📊 Investors Hit Pause in 4Q23 per Burns + CRE Daily Fear and Greed Index. See the full report here.

Officials Worried as MA Loses Workers to Migration

Massachusetts Battles Resident Exodus Introduction Massachusetts faces a concerning trend of increasing resident out-migration, intensified by high housing costs and competitive pressures from other states.

Officials Worried as MA Loses Workers to Migration

Massachusetts Battles Resident Exodus Introduction Massachusetts faces a concerning trend of increasing resident out-migration, intensified by high housing costs and competitive pressures from other states.

Together with

Good morning. Massachusetts faces significant out-migration, impacting the state workforce and economic future, prompting officials to take action. Plus, urban real estate investment is transforming.

Today’s issue is brought to you by Calvera Partners.

MIGRATION NATION

Out-Migration Threatens MA Workforce, Economic Growth

Massachusetts Grapples With 'Deeply Concerning' Trend Of More Residents Moving Away

Massachusetts faces a concerning trend of increasing resident out-migration, intensified by high housing costs and competitive pressures from other states.

Mass exodus: Massachusetts ranked 2nd to last (#49) for growth last year, with a United Van Lines report highlighting it among the seven states with the highest net out-migration. Outbound moves accounted for 56% of all relocations nationwide in 2023, painting a concerning picture of the state's population stability.

Workforce impact: Concerns over the out-migration's effect on the workforce are rising, especially among professional and tech sectors. In 2020, nearly 38K 26-to-35-year-olds left MA, contributing to a total loss of 100K residents between 2020–2022. This threatens demand for new development and could lead to workforce aging and shrinkage.

Economic slowdown: The state's economy grew at a slower pace compared to the national average in 4Q23, recording just a 1.2% increase. Factors such as a constrained labor market, housing supply issues, and high interest rates are cited as reasons for the deceleration, reflecting the broader challenges facing the state.

➥ THE TAKEAWAY

Retention strategies: To address the out-migration challenge and enhance competitiveness, Governor Maura Healey proposed initiatives like the $4B Affordable Homes Act and implemented the MBTA Communities Act. These efforts aim to stimulate housing development and retain talent, crucial for sustaining MA' economic growth amidst increasing migration pressures.

TOGETHER WITH CALVERA PARTNERS

Urban Investing Challenges Create Upside

In this weekend edition of CRE Daily, we welcome back guest contributor Brian Milovich, Co-Founder and Managing Principal of Calvera Partners, to discuss how urban real estate investment is transforming.

The landscape: Urban investing has always been challenging. Usually, it involves investing in an up-and-coming city pocket. Developers work in tandem to create new neighborhoods—restaurants, bars, and retail shops open as new amenities. Adventurous people move into apartments and condos to give the neighborhood a soul. Everything feeds off of one another to generate a palpable energy. This is what makes urban areas great.

The challenge: But when any one piece of an urban neighborhood starts to crumble, the energy changes. Anyone who has lived in an urban setting has put up with some level of discomfort. In San Francisco, widespread homelessness, visible drug use, car break-ins, and unclean public transit was (still is) the norm. A baseline level of this activity was simply part of the experience. Unfortunately, a pandemic-induced spike in this activity hasn't dissipated and drives people away.

The role of government: How a city government functions is one way to assess downtowns. This is particularly true for investment. Is the city government more interested in re-naming schools than improving public safety? Is rent control a hot topic around City Hall rather than solutions for more apartment supply? Is a landlord persona non grata or can she operate under common sense policies? City and state government policies do impact a property's bottom line.

What about supply? Urban areas often experience concentrated new development, leading to rental market volatility. While new investments can enhance neighborhood appeal, an oversupply can depress rents and increase concessions, making timing a crucial element in urban real estate investment.

➥ THE TAKEAWAY

Shifting focus: Calvera's urban investment background is key to our approach, but the challenges of managing urban properties, like complex regulations and crime, are wearing. Despite potential high returns in certain markets, the risks often outweigh the benefits. We're shifting focus to suburban locations with urban features, a niche market where we already have a presence and see great potential. For now, I'm avoiding riskier urban investments in specific MSAs, questioning whether the effort is worth the reward.

For the complete article, please visit Calvera's website using this link.

⏪ Weekend Wrap-Up

  • Rental realities: Recent report from Rentcafe reveals renters consider income-to-rent ratio, balancing expenses, and necessities more than ever when choosing locations.

  • Brokerage breakups: Top broker Bob Knakal, fired from JLL, had $22B in deals. JLL now shifts its focus from star brokers to an investment banking approach.

  • Rising rates: After a slight reprieve, the U.S. 30-year mortgage rate hit 6.87%, its highest level since December, leading to fewer mortgage applications.

  • Bankruptcy battle: Boston Market owner Jay Pandya declares personal bankruptcy, facing a $15M judgment and a $10M debt to US Foods.

  • Taxing tales: Two Colorado Democratic lawmakers proposed a rival bill to Senate Bill 33, aiming to change the short-term rental tax structure.

  • Resilient REITs: FrontView REIT, targeting "e-commerce resistant" tenants, and is considering an IPO this year with 98.8% occupancy and top tenants like Starbucks.

  • Forecast frowns: The MBA’s chief economist predicts a U.S. economic downturn, citing cautious company spending and improving inflation rates in an outlook panel.

  • City success: Austin-Round Rock was named the best-performing large city by the Milken Institute for 2024 due to rapid job and wage growth.

  • Domino effect: Chicago's multifamily market faces some distress, with nearly a dozen properties over $1M affected by foreclosures and lawsuits.

  • Net lease nuances: Single-tenant net lease investment sales in 4Q23 show a 31.7% QoQ drop, with 6.29% average cap rates according to Newmarq.

CHART OF THE DAY

According to Rentcafe, the 10 best cities in the U.S. that give you the best bang for your buck when it comes to financial stability include Sunnyvale, CA (#1), Surprise, AZ (#2), and Arlington, VA (#3).

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