First came the flood of projects that stalled, were put on the back burner, or just cancelled altogether.
You knew it had to happen, and now it is. Hub developers and the industry that supports them, from architects to construction companies to law firms, are slashing jobs in a bid to stay alive amid an ever-more nightmarish downturn.
Companies that have reportedly cut jobs include some of the Boston area’s top real estate firms, from downtown tower developers to powerhouse construction companies.
It’s the early 1990s all over again, except this time it is worse, say some of the top industry players struggling to survive in the midst of this economic storm.
The cuts come as the local development and real estate industry makes the painful changes needed to survive a prolonged downturn. After evaluating the situation over the fall, many companies are coming to the conclusion that there’s little chance of any big rebound this year.
It’s either cut payrolls now or face an even more dire problem a few months down the line.
“We have been hearing from developers, contractors, architects – they are all looking right now at their payrolls and having to make some very difficult decisions,” said David Begelfer, chief executive of Massachusetts NAIOP, which represents the local development industry. “This is not going to be a 2009 problem; this is a problem that is going to spill over into 2010.”
Begelfer estimates that local companies, both in the development industry and supporting it, have cut hundreds of jobs already. And more are likely on the way, with the industry employing roughly 250,000 across the state.
Dean Stratouly is not untypical of how some of the big names in the local real estate business are fighting to keep afloat during the downtown.
The downtown tower developer, who built the 33 Arch St. tower and oversaw construction of the city’s $800-million-plus convention center, has had to let go seven of his nearly 40 employees.
“This is being optimistic when I say two or three years,” Stratouly told me of how long he expects the current downturn to last. “I am hoping for stabilization in ’09.”
Others who have handed out pink slips, according to industry executives, include some of the top players in the local development field.
It’s an exclusive list that includes developer S.R. Weiner, which is building Legacy Place, a 650,000-square-foot cinema and shopping complex in Dedham, as well as New Boston Fund, owned by the Rappaport family, best known for the landmark Charles River Park development.
“Like many of our peers, New Boston Fund is faced with making difficult decisions in this challenging economic environment. To that end, we, like many others, implemented a staff reduction,” the company said in a statement. “We are focused on keeping the firm strong financially and operationally so we are able to respond to market opportunities and future improved economic conditions in the real estate investment, management and development industry.”
Others said to be making cuts include Northland Investments, a Newton-based firm heavily involved in the Connecticut real estate market, and National Development, which has made a name for itself with its bevy of new residential projects next to MBTA and commuter rail hubs.
No Support
And that’s before you start getting into firms that offer supporting services, from law firms, to architects to construction companies.
Boston-based Ropes & Gray, which did a fair amount of real estate work, sent shock waves through the local legal community when it recently let go of 15 percent of its non-lawyer staff.
With companies opting to stay put, commercial brokerage firms are likely to be especially hard hit, with few if any deals to earn commissions on.
In a recent conference call with investors, Doug Linde, a top executive at Boston Properties, one of the biggest tower owners in the country, summed up the current market quite nicely.
“Since September, the vast majority of transactions have either been put on hold or re-traded,” Linde said. “So, we can’t tell you with precision today where market rents might even be. When we went through our mark to market this quarter, we took a meaningful haircut to our overall rent in anticipation of a prolonged economic slowdown.”
The layoffs come after months of bad news on the development front, from projects delayed indefinitely to others quietly cancelled.
After starting construction on plans for a $600 million-plus remake of the Filene’s building downtown, John Hynes, one of Boston’s most successful high-rise builders, has been forced to stop construction amid a financing crunch.
A bevy of other projects, not long ago slated to be under construction now, have since faded from view, from the South Station tower to the Columbus Center proposal for a massive air-rights project over the Massachusetts Turnpike between the Back Bay and the South End.
Would-be tower projects are vanishing as developers grapple with a double-barreled hit, a dramatic tightening up of credit combined with an equally dramatic drop-off in demand from companies for office space.
“People are cutting staff, others are not filling any vacancies,” said Vivien Li, head of the Boston Harbor Association and a waterfront development observer. “I think the question is how long you can hang on.”
