If there’s one big prediction I can make about 2010, it’s that it can’t be any worse than 2009 was for the real estate market and business in general across the Boston area.
It’s fashionable to be gloomy right now, with an array of economic doomsday prophets warning of a double dip recession and an implosion in the now recovering housing market once the homebuyer tax credit winds down.
I’m no Pollyanna, but I’m not buying it.
It’s as hip to be negative now as it was to be mindlessly bullish about seemingly ever-rising home prices during the bubble years.
In fact, a case can be made that the Bay State for once may help lead the country out of recession.
Still, the coming year will be nothing less than challenging, with some big issues looming that could have a huge impact on the Boston area’s economy and real estate market for years to come.
My top Boston-area business trends and stories to keep an eye on in 2010 include:
Improving Local Economy
I wrote a column a few months ago predicting the Bay State will emerge from the recession faster than many other parts of the country. Despite some bumps along the way, the Massachusetts’ unemployment rate is significantly below the national average, while some of our key industries, including biotech, high-tech and health care, are primed for growth. And it’s all happening so far largely without promised billions in stimulus spending in Washington, much of which has become entangled in federal and state red tape.
High Taxes, Fees & Costs
Despite the budding economic rebound, city and town officials are still strapped for cash as the state emerges from the recession. Boston and some suburban towns have already jacked up their commercial tax rates for 2010 on everything from office towers to retail strip malls. Look for others to follow suit. Also, expect local communities to get more creative, adding new fees and resurrecting old ones.
Meanwhile, don’t forget about state government, either. As he prepares for a bruising re-election battle, Gov. Deval Patrick may be tempted to lean left for a time to shore up his base. That could mean more aggressive pushing of a radical green agenda that includes new storm water runoff regulations. The new rules, now under consideration by state environmental regulators, could mean billions in added compliance costs for developers and institutions alike, at least according to NAIOP Massachusetts, which represents local developers.
Return Of The Housing Supply Debate
Barring a double-dip recession, the worst appears over for the housing market in the Bay State, especially the Boston area. Moody’s Economy.com is predicting that housing prices will fall across the country in 2010, including a 4.5 percent dip in Boston, which sounds fashionably negative to me. Given several months now of rising sales heading into 2010, as well as dwindling inventory, Boston-area home prices could easily hold steady if not post a modest gain.
Regardless, Boston is and will remain one of the most expensive housing markets in the country. And the debate over whether we build enough new housing, a big topic in the early 2000s, will heat up as the fall approaches. A question on the state ballot would junk the 1960’s-era Chapter 40B, which helps housing developers push through obstructionist local zoning rules to get new homes and condos built. Look for a coalition of business and housing groups to defend the law as necessary to get new housing built and help guard against the return of runaway home prices.
Lawmakers Legalize Casinos, Dicker Over Details
OK, I am going to go out on a limb on this one and predict that Beacon Hill, after decades of debate, will finally pass casino gambling. Of course, it’s one thing to legalize slot machines, but quite another to set up a new industry with an entirely new set of complex rules and a new regulatory agency to boot. There are just too many things to argue over – from whether to put casino licenses out to bid from how high to set the tax rates – and no Finneran-style strongman to ram it all through. (Of course, Finneran hated gambling, but you get my point.) So expect a big bang this spring if and when the vote passes, followed by months – and maybe even years – of pointless squabbling. If you think that’s overblown, just look at New York, where lawmakers gave a green light to video slots at Aqueduct back in 2001 and still can’t decide who should redevelop the aging Queens racetrack.
Office Market Hits Bottom
If you want to see where the office market is headed, look at the jobless rate. The demand for office space ebbs and flows with the economy – when companies are expanding, vacancy rates fall, and when they start laying off employees, the number of empty corporate suites mounts. Yet there’s typically some lag time here, with vacancy rates not coming down until a recovery is well under way. So while the employment picture may start to slowly turn around in 2010, look for vacancy rates to continue to climb and rents to continue falling through mid-year before bottoming out.
