made to the MESA (Massachusetts Endangered Species Act) regulations affecting countless projects  in all regions of Massachusetts.  The changes, supported by NAIOP, extended the habitat mapping cycle by two years and  provided more flexibility with species of special concern (e.g. Box Turtle), as well as other important changes.

As a result of these changes, the Natural Heritage and Endangered Species Program (NHESP) recently issued a draft Conservation Plan for the Eastern Box Turtle.  The Eastern Box Turtle has long been a source of frustration for developers who encounter the species in Massachusetts.  Given its prevalence, NAIOP has strongly advocated for delisting the species.

While the Conservation Plan does not delist the species, it sets benchmarks which would allow regions to effectively delist the species once certain habitat thresholds are achieved.  The Draft Plan creates Conservation Protection Zones (CPZs) where projects  would be required to provide greater protection to the species and would require a more intensive permitting process through the Conservation and Management Permit (“CMP”).  Projects outside of the CPZs would have more flexibility.  A major improvement included in the Plan is the establishment of habitat banking as offsite mitigation.

Overall, NAIOP supports the concepts proposed in the Plan, but we believe changes are needed. Specifically, we urge the NHESP to:
•consider a reduction in the area of land protected within CPZs;
•allow property owners within CPZs to realize fair value for their property by allowing them to mitigate project impacts through offsite mitigation contributions;
•notify landowners, in advance, who own property within the CPZs allowing them an opportunity to provide input on the Conservation Plan.

NAIOP applauds the Division of Fisheries & Wildlife, the Department of Fish & Game and the NHESP for drafting the plan and proceeding in the right direction. NAIOP’s full comment letter  provides additional information on the concepts proposed in the plan and our thoughts on how it could be improved.  A final plan is expected this fall.

Take NAIOP’s Communications Survey and Win!

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Have you taken the 2011 NAIOP Massachusetts Communications survey yet? If not, please take a moment to answer this brief questionnaire, which will provide invaluable feedback as we evaluate and update our communications plan. In return, we’ll enter your name to win one of 10 tickets to a 2011 Main Event breakfast program!

Surveys must be completed no later than Friday, August 5, and a valid email address must be included to be eligible to win. If you have any questions or additional comments on the survey, please contact me, Diana Chaban Griffith, at 781-453-6900 x6.

The Return of an Owner’s Market?

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It might be a sign that the commercial real estate industry’s recovery is beginning.  A recent article in Banker & Tradesman,  entitled High Rise Office Space Expected to Soar, describes a significant improvement in the industry bellwether of tower leasing. With vacancy rates around six percent in the “upper floor” market in Boston high rises, rents are beginning to push upwards.

This is obviously the premium space in Boston, but in the past it has been a good indicator of market recoveries.  There needs to be more business expansion with substantial job creation for this to spread to other Class A space in downtown and the Route 128 suburbs, but it is a start.

Brokers are now advising their clients to lock in their leases at the current rates.  It appears that the indecision that was evident in 2009 and 2010 is being replaced with timely transactions.  Whether these lease renewals are for current space needs or include expansion for future growth is the most important question.

The good news is that Massachusetts is one of the few states showing any job growth.  Let’s hope that this is the start of a more sustained recovery.

NAIOP Mourns Loss of Myra Kraft

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Myra Kraft passed away today, a tragic loss to her family, friends, and to our whole community.  Myra was one of those rare individuals who dedicated her life to making the world a better place.  Tikkun olam is a Hebrew phrase that means “repairing the world” and Myra Kraft took that obligation to heart through her active involvement in countless local and international causes.

The Krafts have led numerous missions to Israel, Eastern Europe, and Russia, and I was privileged to join them on the Governor’s recent trade mission.  It was clear to us all that the groundwork Robert and Myra have done over the years to establish close relations with Israel’s top leaders helped make the Governor’s mission a success.

Philanthropy was not a part-time job for Myra.  When she committed to an organization, she gave it her all.  Not only was she an excellent fundraiser for the agencies she supported, but she was a skilled leader, serving on the boards of numerous charitable organizations for many years.

This last battle was a personal one for her and was one of the very few challenges she could not overcome.  Her causes continue and we must all rise to the challenge to carry on her good work.  All of us in the business community send her family our deepest condolences.

MassDOT Needs Mullan

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President Truman was fond of saying “the buck stops here.”  Taking responsibility for problems that occurred within his administration was an important part of his leadership style. But taking responsibility did not mean his resignation or
impeachment; and that was a good thing for the country.

Secretary Jeffrey Mullan

Prompted by the appearance of a lack of transparency following the Massachusetts Department of Transportation’s (MassDOT) handling of a light fixture problem in a Big Dig tunnel, the Secretary and CEO of MassDOT, Jeff Mullan, has recently come under
fire.  The Secretary has taken responsibility for the problem and is working to resolve many of the challenges that come with merging multiple transportation agencies.

Let us not forget the size and complexity of MassDOT and this task.  It demands leadership and people skills, as well as an understanding of transportation policy issues, that few people have.

Secretary Mullan, who has been involved in Massachusetts transportation issues for more than 20 years, brings a business-like approach to state transportation. He was a key author of the massive transportation reform plan and has worked diligently to implement significant changes in culture and policy.

We cannot afford to lose such a committed public servant.  If I were the Governor, I would make it clear that his resignation will not be accepted.  There is much work to be done – from completing the massive overhaul of this agency, to investing in key transportation projects to spur economic growth, to completing the deferred repair of our aging roads and bridges.

Mr. Secretary, let the buck stop at your desk, but stick around and help the Commonwealth with your strong leadership, commitment, and willingness to be held accountable.

Direct Flights to Israel – Help Make the Case

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As loyal readers may be aware, NAIOP Massachusetts has been involved in efforts to strengthen economic ties with Israel.  A critical component is attaining nonstop air service from Boston to Tel Aviv. To make this happen, we need your help.   

Given how many opportunities El Al has to expand its service in the United States, we are eager to demonstrate that New England should be next on the list. We are working with the Governor’s office, Massport, and key organizations that generate large amounts of travel to Israel. We plan to make our case to El Al in the fall.

A local survey firm, Strategic Partners, has been retained by Massport to conduct a survey of businesses, organizations and individuals about their current and expected travel to Israel. If you and/or your company travels or might travel to Israel, we would like you to participate in this survey.

To opt-in to the survey, please click here. Once you have opted-in, the actual survey will follow in the coming weeks. With your help, we can make the strategic and business case to El Al about nonstop Boston-Tel Aviv service. 

Thank you for your support,
David

NAIOP Brings the Heat to End Homelessness

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Records were certainly broken at NAIOP’s Annual Golf Tournament benefitting Heading Home, held Wednesday.  Not just the 90+ degree temperatures or the countless number of water bottles consumed on the course, but a record that matters – money raised. This was the year that NAIOP passed $1,600,000 in total donations to Heading Home, raised over the tournament’s 23-year history.   

It was a proud moment when I presented Tom Lorello, Heading Home’s Executive Director, a super-sized check in the amount of $122,000, an amount I know represents their largest corporate donation, and which they have come to count on each year. 

David Begelfer (far right) and Tom Lorello (third from right), joined by volunteers and staff.

This money will help Heading Home fulfill its mission to end homelessness in Greater Boston by providing housing in conjunction with effective support services to help change the conditions that create homelessness. Tom and his staff have been pioneers in the Housing First movement, and they are seeing great results despite the continuing housing crisis that grips our state.

At the tournament, we shared a few facts about Heading Home and their clients that help tell the story about why we support their work:

Did You Know?

  • Average age of a Heading Home client is 8 years old
  • In Massachusetts each night there are 3,000 families without a home

In 2010, Heading Home:

  • Served 2,134 at-risk and homeless people
  • Placed 112 families and  58 individuals into permanent housing

The Heading Home Formula:

  • Housing + Job Training + Matched Savings Plans = Self Sufficiency
  • It works: 90% of Heading Home clients have remained permanently housed

Heading Home was the day’s big winner, of course, but tell that to the winners of NAIOP’s new Super Raffle, which offered over 30 prizes donated by local firms. Congratulations to John Bryer of DiMella Shaffer Associates, Inc. who won the grand prize of a Mini Cooper lease, Dante Angelucci of Leggat McCall Properties who won an entertainment center, and Steve Daley of AEW Capital Management who won a vacation cruise package!  (See photos, press release, and other resources)

None of this could have happened without the hard work of the Charitable Events Committee, led by Bob Hayes at KeyPoint Partners and Steve Brodsky at Synergy Investment & Development, along with the dedicated staff at Heading Home, NAIOP’s Board and staff, and of course, our many generous donors and sponsors.  Thank you to all who helped make this day truly one for the record books!