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Pent-Up Demand Fuels Boston Building Boom

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Rendering Courtesy of Elkus Manfredi Architects
Gearing Up: The $500-million New Balance headquarters building, a feature of the Boston Landing mixed-use project, is set for completion next year.
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Mark Erlich, executive secretary and treasurer of the New England Regional Council of Carpenters, is not an optimist. With an industry career spanning four decades, Erlich has been through many economic highs and lows, and so Boston's current private-sector building boom does not greatly impress him. In fact, he says it's kind of odd.

"In past down cycles there usually hasn't been that much of a discrepancy between [activity in] Boston and the rest of New England," says Erlich, who is based in the city. "But this time, the drivers of economic growth are particularly favorable in Boston. Life sciences or biotech, health care, higher ed and residential—they're all [aggressively] growing here but not elsewhere" in the region.

Even so, Erlich takes heart that the industry is on an upswing in Boston, which accounts for about 35% of the total hours worked in New England by his union's 19,000 members. "We anticipate sustaining the current level of employment and, perhaps, a slight increase next year," he says.

Union carpenters logged a total of 16.4 million hours of work throughout New England in 2013, up 14% from 2010 but still 24% below 2008, Erlich says. "We have a way to go to get back to the pre-recession work environment," he says, adding that when it comes to predictions, "I tend to be cautious."

Of the high-growth markets, the multifamily, commercial and higher education sectors are especially strong. Megaprojects include Boston-based developer Fallon Co.'s complex that spans 21 acres and nine city blocks at Fan Pier overlooking the Boston waterfront, an area attracting a significant amount of commercial development.

Fallon, which says the site is among the country's largest privately funded developments, recently broke ground on 100 Northern Avenue, a 17-story, 515,00-sq-ft commercial tower. This follows the start of construction last October of Twenty Two Liberty, a 14-story residential high-rise at the site that is set for completion next year.

The entire development will include a total of eight commercial and residential luxury high-rises, five of which are already completed or under way, says a Fallon spokeswoman.

She declined to provide construction costs for any of the projects, but local media reports peg the entire development value at $3 billion.

Further inland, the $630-million Millennium Tower complex is under way in downtown Boston, another section of the city teeming with work. The project calls for building a 980,000-sq-ft, 55-story residential mixed-use tower and redeveloping the once-stalled historic Daniel Burnham-designed building that was formerly the home of Filene's Department Store.

The 1.4-million-sq-ft complex is one of several Boston projects by New York-based developer Millennium Partners. The firm recently completed Millennium Place, a $220-million residential high-rise, also located downtown.

That is also where the $150-million Parcel 24 "One Greenway" project is being built. The site, which once was home to Chinatown residents, was taken over for highway construction in the 1960s, according to developers New Boston Fund and the Asian Community Development Corp. Thanks largely to community efforts, the two-building residential Parcel 24 returns the site to the community.

Both the downtown and seaport districts of the city are hot areas, especially for residential development, industry executives say. During the downturn, new housing construction in the metro region stopped altogether, leaving a lot of pent-up demand, they say.

Prior to the recession, Erlich says, the bulk of demand was for more suburban multifamily unit rentals, located primarily between the two beltways around the city—routes 128 and 495. Rising demand from young professionals and "empty-nesters who want to live in or near the city and near transit" has helped to accelerate residential demand in the more urban areas of Boston, Cambridge and Somerville, he adds.

"We are seeing a fair amount of folks moving to the seaport, so there are opportunities for tenant improvement and real estate projects," says Mark Warren, senior vice president and managing director of WSP's Building Systems. "There is renovation work in the financial district and downtown as well."

WSP is working on several Boston projects, including the Millennium complex and the 14-acre, mixed-use Boston Landing development in which a $500-million New Balance headquarters office building is under way. Project plans include a hotel and sports complex as well as a $15-million commuter rail station nearby.

The influx of young talent as well as the concentration of colleges and universities in the region have made for a highly educated work force that is drawing companies to expand in the city, Warren says.

Academia too is expected to continue a growth spurt that some of the big schools began in the last decade, executives say. Most major public and private institutions—including Harvard and Boston University—have massive building programs well under way.

The University of Massachusetts (UMass) Boston is in the $500-million first phase of a 25-year expansion plan that began in 2008. The current phase includes roadway upgrades as well as building student housing and academic buildings. MIT plans to redevelop 26 acres of its east campus at Kendall Square. The much-debated plan aims to build on school-owned parking lots and includes construction of academic and office buildings as well as student housing.

"Students want newer dorms and better facilities. They are demanding more," says Anthony Puntin, executive director of the Boston Society of Civil Engineers. "A lot of state facilities are old, and so the square footage needed for students is growing."

"With the downturn of the economy, the enrollment in the public schools has skyrocketed because people don't want to pay the [pricey] private tuition," says Jack Hobbs, Hill International senior vice president and New England regional manager.

Hill entered the New England market in January with the acquisition of Hobbs' Boston-based project management firm Collaborative Partners. The firm won a contract in March to provide owner's project management services related to UMass Boston's academic building renovations. Hill is also providing the same service at Northeastern University's $225-million Interdisciplinary Science and Engineering Building (ISEB) development. The ISEB project, part of Northeastern's $1.6-billion master plan, includes a new building and a pedestrian bridge over the existing rail lines of Massachusetts Bay Transportation Authority and Amtrak. The bridge will connect the development to the main campus. Work on the project began in March and is set for completion in 2016.

Another factor affecting higher education investment is competition. "The private institutions are competing against each other. All are trying to build student centers, athletic facilities, research halls and academic buildings that attract students," Hobbs says. He adds that some public and private schools are in the middle of their building programs and so have many years of work ahead.

Like most places nationwide, while private sector work is picking up in the region, the public sector is lagging, executives say. But with the state's recent passage of a $12.7-billion transportation bond bill, the outlook is brightening. The bond will provide a significant boost to numerous road and bridge projects and will go a long way to help revive the public sector, Puntin says.

As for the private marketplace, WSP's Warren believes there is enough work throughout the metro region for years to come. "Everyone says you are going to saturate the market at some point," he says. But there is research showing that existing space is being consumed and that more is needed, he says.

Erlich expects the Boston market to remain strong for the foreseeable future. "It is much more of a question mark for the rest of New England," he says.

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