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Sure, the economic recovery leaves much to be desired, but Boston has a lot to be grateful for. That was the general impression given by the panel at REFA's Fall Conference at the Westin on Friday. The market?s high barriers to entry and enviable workforce have limited development and attracted new companies, a good formula to grow by, it turns out.
PPR?s master ?metaphorian,? Hans Nordby
At the top of the batting order, PPR?s master ?metaphorian,? Hans Nordby, confirmed that an underwhelming recovery is underway. Emerging from recession, US GDP growth is merely 1.3%, as the nation struggles with a heavy debt load. In the capital markets,banks have taken about two-thirds of the expected residential loan write-offs, but have further to go with CRE and homebuilder loans. In the next few years, Hans forecasts more bank write-offs on commercial property loans and more bad CMBS paper coming up for a scrubbing. With constrained supply and a well-educated workforce, Boston is among the Big Six US office markets global investors are jumping into, some with Chinese capital in hand. One setback might occur in some locations if Sanofi takes over Genzyme and cuts staff.
Listening intently to O?Connell Hospitality?s James O?Connell are the other panelists: Atlantic Retail?s Ben Starr, CBRE's Andrew Majewski, Cushman & Wakefield's Simon Butler, HFF?s Riaz Cassum and Hans. Bensaid that retail has rebounded well and some members of the DeMoula family, which owns the ?sleeping giant? that is Market Basket, invested in purchasing the former Polaroid campus now being redeveloped on Rt.128. In general, Ben says retail has quickly bounced back from what seemed like a fatal blow in ?08. The new normal is a big gulf between weak and strong markets, fewer big money transactions, and a focus on core locations—Chestnut Hill vs. New Hampshire or Maine. Ben says hands-on landlords, local or not, will be the winners.
James O?Connell
And here's one with James O?Connell actually in the frame, right. He sees positive indicators in the hotel market with an upswing in RevPAR, occupancy and rates, especially for the $300-plus/night rooms. Meanwhile, a dearth of new construction will prevent oversupply. On the other hand, hotels are still fighting to bump up occupancy especially in outlying locations like Rt. 495, where a full complement of jobs hasn?t returned after the tech wreck two decades ago. But, James says REITS and private equity are chasing prime properties like the Copley. They're looking for deals that beat replacement costs, which in the Copley?s case could be as much as $600k room.
For some hoteliers and households that invested millions in their waterfront properties facing Nantucket Sound, there is concern that paradise may be dented along with property values by the recent Supreme Judicial Court ruling over Cape Wind?s 130 turbine wind farm. The court ruled 4-2 to allow the nation's first approved off shore wind farm to move forward after a nine-year permitting process. Cape Wind Associates, which will pay royalties to lease the property from the federal government, faces one more hurdle: DPU approval of its contract with National Grid. CWA spokesman Mark Rodgers expects that to come in November, with financing and construction to follow. Opponents such as Audra Parker of the Alliance to Protect Nantucket Sound says the ?fight is far from over.?