Economically (and Perhaps Otherwise) We Are Lucky to Work in Greater Boston
As representatives and leaders within the AEC community, there is always a curious and reserved look towards the future economic outlook- which is often manifested in commercial real estate health. We work and are active with the Greater Boston market first- but there is no doubt that the broader national economy plays a key role as well in the viability and the profitability of our businesses.
As of July 2019, the U.S. is in the longest economic expansion (“bull market” to some degree) in our country’s history. How much longer can it continue is a question that experts and the media grapple with on a daily basis. According to Bankrate (September 2019), experts surveyed state there is a 41% chance of a (national) recession in 2020. This is the most negative prognosis in some time. Regardless, we need to focus on what these economic questions mean here in Boston and the surrounding adjacent vicinity.
A few relevant data points are as follows:
Per this article by USA Today
- Where are Americans moving to? According to the 2018 report noted, Greater Boston is the 14th most popular destination for people in other parts of the country to move to. (As a point of reference, there are 40 US cities with populations greater than 500,000.) #14 may not seem that stellar, but consider that the top 8 cities for domestic migration are from the southern half of the nation. Very few “cold-weather” areas are strong destinations- but Boston/Cambridge is one of them.
- The top 2 largest cities in the US, NYC and L.A., have been losing population via net-migration for several years now. Many in the Boston area assume that NYC is the “it” city and is where everything is happening- however for a variety of reasons thousands of people are leaving NYC each year- more than they are moving there.
From this article by Consulting.us
- Bostonians are proud people and we often consider ourselves the hub of the universe. All jokes aside, there is a lot of truth in this statement. Per the Global Cities Index, Boston ranks #24 in the entire world. Boston is the 5th most influential and “global” city in the United States. We know many of the reasons for this: bio-pharma industry, world-class colleges, world-class hospitals, historical relevance, Bill Belichick (?!?), etc. The fact is that we have several draws that continue to influence people and businesses to move into the region. It does not appear that any of those factors will change in the foreseeable future.
And from this article from the Architect’s Newspaper
- AIA billings are a key indicator for anyone in the AEC industry as they show the general health of development and construction. There have been recent chinks in the armor over the past few months, for one of the first times in roughly ten years. “Per the AIA’s monthly Architecture Billings Index (ABI), the demand for design services on commercial, industrial, and mixed practice projects has fallen from a score of 50.1 in July to 47.2 in August,” as noted on archpaper.com. However, the Northeast region fared a bit better than the national average, with a 3-month score of 49.1. (The Northeast region includes all of New England, plus all of NY and NJ.) While this is certainly a data point to look at, it is not the end-all, be-all.
Recessions are by definition contractions in the economy, often resulting or pared with a lower stock market value. What will this eventual “dip” be? Some say, nationally and on Wall Street, it could easily be 20%. Given the points above about the relative strength in Greater Boston, it seems realistic that we might only suffer a 10% slide instead of the more significant national market.
While nobody truly wants a 10% decline, I have talked with many folks in the industry who wouldn’t necessarily mind a 10% slowdown from where the market activity has been over the past 2-3 years. It might be a chance to refocus, improve profit margins, prepare for future market changes, and to simply take a bit of a breath. However it works out, we should be thankful we work in Beantown instead of the majority of other regions throughout the country.