Going ‘green’ is here to stay. The environment in which we live, work, shop and play has forever changed. This has a lasting effect on the way we design and construct buildings. Not just the materials used in construction, but how they are used, how materials are disposed of and how the environment is sustained. You see this at Russia Wharf (now called Atlantic Wharf) along Boston’s Waterfront and The Weston Corporate Center in Weston (both projects currently under construction, the latter poised to be delivered, by Boston Properties) and will see this in the Liberty Mutual Insurance expansion. The question has always been how much more will this cost, but maybe the right question is how much will this cost if we don’t do this.
The Boston local commercial markets, despite some positive news out of both the Seaport District in newly signed leases for almost 100,000 square feet and the Fenway area (near and dear to my BU heart) with the beginning of permitting for new major retailers continues to be stressed. Recently Waltham’s Bay Colony, one of Broadway Partners acquisitions in 2007 is handing the keys to the complex back to Prudential Financial.
Though there is money on the sidelines to purchase properties like Bay Colony, the question still revolves around pricing, with few data points, declining rent and increasing vacancies. As the front page of a recent Boston Business Journal article stated ‘Commercial RE: Things are less Bad’.
Congress and the general public (those that are informed) are questioning if we should, and at what price, continue with taxpayer support to prop up secondary market giants Fannie Mae and Freddie Mac. This cost may well exceed $400B. The generally accepted rational for their existence is that they make homeownership more affordable and that because they buy and then package loans they make the secondary market possible while deflecting risk from the banks to the banks and investors. Before you throw out the baby with the bath water remember that they hold, in some form, $5.5T of mortgages.
As the homeowner tax credit is about to expire at the end of June, the question is how much support has this given the housing industry? Recent new home permit applications were up, though at about 60% of their ‘normal’ level. Home prices and sales activity were up in many communities though the National median price fell by about 1%; existing home sales are approaching 85% of ‘normal’ activity. Will this continue? Despite record low interest rates I believe that the lack of credit incentive will put a damper on the resurgent housing market.
The underpinnings of my foreboding on both the commercial market and the residential market remain anemic job growth. Without an expanding employment base both the business community and the consumer will remain reticent to expand/spend. Millions of jobs lost in the recession may be gone forever. Though there has been an uptick in consumer spending, the loss of home equity and retirement funds will make this resurgence short lived.
What’s the good news, the good news is that there is less bad news than before. Things seem to be getting worse at a declining rate.
Keith Munsell 
