Category: Real Estate

Snow Throws Wet Blanket on Economy

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Starting in late January, Massachusetts has been battered by major snowstorms that have blocked roads, buried parking spaces, and caused widespread power outages. MBTA service has been limited, and even shut down in places. Snow and ice continues to block roads, keeping people away from shops and restaurants and impeding industrial and agricultural operations.

According to Christopher Geehern of the Associated Industries of Massachusetts, employees are having trouble getting to work, and companies are having difficulties distributing their products. Industrial businesses are also spending a lot of time on snow removal.

Here are some other ways the snow is impacting the economy.

The Mystic Generating Station, an eight unit oil and natural gas power facility on the Mystic River across from Charlestown, lowered output to keep snow and ice in the river from making the plant malfunction. Workers also shoveled the flat roofs on the facility constantly. Kevin Thornton, a spokesman for the plant’s owner Exelon, said that the plant put workers in a hotel and provided food to make sure that they could get to work despite the snow. The plant has about 100 workers and the ability to power roughly two million homes. “The biggest costs have been snow removal,” Thornton said.

Insurance broker Marsh & McLennan in Worcester is seeing more claims for ice dams on roofs that have caused leaking and collapses. Jerry Alderman, president of property and casualty in New England, expects an increase in auto claims from snow and ice as well. Snow removal services are stretched very thin.

Economist Michael Goodman said that all the bad weather in January and February could cost the state billions of dollars while, according to a study by IHS Global Insight, a one day shutdown due to snow in Massachusetts would cost the state’s economy about $265 million.

Medical Device Manufacturer Moves to Worcester

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Cogmedix, a wholly owned subsidiary of Westborough-based Coghlin Companies Inc., recently announced the relocation of its world headquarters to 17 Briden Street in Worcester.  The medical device engineering and manufacturing services provider has become quite a success story in an increasingly important sector of the Commonwealth’s economy.

Chris Coghlin, President and CEO of the Coghlin Companies, stated “We are very excited about the trajectory of Cogmedix and the recent relocation, renovation and expansion of this world-class facility. For more than 100 years, our family has shared a deep-rooted passion for the economic success of Worcester and its surrounding communities, and we look forward to adding many new jobs in the greater Worcester area for years to come. The proximity of this facility lends itself well to attract highly skilled technicians as well as engineering and supply chain personnel as our growth continues into 2015 and beyond.”

Matt Giza, Vice President and General Manager of Cogmedix, said, “This move was made necessary by our steady pattern of growth. We really needed the additional space and these newly outfitted facilities are more than twice the size of our former location. This expansion will allow us to increase capacity to accommodate the needs of our customers, both existing and new, as well as provide improved inventory and supply chain management operations.”

Addressing Cogmedix’ growing niche in manufacturing finished laser and optically-based medical devices, Giza noted that upgrades included the installation of five purpose-built, independently climate-controlled, laser-safe test labs. Amenities include new cafeteria spaces, modern conference rooms, and a new Customer Convenience Center featuring fully equipped workspaces exclusively for visiting clients to enable a more intimate and efficient product launch experience with total transparency.

In addition to expanded production capacity and other benefits made possible by the much larger facility, the address itself has significant advantages. “Our new location,” Giza explained, “is at the junction of Interstate I-190 and I-290, providing quick and easy access to the entire region’s transportation infrastructure, including major airports in Boston, Worcester, Providence, and Hartford. We are also only about a mile from Worcester’s Union Station. All of this makes it possible for our visiting clients to arrive by air or rail and be hard at work in their own dedicated spaces in about an hour or less.

“We also couldn’t help but take notice of the rapidly growing biotech and biomed industry presence in the neighborhood,” said Giza. “Both regionally and nationally, Worcester has become well-known as a home for these cutting-edge industries, and Cogmedix is now located right in the heart of it all. We are immediately adjacent to WPI’s Gateway Park, Massachusetts Biomedical Initiatives (MBI), as well as multiple life science companies in the immediate vicinity, something that will surely add to the atmosphere of innovation and create real opportunities for meaningful collaboration.”

 

Home Sales End Year on Upswing

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December 2014 marked the end of a better year for home and condominium sales. The market came back with both more sales and higher prices. December marked a long uphill climb of nearly two years of returning sales, with a continuing upswing over the past twenty-two months.

Due to a lack of available inventory, there has been a decline in the confidence of the home market by realtors. On a 100-point scale, realtors’ confidence was marked at only fifty percent for December, and that number has been dropping steadily for just over a year. Confidence in inventory dropped 13 percent between December 2013 and 2014. Confidence in pricing fell over the same period to 73.42 percent, a drop of 2 percent.

While the confidence scale of realtors may be down, the buyers seem to be more willing to purchase. Mortgage interest rates have been going down and buyers are taking advantage of these lower prices to purchase now rather than later.

Pending sales for single family homes rose 28.7 percent in December 2014 over December 2013. With a median price of $333,000, the average price of these homes increased by 4.1 percent. The median price of condominiums rose by 3.9 percent to $318,500. There was, also, a rise of 9.9 percent in sales of condominiums for the same time period as single family homes.

As median prices continue to rise, more owners may be motivated to sell and an upswing in market inventory may follow suit. Those who have kept homes may decide now is the time to sell and purchase another home.

While limited inventory is still hampering the market and making it more of a challenge to find the home or condominium of the buyers’ dreams, there are still buyers out there. Prices are rising higher with competition for the inventory, but it does not appear to be stopping those who can borrow at the lower interest rates offered by today’s mortgages.

Great Wolf Water Park May Lose $17M in Tax Incentives

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The possibility of rescinding a $17.2 million tax incentive package on a deal with Great Wolf Resorts is now being considered by Massachusetts’ Economic Assistance Coordinating Council (EACC) after it was discovered that the company selected subcontractors who didn’t use union labor for their water park’s  recently-completed renovation. The resort opened in Fitchburg earlier this year.

After purchasing the former Holiday Inn in Fitchburg for $66 million, Great Wolf began construction on its water park. Last March, the company was awarded $16.5 million by the EACC in municipal property tax credits, along with an additional $700,000 for related issues.

However, the New England Regional Council of Carpenters had previously complained during construction of the subcontractors using non-union laborers who were not covered by workmen’s compensation, a violation of Massachusetts state law. The union was able to obtain a brief stop-work order, but the project was completed and the facility opened its doors this past spring.

The union’s main argument is that since the company was in violation of state law prior to the awarding of the multi-million dollar tax package, the tax breaks earned by the company should be voided.

The furor has caused the EACC to create a special subcommittee to focus specifically on this controversial conflict. That subcommittee met last Tuesday to see if the tax credits should be taken away, as well as exploring whether or not state oversight of such programs should be revamped. They will then offer a recommendation to the full committee, which reconvenes on December 17.

In previous cases asking for revocation of tax credits, the issue has usually been not reaching agreed-upon job targets. The EACC’s out-of-the-ordinary move raises the possibility that they might indeed take away the company’s credits.

When asked for comment, Great Wolf says that they spend approximately $6 million with subcontractors in the state each year. They also pointed out that they employ roughly 200 full-time staffers at the resort as well as 300 on a part-time basis.

Is MA Real Estate Market Rebounding?

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With prices stabilized and interest rates under 4.25 percent, buyers appear confident in the Massachusetts housing market. According to the Massachusetts Association of Realtors (MAR), pending sales of both single-family homes and condominiums continued rising in September.

The MAR noted a 22 percent increase in September of 2013 in the number of accepted offers or homes placed under agreement. The 4.901 homes placed under agreement last month was the highest monthly total since the MAR began tracking data. The number of condominiums placed under agreement rose to 1,858 and represented a 13 percent increase.

Despite the increase in future sales, the median selling price remained virtually unchanged. The median selling price for single-family homes was $325,000, a modest increase of $500 over last year. The median price of condominiums remained around $305,000.  Analysis of the price data indicates that while sellers appear confident of the market conditions, buyers appear to be waiting for the lowest price.

According to Peter Ruffini, MAR president, an increase in inventory and leveling of prices led to a drop in confidence among MAR members. The organization’s confidence index, which indicates future activity, dropped 14 percentage points to 54.07. The index is based on a 100-point scale with 50 being neutral. Meanwhile, the price index dropped 7 percent to 65.37, adding to a lack of confidence.

While it’s clear that the Commonwealth’s real estate market still has some recovering to do, it’s also clear that progress is being made.

Improvements to South Station Could Boost Framingham/Worcester Rail

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According to Massachusetts Transportation Secretary Richard Davey, Boston’s South Station is “becoming a choke point in the system and an obstacle to expanded service.” Davey placed a request with lawmakers on October 9 asking them for help with negotiating a deal that has the potential to allow the expansion of South Station.

Before the MBTA can add an additional seven tracks to the existing 13, it must first purchase property owned by the U.S. Postal Service. This piece of land has been the topic of discussions for years. The property is critical for the expansion of the station in its efforts to provide prompt service to commuters traveling through South Station.

The U.S. Postal Service and South Station “have yet to strike a deal,” said Davey, who will be leaving his post as transportation secretary at the end of October. He has asked Transportation Committee chairmen Sen. Thomas McGee (D-Lynn) and Rep. William Straus (D-Mattapoisett) for assistance with coming to an agreement. Davey also mentioned that the office is interested in purchasing property that once belonged to the Spaulding Rehabilitation Hospital. This purchase would enable the expansion of the North Station rail lines with two new tracks and a center platform.

Following the signing of a transportation bond bill in April, the Patrick administration re-engaged with the Postal Service, offering to build a $350 million mailing facility in the Boston Seaport District. “Frankly, we’re a little stuck,” Davey admits. “We’ve made a number of different proposals that we thought were compelling, that made the Post Office whole.”

The Postal Service has expressed concerns that the new Seaport land would depreciate, resulting in a lower price if it should attempt to sell the property in the future.

MA Senate Passes $80 Million Spending Bill

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An $80 million spending bill was recently approved by the Massachusetts State Senate to end the 2014 fiscal year. The bill will allow select state agencies to spend money from the 2014 fiscal year in the 2015 fiscal year. Five million dollars was also included to reimburse cities for expenditures from extreme weather conditions.

While several riders ended up attached to the bill, a rider to authorize the sale of the state transportation building in Boston was stripped. This rider originated in the House and would have allowed the Massachusetts Department of Transportation building on Tremont Street to be sold to the highest bidder. The Senate was wary about moving forward with the sale. After the Senate passed the spending bill, Democrat Senate Ways and Means Chairman Stephen Brewer said, “We will have an ongoing discussion about that. I am not going to prejudge where anything ends up.”

A myriad of other items were also included in the bill. There was a section on a commission to address sex offenders, a section on prescriptions written by nurse practitioners or physicians assistants, a section regarding Taunton State Hospital, the crafting of a new unemployment table, a section on the Cambridge Public Health Commission, and sections on home energy assistance to low-income families.

There was also a specific section that earmarked two million dollars to cover the restoration costs of the Mayflower II. A section could also be found that allowed the building of a three million dollar public safety building in Senator Brewer’s hometown.

The bill seems to effectively dispense with the budget surplus, estimated to be at twenty-five million dollars, amassed by the Patrick Administration as a result of tax collections that greatly exceeded revenue estimates made for the 2014 fiscal year.

The Senate and the House orchestrated no debate or public explanation of the bill. Senator Brewer stated he is optimistic to have the final bill on Gov. Patrick’s desk quickly.

Needham wins Google’s Annual eCity Award in Massachusetts

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This Wednesday Google will honor the the city of Needham, MA with the company’s annual eCity award.

In an attempt to identify the “digital capitals” of America, the award (which went to Westborough last year) is meant to recognize the communities with the strongest online business presence in every state. Google’s honoring of the town may be a show of support for the town of Needham’s recent rebranding as becoming a part of a new “innovation corridor” in Massachusetts, which aims to compete the city of Cambridge’s Kendall Square and Boston’s Innovation District.Together with the independent research firm Ipsos, Google analyzed the strength of the online presence of local small businesses in every state in America. According to a spokesman from Google, each of the winning cities showcase both “strong engagement with and potential growth within the digital economy.”

“Long before the current tech boom, our town leaders had the wisdom to re-zone our old industrial areas and make them attractive to the technology, life science and other innovative businesses that are moving and thriving here” says president of the Newton-Needham Chamber of Commerce Greg Reibman in a statement. “Needham’s success is really about a partnership between the municipality and businesses here.”

Aside from the formation of the N2 Innovation Corrider, in partnership with the neighboring town of Newton, MA, the town will soon also become the new headquarters of the company TripAdvisor (Nasdaq: TRIP). Another top name company Verastem, a biopharmaceutical company formerly based in Kendall Square, will also make the move to Needham.

Staples to Close 140 Units – Sign of Trouble Ahead?

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As more people enjoy the convenience of online shopping and fewer people are using paper office supplies, Framingham-based office retail giant Staples has announced it’s well on its way to closing 140 stores this year in its effort to save over $500 million within two years.

The announcement provides more details to plans that have been over two years in the works. In 2012, the office retailer said it would examine leases individually as they came up for renewal, with plans to trim $225 million worth of expenses by late 2015. Earlier this year, it was revealed 225 stores, representing 12 percent of Staples’ North American stores, would be closed. As its second-quarter revenue of $5.2 billion was thought to be in line with analysts’ estimates, Staples generated $75 million in net income for the period, which was down significantly from the $103 million at the same time last year.

With same-store sales down five percent in the second quarter, the decline was attributed to smaller-sized orders and a four percent decline in customer traffic to its stores. Wednesday, Staples CEO Ronald Sargent said in an earnings call the company is “working hard to position Staples for the future and to build a stronger foundation for long-term growth.” Much of this work will center on the company’s website Staples.com, and will include adding more products online as well as giving customers the option to buy online and pick up in a local store. This option, allowing customers to pick up an item ordered online within two hours at the store of their choice, is doing well according to Sargent. “Early results are running ahead of expectations,” he stated Wednesday.

Staples is not the only store to have e-commerce sales affect its business. In May, Office Depot announced it would close 400 stores nationwide after it merged with fellow office supply retailer OfficeMax.

What does this mean for brick-and-mortar retail office supply outlets? Is it the beginning of the end or will there always be a need for a retail environment?

Boston’s Real Estate Market – Too Hot for Startups?

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As far as commercial real estate markets go, Boston is among the best in the country. According to real estate research firm Reis Inc., the retail-vacancy rate fell 10 basis points in the past three months, and the city is now tied with Austin as the 12th best in the nation. What does this mean for start-ups who want a piece of the thriving Boston business world?

There’s no denying that Boston is a great place to start a business, but the rewards do not come without risk. There is clearly more competition for space and higher rents seem to be the norm in all sectors. Reis reported that Boston was one of only 11 markets in the country where rents increased at least 2.5 percent – far above the national average. Only small businesses with sufficient capital to get up and running will have a chance downtown, and even then there are risks.

Boston will still continue to be a bustling hub you can depend on, but there may be some bumps in the road along the way. Don’t jump in if you’re not committed for the long haul.