THEBOSTONECONOMY TURNING THE CORNER 2004 CITY OF BOSTON THOMAS M. MENINO, MAYOR BOSTON REDEVELOPMENT AUTHORITY MARK MALONEY, DIRECTOR 599 The Boston Economy 2004 Turning the Corner THOMAS M. MENINO, MAYOR CITY OF BOSTON Boston Redevelopment Authority Mark Maloney, Director Clarence J. Jones, Chairman Consuelo Gonzales Thornell, Treasurer Joseph W. Nigro, Jr., Co-Vice Chairman Michael Taylor, Co-Vice Chairman Christopher J. Supple, Member Harry R. Collings, Secretary Report prepared by Paul Leonard Dominic Modicamore Gregory W. Perkins Research Division Gregory W. Perkins, Interim Director Report #599 September, 2004 TABLE OF CONTENTS TABLE OF CONTENTS................................................................................................................1 A NOTE ABOUT THIS REPORT .................................................................................................1 EXECUTIVE SUMMARY.............................................................................................................2 INTRODUCTION ................................................................................................................................7 OVERVIEW OF CURRENT ECONOMIC CONDITIONS ...........................................................................7 STATISTICAL DATA..........................................................................................................................8 NEW ENGLAND, MASSACHUSETTS AND METROPOLITAN BOSTON ECONOMIES...............................8 EMPLOYMENT STRUCTURE, EMPLOYMENT TRENDS AND OCCUPATIONAL CHANGES ......................9 UNEMPLOYMENT ...........................................................................................................................13 LARGEST EMPLOYERS....................................................................................................................14 LABOR FORCE AND EDUCATION ....................................................................................................15 INCOME, WAGES, AND COST OF LIVING ........................................................................................16 POPULATION ..................................................................................................................................17 MEDICAL AND HIGHER EDUCATIONAL INSTITUTIONS....................................................................18 TOURISM........................................................................................................................................20 HOTEL MARKET.............................................................................................................................21 TRANSPORTATION..........................................................................................................................22 SEAPORT AND AIRPORT .................................................................................................................24 CONSTRUCTION ACTIVITY .............................................................................................................25 LARGE PUBLIC SECTOR PROJECTS .................................................................................................26 EMPOWERMENT ZONE DESIGNATION.............................................................................................28 OFFICE MARKET AND NEW DEVELOPMENT ...................................................................................30 RETAIL MARKET............................................................................................................................31 INDUSTRIAL MARKET AND RECENT DEVELOPMENTS ....................................................................32 HOUSING STOCK, HOUSING VALUES, AND DEVELOPMENT............................................................34 THE LINKAGE PROGRAM................................................................................................................40 A NOTE ABOUT THIS REPORT The following report was been prepared by the Boston Redevelopment Authority (the “BRA”) Research Division in the Spring and Summer of 2004. The report describes the principal components of the economy of the City of Boston (the “City”) and presents major economic, demographic and market indicators, and historical, statistical and other information. The information contained herein has been furnished by the City and certain information has been obtained from other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness. EXECUTIVE SUMMARY Boston’s economy is showing signs of a turnaround point of 2000 and year-end 2003 in Boston. after the lingering effects of a regional economic Unemployment moved upwards from a very strong recession that lasted longer than the official U.S. 2.9% in 2000 to a higher, but tolerable level of 6.0% economic recession which spanned from March 2001 in 2003. through November 2001. Boston’s economic downturn as measured by a loss of employment was The commercial real estate markets have showed evident for three years 2001 through 2003 while the weakness since early 2000 and the effects of U.S. economy experienced a recession in 2001 and a September 11, 2001 compounded problems in the very slow economic turnaround from 2002 through economy and the tourism market. The office 2003. market has shown vacancies of over 12% although Boston remains positive in relation to . Boston is the economic hub of both the many other cities. Hotels had several years of Commonwealth of Massachusetts and the New weakness although the last year has shown some England region. It is a center for professional, strength even as new rooms are added. Residential business, financial, governmental, higher educational real estate has remained strong even through the and medical services, as well as transportation, weak economy as increasing sales volume and communications, export, cultural and steadily rising values have been bolstered by record entertainment activities. As a government center, low interest rates. Boston is the capital of the Commonwealth and is host to several federal offices. High technology, From the most recent data of late 2003 and early research and development, manufacturing and 2004 it appears that the worst of the economic wholesale distribution also contribute to the downturn is over, that the upward climb is beginning economy of Boston and its suburbs. in Boston, and that the economy is turning the corner. The following report presents the major economic POPULATION and demographic indicators of the last ten years and more that demonstrate the continuing strength Boston's population reached 589,141 according to the of the city's economy despite challenging times. 2000 U.S. Census, registering its second gain in Boston's is the engine of the state and regional the past two decades as testimony to Boston’s economy. economic and social strengths and its physical attractiveness. Boston’s population has grown OVERVIEW OF CURRENT again by attracting young professionals from all ECONOMIC CONDITIONS over the country and by its role as a gateway city for new immigrants from all over the world. The current regional economic recession is in its fourth year, lasting from 2001 through early 2004. Economic Boston is the center of a metropolitan area of more indicators reveal a loss of employment, higher than 3.2 million persons, and is the capital of the unemployment rates, weakened office and hotel Commonwealth, which has over 6.3 million markets over the past three plus years. Positive residents. Boston is also the center of the signs are the remaining strong sales and prices in nation's seventh largest Consolidated residential real estate, over $2 billion in private Metropolitan Statistical Area, which stretches development construction investment in housing from Maine and New Hampshire down to hotel and retail space particularly, and the Southeastern Massachusetts and Connecticut and continued stimulative effects of several large contains 5.8 million people. public sector projects which are improving the infrastructure capacity of the city and laying the groundwork for future economic growth. The population of Boston is young, in large part because of the high concentration of younger adults who come to the city to attend school or Over 54,000 jobs were lost between the high 2 to work. Another characteristic of Boston's 70.9% and Average Daily Room Rate declined population is shown by the racial and ethnic further, to $154.43. Through the first four diversity of its residents: the racial composition months of 2004 there has been a 7.9% increase is 49.5% white and 50.5% minority. in room demand and an increase in the occupancy rate to 64.5%, up from 60.9% for the EMPLOYMENT first four months of 2003. The number of jobs in Boston was 633,668 in 2003. OFFICE MARKET. The City currently has Although this represents a loss of 54,409 jobs approximately 66.3 million square feet of office compared to the all-time peak in 2000, it still space. By the first quarter of 2004 (April 30th) represents a gain of 55,048 over the low reached in Boston’s overall vacancy rate according to CB 1992. The 2000-2003 employment record Richard Ellis was 12.3% (16.0% when including showed losses in construction, manufacturing, space to sub-let). Another realty firm, Spaulding & transportation, government,and professional and Slye, places the City’s office vacancy rate at 11.9% business services but did show gains in (availibility 17.4%). Certainly, given the economic educational services and