By Lynn Tokarczyk and Peter Abair
BOSTON–Many experts predict the economy will rebound the second half of 2021. Given last year’s significant challenges, you would expect companies to sideline their expansion projects, but the opposite is true. Want to put your project ahead of the curve? Here’s what you need to know.
1) Size does Matter – Large sites are more difficult to acquire with big box distribution companies snapping up large parcels, often before needed. Add to that, other sizeable warehouse, manufacturing, and life sciences companies are hunting for space in Massachusetts. Sites with over 100,000 square feet of space are at a premium and disappear quickly. Cold storage locations for COVID-19 vaccines are also in high demand. For municipalities and developers considering site development or redevelopment, it’s an opportune time to add inventory to the marketplace. Keep in mind that larger sites could have infrastructure challenges which increases costs. Smaller sites, under 100,000 square feet, are more readily available throughout the state, particularly small- to medium-sized spaces in multi-tenanted buildings.
2) The Urban versus Suburban debate – Urban hotspots such as Kendall Square and the Seaport have dominated the innovative sector’s commercial marketplace in the most recent decade. Although we expect this demand to continue, a great number of employees are effectively working remotely and may want to continue. That means there may never be a “full” return to the office. A common trend in companies that expanded last year that continues, is the demand for employers to provide outdoor collaborative spaces to promote employee health and social distancing. Suburban sites with walking trails and outdoor recreation options are priorities for many companies and top talent may dictate locational preferences to employers moving forward.
3) The Real Estate Market Remains Vibrant – With interest rates remaining at all-time lows and many municipalities actively pitching companies to locate in their community, the time is now. Expansion has been so widespread that many companies that don’t act risk losing their preferred site. Fortunately, municipalities are responding to this increased demand by getting creative on the supply side. Worcester, Taunton and Burlington are making significant strides in rezoning or repurposing existing space to welcome new industries. Several shopping malls hit hard by fewer brick and mortar shoppers, are providing space for non-retail industries such as manufacturing or distribution. With a history of several successful pandemic expansions, and many municipalities striving to increase opportunities for growing companies, 2021 is shaping up to be an exceptional, if not unconventional, year for growth.
4) Understand the Impact of “The Three C’s” – Company, Community, and Consultant. Partnering with experienced consultants can not only save a company significant time and financial resources, but the partnership also ensures a positive economic impact on the surrounding community through job creation and new tax revenue. Additionally, many companies are unaware of the full range of tax incentives available to them and leave money on the table. Teaming up with a tax incentives specialist can help ensure that a business realizes the full monetary savings it is eligible for, while non-profit development organizations such as MassEcon provide an abundance of other resources and expertise to guide businesses through the various stages of a real estate site search, as well as a rich reservoir of data and analysis on demographics, the labor market, and business and industry trends.
5) Collaborative Spaces are Still Desired, Though Collaboration Itself Might Look a Little Different. Last year introduced us to the concept of virtual collaboration, a trend that is here to stay. Virtual platforms such as Zoom and Microsoft Teams have proved an effective, and at times preferable, substitute for in-person events, conferences, interviews and team meetings. The hybrid model in which employees work part-time from home is also anticipated to withstand the test of time. Companies benefit from needing less space when employees share offices or workstations on alternate schedules, and employees enjoy a reprieve from daily commutes and report a higher level of productivity. The pandemic has introduced a necessity for both virtual and in-person collaborative spaces, a new framework that companies must keep in mind while searching for and planning new space.
While it’s too early to predict how this year will play out, expansion is a realistic and achievable goal for many companies. While the hospitality and retail industries took major hits in 2020, it was one of the most active years for expansion projects for companies in other industries. As we hope for a rebound for these hard-hit sectors as the pandemic recedes, 2021 will see continued and robust activity with business expansions, especially at sites that can accommodate large requirements and in municipalities that have effectively positioned large properties for development and redevelopment.
(Lynn Tokarczyk is President of Business Development Strategies, Inc. one of the leading government tax incentives consulting firms in Massachusetts, and Peter Abair is the Executive Director of MassEcon, a private, nonprofit partnership of business, industry leaders and government dedicated to the economic growth of Massachusetts.)