Q2 2012 Boston, Massachusetts Commercial Real Estate Economy

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Q2 2012 Boston, Massachusetts Commercial Real Estate Economy

As reported in the previous Observer, the annual rebenchmarking of Current Employment Survey (CES) data from the U.S. Bureau of Labor Statistics (BLS) showed the Boston area had far fewer jobs, and far less job growth, than previously estimated in 2011. But that provides an easier comparison with which 2012 may be compared. Accordingly, total non-farm payroll employment increased by a solid 39,500 (1.6%) from May 2011 to May 2012. The private sector was up 43,400 (2.0%) year-over-year, partially offset by a decrease of 3,900 (1.3%) Government sector jobs. While some question the data, given last year’s disappointment, these increases are confirmed by another source: household-based data from the BLS on the number of employed residents of the Metropolitan Statistical Area (MSA), including the self-employed. The year-over-year increase as of May, according to this source, is nearly 40,000 (1.7%). While much of the country remains plagued by high unemployment, the unemployment rate for metro Boston is now moderate, and heading for low.

After briefly facing a period of decline, the Boston area is once again facing barriers to growth in an expensive, older, already densely developed region. Much of that growth is taking place in older cities such as the region’s center rather than at the exurban fringe. Accordingly, “MBTA ridership set a record in the authority’s fiscal 2012, topping 400 million T riders in the Boston public transit system,” according to the Boston Business Journal. During the long decades of urban decline public investment had shifted from transit to highways, and Boston transit may not be up to the job of accommodating the new lifestyle preference. “Surging T ridership and booming construction around transit stations, the study from the Urban Land Institute found, are poised to overwhelm the MBTA, potentially limiting future development and slowing the regional economy,” noted the Boston Globe. “Some 30,000 housing units and 45 million square feet of commercial space are planned or under construction within a half mile of rapid transit and commuter rail stops, in places like the South Boston Waterfront and Kendall Square in Cambridge.”

Housing itself is a barrier, growing slowly with more and more existing units occupied by empty nesters and retirees. Despite the strong appeal of metro Boston to would-be migrants, the area struggles to match the national average population growth rate according to Moody’s Economy.com. The projection for 2012 is a gain of just 0.6% (24,310). “When we think of places with high salaries, big metro areas like New York, Los Angeles, or San Francisco are usually the first to spring to mind,” according to Forbes. “Or cities with the biggest concentrations of educated workers, such as Boston.” But these places also have high housing prices, meaning effective pay is lower there. “Brain-rich Boston has the fifth-highest income of America’s largest metro areas but its high housing and other costs drive it down to 32nd on our list.”

For now, neither housing nor transit crowding is slowly Boston’s growth, particularly in advanced technology. CES data by sector shows a gain of 18,000 jobs (4.5%) in the Professional and Business Services in the year to May. Within the latter sector, employment in the Computer Systems Design and Related industry increased by 6,300 (12.0%) year-over-year in May, the Scientific, Research and Development industry was up by 2,000 (4.4%), and the Management, Scientific and Technical Consulting industry was up 2,500 (7.5%). The Information sector added 2,200 jobs (3.1%), with the included Software Publishers industry adding 2,400 (10.2%). Boston’s mostly high-tech Manufacturing sector was up 3,400 jobs (1.7%), and its Education and Health Services sector was up 8,500 (1.7%). Highlighting the shift in economic power, the Newspaper, Periodical and Book publishing industry lost another 800 jobs (6.2%) and the Financial Activities sector lost another 1,700 (1.0%).

Despite the surge in leading industry employment, consumer-driven sector growth is muted for now. CES data show a year-over-year gains of just 2,600 (1.1%) jobs in Leisure and Hospitality and 3,300 (1.3%) for Retail, the latter driven by a strong increase of 3,900 (5.7%) in the Food and Beverage Store industry. The Construction sector, devastated by recession, was up 2,700 jobs (3.3%) year-over-year in May.