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Cheryl Marsh

Beige Book Report for Boston April 2017

Federal Reserve Bank of Boston

Residential Real Estate
Residential real estate markets in the First District continued to struggle with a shortage of inventory. All six First District states as well as the Greater Boston area reported large declines in inventory for both single-family homes and condos from February 2016 to February 2017. Closed sales also declined in every state and Boston for single-family homes. Results for condos were mixed, with closed sales increasing in New Hampshire and Vermont but decreasing elsewhere. Respondents ubiquitously reported strong buyer demand. A contact in Boston said: "Sales could have been much stronger had the inventory been up. Unfortunately, we've noticed that potential sellers have become more reluctant to list their homes because they are apprehensive that they may not be able to find another home themselves."

Given the robust demand and low inventory, contacts were not surprised that prices generally rose year-over-year. For single family homes, median sales price rose in each state except Connecticut. For condos, prices rose in all reporting regions. A New Hampshire contact said the low inventory situation and rising prices were "particularly hard on first-time buyers struggling to get into the market." In general, contacts saw no remedy for ongoing declines in inventories. Most were confident, though, that buyer demand would stay strong, even in the face of increasing interest rates.

Commercial Real Estate
Reports on commercial real estate activity in the First District were mixed. Contacts in Boston and Hartford reported a modest softening of commercial leasing activity in recent weeks, while activity was reportedly stable in Portland and somewhat stronger in Providence. In Connecticut the weaker activity extended to both the industrial and office sectors. In Boston reports of slower demand pertained to the urban office sector, which still enjoyed a single-digit vacancy rate. Investor demand for prime Boston properties remained strong but price appreciation slowed further.

Office construction activity continued to be restrained across the District. Apartment construction activity remained significant but the pace of new deliveries slowed and the pipeline of planned projects contracted somewhat amid evidence of slowing rent growth. Respondents noted that borrowing rates for commercial property loans were flat despite recent increases in short-term rates. Most contacts expect further improvements in their respective commercial real estate markets moving forward, but likely at a slower pace. A Hartford contact was somewhat less optimistic, citing drags on growth related to severe fiscal strain in his state, while a Providence contact was more upbeat, based on signs that business confidence in Rhode Island had improved recently.

Summary of Economic Activity
Business activity continued to expand in the First District in recent months, with the year-over-year pace of increase said to be modest to moderate. Most responding retailers and all contacted manufacturers and software and information technology services firms reported increases in revenue from a year earlier when contacted in early April. Commercial real estate markets were somewhat mixed in the region. Residential real estate markets across the region saw price increases and sales declines in February compared with a year earlier, which contacts attributed to low inventories. Across sectors, hiring was reportedly modest as were wage increases, while many respondents cited difficulty filling a range of positions. Retailers and manufacturers said some selling prices were up modestly. Most responding firms cited a positive outlook amid some ongoing policy uncertainty.

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    Seaport Square - the Cultural Corridor

    Seaport Square ‘cultural corridor’ a response to needs of Boston’s artists, developer says

    Replaces plans for larger theater

    BY TOM ACITELLI  FEB 17, 2017, 11:00AM EST

     

    WS Development

    Apparent demand for smaller cultural spaces in Boston drove the decision to do away with a proposed 200,000-square-foot performing arts center in the last major bit of Seaport Square under development, according to developer WS Development and members of the city’s arts community.

    The scrapping of the larger theater center at Seaport Square in Boston’s Seaport was part of a slew of changes that WS Development recently proposed. In the larger venue’s place will be what the developer describes as a “cultural corridor,” per Tim Logan and Malcolm Gay in the Globe.

    That corridor is due to feature much smaller venues—which some in the Boston arts community say are more in demand than mammoth locations (just look at the recent acrobatics executed to preserve Boston’s Colonial Theatre).

    Still, the change has rankled some who see the corridor in place of the center as a bait-and-switch—just a way to get the necessary nods to commence development.

    However! It appears that the original 2010 Seaport Square master plan included caveats: re: a performing arts center, including its dependency on “local demand and funding.”

    For now, WS Development is gathering feedback from the arts community about what the venues along the cultural corridor should look like, including how big they should be. That could take a year. And the full build out of Seaport Square could (and will probably) take into the next decade.

    Beige Book Boston Real Estate 1st Report of 2017

    Boston - First District

    Federal Reserve Bank of Boston

    Residential Real Estate
    Continuing recent trends, residential real estate markets in the First District showed robust increases in sales and prices relative to last year. Closed sales for single-family homes and condos increased in all six First District states as well as in the Boston metro area (five of the six First District states and Boston reported changes from November 2015 to November 2016; Maine reported on October 2015 to October 2016). Massachusetts recorded the most closed sales on record for the month of November. As usual, many contacts cited falling inventories as an issue: inventories decreased year-over-year in every reporting region. A contact in Massachusetts reported that "with such little inventory, buyers needed to be quick with their best offers from the start."

    Home prices also rose year-over-year. For single-family homes, the median sales price increased in every reporting region. The same was true for condos, except in Vermont where prices decreased slightly.

    Overall, contacts were optimistic about the outlook for the end of the year and into 2017. Many said rising interest rates would stimulate buyers to make offers at the end of 2016, but they did not expect further moderate increases in interest rates to restrain the region's consistently strong buyer demand.

    Commercial Real Estate
    Conditions in commercial real estate markets across the First District were stable in recent weeks. Office leasing activity was steady or modestly slower in the region's major metro areas. Investment sales activity and sales prices for prime commercial properties in Boston were also stable, as foreign investors were undeterred by higher interest rates and a stronger dollar. One contact estimated that office rents in greater Boston increased 10 percent on average in 2016. Apartment construction activity slowed in recent months in both Boston and Portland, while office construction was stable at a slow pace in Boston and minimal in the rest of the region.

    The outlook among contacts was cautiously optimistic, with significant uncertainty related to domestic politics. Contacts across the District expected capitalization rates to increase in 2017 to keep pace with rising interest rates, noting that such increases imply that rents will have to increase and/or valuations will have to decrease. On balance, contacts anticipated that property values will remain flat in 2017. Apartment construction activity was expected to slow further in coming months as borrowing costs continue to rise and lending terms continue to tighten, but prospects for new office construction appeared brighter for 2017 in light of rising office rents and low office vacancy rates around the region.

    Summary of Economic Activity
    Business activity continued to expand in the First District at the close of 2016. Both retailers and manufacturers cited modest to moderate increases in revenues in recent weeks compared with a year earlier. Software and information services firms reported strong order increases in the fourth quarter. Commercial real estate markets were mostly steady in the region; in the Boston area office rents increased and sales prices for commercial properties were stable. Residential real estate markets across the region continued to experience increases in both sales and prices. Although none sought substantial additions to headcount, a number of firms reported difficulty finding workers to fill openings. Prices were largely stable. Most responding firms cited a positive outlook, expecting end-of-year growth rates to continue in 2017.

    BEIGE BOOK REPORT - JULY 2016

    Federal Reserve.gov

    Residential Real Estate
    Residential real estate markets in the First District remain strong. Five of the six First District states, as well as the greater Boston metro area, reported sales and inventory trends for the period May 2015 to May 2016; New Hampshire reported on trends between April 2015 and April 2016.

    Closed sales of single-family homes are up by moderate-to-large margins in every state in the District, and pending single-family sales increased at a slow-to-moderate pace depending on the state. A contact in Rhode Island considers a summer slowdown "unlikely" in light of strong recent sales. Median sales prices for single-family homes are on average up modestly from a year ago--with Vermont and Connecticut reporting moderate price declines and the remaining states reporting small-to-moderate increases. Condominium sales figures varied across states. Closed sales of condominiums are up in all states except Connecticut and Vermont, while pending sales increased in Massachusetts and New Hampshire and decreased in Rhode Island, Maine, and Vermont. As in the single-family market, median condo sales price changes are moderate, with the exception of a large over-the-year decline in Rhode Island. However, a contact in that state believes the decline is likely transitory because the data are prone to volatility.

    For both single family homes and condos, inventory is down in every reporting region. In addition, number of days on market decreased from a year earlier in all states reporting such data, as did months' available supply of both single-family homes and condominiums. Contacts continue to attribute the lack of inventory to a combination of lack of new construction and a dearth of sellers coming to market.

    Despite persistent inventory issues, contacts are optimistic. Those in Massachusetts, Vermont, and Rhode Island all expressed a positive outlook, primarily attributable to strong buyer demand. They cite stable employment figures and continued low interest rates as the key factors supporting such demand.

    Commercial Real Estate
    On balance commercial real estate markets appear stable or improving in the First District. In greater Boston, a modest slowdown in office leasing is reported, especially for high-rent space, but rents are steady amid low vacancy rates. Office leasing activity held steady at a moderate pace in Portland and Providence, but in Hartford activity remains light and some firms gave up space. Investment sales activity is down in Boston from last year's brisk pace. However, industrial sales activity picked up recently in Boston and parts of Connecticut, and a Portland contact sees a strong industrial property market with potential for new construction. Throughout the District, office construction remains limited in light of high building costs. Infrastructure construction is on the rise in Rhode Island, and hotel construction is planned for greater Portland. A regional lender to commercial real estate reports an uptick in loan demand at his firm amid reduced competition from other lenders. The outlook for Connecticut's commercial real estate market remains somewhat pessimistic based on weak job growth in the state. A Boston contact expects the Brexit vote to exert downward pressure on economic activity in the U.S. and the region, but notes that the vote should also boost foreign investment in Boston's commercial real estate market. Elsewhere in the District contacts are cautiously optimistic for commercial real estate but see risks as tilted to the downside based on global economic and political uncertainty.

    Government Center Garage Towers - Latest Renderings

    Government Center Garage Towers: the Latest Renderings

    Tuesday, November 17, 2015, by Tom Acitelli
    Courtesy of Boston.curbed.com
     
    SkylineImageWPB1ResANDWPB2Office-CroppedandZoomed.A.jpg

    The towers to your above right represent the biggest of the would-be spires rising on the site of the Government Center Garage in downtown Boston. The cylindrical one would stretch to 528 feet and, at 1 million square feet with the capacity to hold up to 5,000 workers, "would be the largest office building under construction in the city," according to the Globe's Tim Logan. It's designed by Pelli Clarke Pelli and CBT Architects.

    CT8mc2uUkAAiRb6.jpg
    The residential portion of the Government Center Garage redo, designed by CBT, is supposed to be 480 feet, or 45 stories, and contain 486 apartments as well as ground-floor retail. Both towers would be developed by HYM Investment, which got the city's O.K. two years ago for what could be a six-building project with 812 residences and a hotel, but that needs individual design approvals for each tower. Both of these rendered towers are, of course,quite tall by Boston standards. Settle in.

     

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      Beige Book Report for Boston January 2016

      Beige Book Report - First District BOSTON

      Residential Real Estate
      Residential real estate markets continue to exhibit strong performance across the First District, consistent with the seller's market environment present throughout 2015. For single-family homes, closed sales increased in November on a year-over-year basis in every state. Massachusetts experienced its sixth straight month of year-over-year increases in closed sales. Median sales prices were generally stable, showing modest increases in most states. Pending sales were up in every state with the exception of Maine, indicating a strong outlook going into the end of the year. A contact in New Hampshire says that residential real estate is experiencing its best year since the recession. The market for condominiums showed similar positive sales trends; closed and pending sales increased across the board when compared to last year. Median sales prices for condominiums, however, were mixed. Prices increased in three states, but decreased in the other three. November saw Massachusetts' largest year-over-year increase in condo prices of 2015 to date.

      Inventory continues to be an issue throughout the First District. Available homes for sale, available months' supply, and average days on market were consistently decreasing on a year-over-year basis for both single-family homes and condos. Both supply side constraints (limited construction) and healthy demand contribute to this. Contacts cite the improved employment situation as a driver of demand. Many also report that buyers were motivated to purchase in the months leading up to December due to the anticipation of increasing interest rates.

      The consensus among industry contacts is that the market is strong and expected to continue to perform well in 2016. A contact in Connecticut cites the mild weather as a contributor to increased activity in the normally slow holiday season. A contact in Boston reports that "sales increases in both markets are encouraging at this time of year which is typically slow." A New Hampshire contact notes that "more of the same is anticipated in 2016, but inventory and affordability challenges coupled with mortgage rate increases will likely keep any sort of monster growth in check." In spite of any potential concerns about increased interest rates, a Massachusetts contact indicates that he feels buyer demand will remain strong in the New Year.

      Commercial Real Estate
      Reports from First District commercial real estate contacts are for the most part little changed since last time. Office leasing demand remains robust in Boston and Portland and weak in Hartford. Leasing activity slowed modestly in the past month in Providence, where a contact perceives greater caution among business owners. The investment sales market for commercial real estate in Connecticut is described as somewhat less "frothy" than it was earlier in the fall, with "careful" bids, but demand still reportedly strong, by contrast with the leasing market. In Boston's investment sales market, contacts note that there are fewer bids per property on average than six months ago, but pricing remains robust. In both Boston and Portland, contacts note that the availability of large blocks of contiguous office space has become quite limited, a condition which--coupled with recent rent growth in both markets--is expected to lead to more office construction moving forward. Extending recent trends, new office projects in greater Boston are typically at least partly pre-leased rather than purely speculative.

      In Providence, the outlook became more guarded amid expectations that the national election cycle may delay decisions; at the same time, however, for the first time since prior to the recession, developers in Rhode Island are discussing the possibility of new industrial construction. More industrial construction appears likely in Portland as well in 2016, where supply is quite limited and industrial business activity is reportedly strong and growing. The overall outlook for Portland's commercial real estate market for 2016 is very strong, while in Hartford the outlook remains weak in light of risks that more businesses will leave Connecticut or leave Hartford for suburban locations. On the plus side, a Hartford contact sees business and consumer sentiment as being buoyed by low oil and gasoline prices. The outlook remains optimistic for Boston's commercial real estate market, including leasing and investment sales, but contacts also note risks stemming from political and economic uncertainty at both the national and global level.

      Email Cheryl Marsh to discuss what your property would sell for in this market. Cheryl@BostonLuxuryRealEstate.com

      Courtesy of Federalreserve.gov

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        Beige Book Report - September 2015

        First District--Boston

        Residential Real Estate
        Closed sales of both single-family homes and condominiums increased on a year-over-year basis in all six First District states in June. Contacts in the real estate industry say that sellers seem to be recovering from the harsh winter weather, and increased activity that began to show up in the last Beige Book continues. June represented the first year-over-year increase in closed sales of single-family homes for Massachusetts in 8 months. In Boston, where sales increased 10.2 percent, the volume numbers were near record highs. Median sales price increased from a year earlier on single-family homes in half the First District states and fell in Vermont, Connecticut, and Maine. Contacts in Massachusetts characterize the price appreciation as modest. Pending sales increased from July 2014 for nearly every state in the First District; the exception was condos in Maine. Inventory has decreased in every state but Connecticut. Massachusetts contacts say building and zoning laws continue to make new construction difficult. Contacts say low inventory has created a strong "sellers' market." Additionally, the available months of supply decreased in every state's single-family home market. The number of days spent on the market also decreased for both single-family homes and condos in most New England states.

        Contacts express a generally optimistic outlook as the market continues to recover from the unseasonably slow winter. Some note that sellers may still be working on repairs before putting homes on the market and expect upward trends in sales and prices to continue into the fall. Many are weary of the inventory shortage and express concern that rising prices and potentially increasing interest rates will begin to present financing issues for buyers

        Commercial Real Estate
        Contacts in the First District give mostly upbeat reports concerning the region's commercial real estate markets. Extending trends reported last time, office rents in Boston continue to climb, office vacancy rates continue to fall, and investors are pushing prices for Boston's commercial properties to near all-time highs. A few Boston contacts note that, over the past couple of years, the pace of delivery of new office space has been slow relative to historical norms under similar market conditions, contributing to the recent surge in rents. However, contacts also report that there has been a modest uptick in office construction activity in Boston's Seaport and Financial districts, involving a combination of pre-leased space and unleased space, and in some cases incorporating additional uses such as retail and residential space. Construction of hospitals and related facilities also continues to expand in the Boston area.

        In Providence, office leasing activity experienced only a very modest summer slowdown, maintaining a decent pace that is expected to strengthen come September; a contact in that city reports that the number of large blocks of vacant office space is down considerably in recent months. The Portland area continues to see strong leasing activity across the office, retail, and industrial sectors, pushing vacancy rates into the single digits, and the city's hotels are enjoying very high occupancy rates. In Hartford, leasing activity is light amid flat economic activity but the city's investment sales market remains strong and has recently attracted the interest of foreign buyers. A regional lender to commercial real estate notes that his bank saw a recent spike in loan payoffs resulting from an increased number of property sales among its borrowers; at the same time, it struggles to secure new lending opportunities amid fierce competition from insurance company lenders and from the commercial mortgage backed securities market.

        The shortage of skilled construction workers and accompanying wage pressure continues to weigh on the outlook for construction activity in Boston--according to one contact, within the next six months relevant labor costs in the metropolitan area could rise to levels that would significantly curtail construction activity relative to current plans. With the exception of a Hartford contact--whose outlook is modestly pessimistic--most commercial real estate contacts are optimistic concerning leasing fundamentals moving forward, but Boston contacts continue to be "nervous" about current high sales prices and low capitalization rates.

        FederalReserve.gov

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          Beige Book Report July 2015

           

          First District Boston

           

          Residential Real Estate
          Homebuyer confidence is up across the First District, according to contacts. Accordingly, completed sales of single-family homes increased over-the-year to May 2015 in every state except Massachusetts, which posted a decline in completed sales for the same period. The decline in Massachusetts' completed sales is attributed in part to the state's long and harsh winter, which deterred foot traffic even into April. Record-low inventory levels in Massachusetts are reportedly causing changes in the contracting environment, such as an increased willingness of sellers to let buyers out of pending sales contracts and a trend of sellers' making a sale contingent on their finding a new home to purchase. Over-the-year to May 2015, supply of single-family homes decreased in every state in the First District while pending sales increased. Median Sales Price (MSP) of single-family homes increased over-the-year in four of six New England states, while in Connecticut MSP is flat and in Massachusetts MSP decreased. The latest decline in MSP is only the second for Massachusetts in 31 months and contacts insist that buyer demand remains strong. The condominium market saw mixed results. Completed condominium sales are down in Massachusetts, Connecticut, and Vermont and up in Rhode Island, New Hampshire and Maine. MSP for condos increased in all states except Vermont and Maine. Massachusetts currently has only 1.8 months' supply of condominiums available, compared with 6 to 7 months' supply in a balanced market. Condominium inventory is down and pending condo sales are up in all six states. Contacts are generally optimistic about regional demand for residential real estate moving forward, despite voicing some uncertainty about the impact of eventual increases in interest rates.

           

          Commercial Real Estate
          Contacts report that office rent growth is accelerating in greater Boston, especially in urban submarkets. One contact describes Boston's office leasing market as the strongest in 50 years. Prices for investment properties in greater Boston continue to rise and, despite accelerating rent growth, contacts remain concerned that recent sales prices embed overly optimistic rent growth assumptions. In Portland, commercial leasing activity is steady at a solid pace and a modest amount of build-to-suit construction activity is reported. In Providence, deal volume is steady in both the office and industrial leasing markets and office vacancy rates are expected to decline moving forward amid lack of construction activity. Also in Rhode Island, business sentiment is described as optimistic in the face of modest improvements in current economic conditions and passage of a state budget that is seen as favoring job creation. Hartford's office leasing volume slowed in recent weeks, prompting one contact to downgrade his outlook for that market; however, Connecticut's investment sales market remains quite strong. Bank lenders in greater Boston are reportedly offering very low interest rates and generous terms for commercial real estate mortgages and construction loans. A common concern among contacts in the First District is the potential impact on investment demand for commercial properties once short-term interest rates start to rise.

          Federalreserve.gov

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