CREW Boston, CCIM/NE Assess CRE Market Trends

BOSTON — Massachusetts has undergone tremendous change since it first began to recover from the 2008 recession. Since that time, the region has become an epicenter of the life sciences industry, gained traction as a hub of innovation for technology, has seen an entire new neighborhood begin to materialize in the Seaport, and emerged as a prime target for global investors. Last week, CREW Boston and CCIM New England partnered to host a panel discussion at One International Place to examine those trends. The panel included Patrick Annese, Senior VP of commercial banking at TD Bank; Angela Parziale, CPA, MST with Walter & Shuffain, P.C.; Rob Caridad of the Chiofaro Co., who handles leasing and marketing for International Place; and Wayne D’Amico, Executive VP of corporate development and strategic relations for commercial real estate information provider Xceligent. Michael Walsh, publisher of Real Reporter, moderated the program. “I think what has really happened over the course of the last eight years is that we’ve had a more cohesive downtown come together, with the arrival of residential to this area, the incorporation of retail, and truly becoming an 18-hour neighborhood,” said Caridad. “And during that time, we’ve seen Boston go from a regional center to a national player to a global player.” The industry veteran credits Greater Boston’s strong economic base – “meds and eds,” as well as the growth of the life sciences and technology sectors – as principal reasons for the General Electric’s and other global companies establishing their presences here, as well as the increase in investment by offshore capital. D’Amico seconded those opinions, and affirmed the importance of the transformation of Boston from a FIRE-based (Finance, Insurance, Real Estate) economy into a “full-blown” TAMI (Technology, Advertising, Media and Information) one. “This is the place to be, because you have the youth and the drivers,” he said. “I think the fundamentals of Boston are so much deeper, and the likelihood that as you grow, the tenants that made the decisions in the last couple of years to come to Boston will suit us better in the next downturn.” Annese told the gathering that there has been tremendous access to capital in recent years which has created a very competitive marketplace among lenders. “In order to win deals, banks have had to push the envelope on either price or structure of deals – higher leverage, lower spreads – especially when there are multiple financing options from which clients can choose,” he outlined, citing CMBS, life companies and Fannie and Freddie as active players on the multifamily side. TD Bank typically operates in the $2.5 million to $15 million lending space, working with local investors and developers, and “It has been a great space for us to play in,” he said. Parziale offered many of the morning’s freshest insights, remarking that she is seeing a substantial increase in joint venture development on the part of her privately-held clients, who are increasingly pairing up with funds and institutional investors. There is also a surge in interest by foreign capital in smaller CRE deals. “We see them knocking on the door, and I see it from my smallest clients that own a couple of strips (malls), or a few (Dunkin Donuts locations) around the area,” she said. “But it’s a slow road, and everybody is looking to see if the price is right to consider it, but there’s a lot of fear from the complexity of the deals from a tax perspective.” She also weighed in on potential changes to tax laws under the new administration, and maintains that, given the alignment of thinking between President Donald Trump and the GOP-controlled Congress, a simplification of the tax code (fewer individual brackets for instance) could be on the way. But she added that CRE tax specialists are concerned that things like accelerated depreciation and 1031 exchanges could be on the chopping block with any tax reform, “and that would take its toll on the commercial real estate market if they took that (1031 exchanges) away,” she opined.

Original article appeared in the March 22, 2017 issue of The Real Reporter