Can Somerville be the next innovation center? Maybe

On March 10, 2017, in Latest News, by The Somerville Times

By William C. Shelton

(The opinions and views expressed in the commentaries and letters to the Editor of The Somerville Times belong solely to the authors and do not reflect the views or opinions of The Somerville Times, its staff or publishers)

Somerville has the worst jobs-to-workers ratio and commercial-to-residential-property ratio in Massachusetts. Both accelerate the displacement of long-term residents, while limiting revenues that can support city services. And a tiny commercial tax base means high homeowner taxes.

Yet Somerville Chamber of Commerce CEO Stephen Mackey tells us, “Today, companies are bypassing Somerville.” He’s right, despite our city’s being well positioned to lure tech firms.

At a forum that his organization sponsored last week on our potential for becoming “The Next Innovation Center,” 130 attendees heard what many of us have been saying for years.

Peter Bekarian told the audience that Somerville already has most of the ingredients that it needs. Mr. Bekarian is Managing Director of Jones Lang LaSalle, a leading real estate brokerage and consulting firm.

He says that we enjoy critical advantages that competing communities, including the flourishing Seaport District, do not. We are a mile from the densest innovation cluster on the planet, with easy access to the foremost research centers. Our residents and city government have an “entrepreneurial, creative spirit.”

We are well serviced by transit, and will become more so with the Green Line’s arrival. Already, 30.5% of us get to work using public transportation, as opposed to 12.3% for Greater Boston.

We have a “built-in talent pool.” The proportion of our population that is between the ages of 25 and 34 and that has college degrees is, respectively, 226% and 129% that of Greater Boston. And we have the density of dining, entertainment, and cultural offerings that competing areas can only envy.

As Mr. Bekarian’s list may suggest, much of what influences tech companies’ location decisions is what will attract and retain talented employees, particularly those who are early in their careers. Talent is these companies’ most critical success factor and accounts for 80% of their cost structures, as opposed 8% for real estate. So Human Resources Directors increasingly have as much influence on location decisions as CEOs do.

Bob Coughlin is President of the Massachusetts Biotechnology Council, a trade association with almost a thousand member organizations. He told the Forum audience that employees want to “live, work, and play in the same place.” While acknowledging that Somerville offers that, he seemed unaware that he was echoing the City’s own promotional message.

He’s right, of course. Commercial brokers tell me that many small and emerging tech companies would happily locate here if there were only space that could accommodate them.

Except for a 250,000-square-foot commercial project proposed by Federal Realty in Assembly Square, no such developments are in the pipeline. Why?

The reason is not, as some suggest, that we need to “activate” the Union Square area with additional residential and retail development. We are already considerably more “active” than competing districts. Indeed, it is the lack of a daytime population that is holding back growth in retail and service businesses, not the reverse.

Nor does concern about a near-term economic downturn seem to be an obstacle. Kermit Baker, Chief Economist for the American Institute of Architects reported at the forum that although we are “in the latter stages of the economic/construction/real estate cycle, [a] downturn does not appear imminent.”

In fact, the nature of demand for biotech products, and emerging biotech firms’ reliance on venture capital and National Institutes of Health funding, make this industry segment less vulnerable to economic cycles. As the New England manager for one of the world’s largest biotech space developers told me, “Until death is cured, there will always be public and private investment in the life sciences. Cycles may affect us, but they won’t shut us down.”

For some developers, uncertainty about the Green Line and other infrastructure development remains a sticking point. And some would like greater certainty on future zoning, the first batch of which—for Union Square—is now before the Board of Aldermen.

But two commercial developers are looking to do major projects in Boynton Yards now, whether or not the Green Line is coming. And they feel that what they intend could be accomplished under current zoning, with some minor variances.

Zoning matters to the extent that it is ambiguous, and a slow approval process can, indirectly, undermine financing. It is very difficult for developers to finance projects for which tenants have not yet been secured—what the industry calls “speculative” or “spec” projects. Even within well capitalized firms, investment committees want to see executed leases or letters of intent for at least half the space.

But the kind of small and emerging companies that most commend themselves as tenants here have rapidly evolving space needs, which can change in as little as two years.

For these kinds of projects, the average time between when the project is marketed and a lease begins is eleven months. Mr. Bekarian reports that his brokerage will not begin offering project space until permitting is at or near completion.

Consequently, developers are obligated to self finance all of their own predevelopment costs. Even then, the expected time between permitting and occupancy may be too long for potential tenants to make the kind of commitments that investors require. This challenge may be the greatest obstacle, which in turn, can be aggravated by delayed permit approval.

Finally, while Union Square’s and Boynton Yards’ “frontier” status may pose no problem for potential tech tenants, it does for some developers, and even more so for their investors. We need pioneer developments that will demonstrate those neighborhoods’ viability as tech-company locations.

Competition with other regional locations for first mover advantages increases this imperative’s urgency. As do increasing interest rates and building materials costs.

But while the Union Square Zoning now before the Board of Alderman specifies a 60%/40% ratio between new commercial and residential development, it contains no mechanisms to effectively enforce this split.

And the draft contract between the Somerville Redevelopment Authority and US2, the Union Square Master Developer, allows US2 to delay commencement of office/lab space construction until two years after Green Line station construction begins, which itself is at least three additional years out.

In the meantime, MassBio President Bob Coughlin says, “Today I drive through Somerville on the way to other towns. That shouldn’t be the case.”

No, it shouldn’t.

 

9 Responses to “Can Somerville be the next innovation center? Maybe”

  1. Brandon says:

    It’s a shame that massrobotics (https://www.massrobotics.org/) was lured to the seaport when they actively considered brickbottom as their new incubator/accelerator. The city should have done more to court them.

  2. Barbara Millicent Roberts says:

    Somerville absolutely has what it takes to be the next innovation center. The right people need to be promoting this, and vigorously.

  3. CAP says:

    People talk about attracting sexy hi-tech business to Somerville like no else has the same idea. Everyone is pitching themselves to the same small pool of tech companies right now. This is a race that Somerville is never going to win. So why should we destroy the community we already have to chase this rainbow?

    Boston is already into construction on millions of square feet of new tech space. How come nobody mentions that the “innovation center” in the converted Hood factory right outside of Sullivan Square is already open for business but can’t fill their floors? There will be a glut of tech space in Boston proper (the ‘real city’ – as opposed to big city wannabe Somerville) plus in Cambridge and Watertown and Quincy long before anything can be built here. And you think the quality of our local craft beer emporiums is going to jump us over all of that?

    Meanwhile, we’re gutting our neighborhoods, driving out long time residents and existing local businesses, and turning the city upside down so that we can feather a nest for a bunch of imagined tech darlings that are never going to come. Stupid stupid stupid.

  4. Steve keenan says:

    Another excellent and informative article by Mr. Shelton. And the reader comments are good.

  5. Oliver Seppo says:

    The sexy word of the moment is “innovation”, often paired with “creative”. Whether it means anything is unclear.

  6. Joe Beckmann says:

    Poooor CAP, but it’s good you repeated the theme of your response three times, because it’s very, very, very stupid. Kendall Square has no vacancies, and the highest commercial rents in New England. Somerville has the lowest ratio of jobs-for-residents of any city in metro Boston. And incubators – from TheKitchen to Canopy to Greentown to Artisans – have backlogs and generate more jobs per participant than Harvard does. Wake up. Stupid.

  7. Genie Geronimo says:

    All good points, but CAP’s about selling our souls along the way shouldn’t be ignored, either. What Boston built in its “innovation” district is pure schlock – a glorified office park on the water. It’s a lost opportunity to create a neighborhood with some kind of (positive) character on the harbor. It’s crap that got thrown up in a hurry to capture trendy tenants. Kendall square has a few cool, expensive buildings, but as a whole it comes off the same way – devoid of any character it had once upon a time – but it makes money for Cambridge, so who cares?

    My fear is that as we chase this dream of obtaining the same economic trust fund that fell into lazy Cambridge’s lap we risk turning Union square (& elsewhere) into the same sort of architectural & urban graveyard. Frankly, I find walking lower Broadway more interesting than anywhere in Kendal square. Allowing a single developer to plunk down so many oversized buildings in & around Union square at more or less the same time & for the same purpose poses a huge risk to the enduring character of Union Square. I honestly think the best thing for Union square would be for the developer to build a bit of housing & commercial space, and then go bankrupt – leaving the square to evolve gradually over time.

    And a side note: the majority of the coveted 25-34 year old college graduates will, of course, continue to leave Somerville once they become 34-50 year olds. They won’t be able to raise families in the fun, tiny, car-free condominiums they bought once upon a time so they could be near the cool breweries, rock climbing gyms and breakfast joints (God knows anything larger won’t be affordable). But hopefully they’ll be commuting to Somerville instead of Cambridge when the time comes.

  8. Matt says:

    Genie… So what do you want them to do? Nothing? Build condos? Single families? It sounds like the your biggest concern is making sure the look and feel accommodate you and your view of the world.

    Everyone knows that Innerbelt and Boyton will never be kendal, but if they could be Assembly without the give away to partners I think we could call it a success. Hundreds if not thousands of new jobs at all skill levels. Commercial tax revenue. Daytime foot traffic driving sales in surrounding businesses.

    Meanwhile, housing costs will continue to increase in Somerville… and you know what, we could add 1000 new units of housing and it won’t change the fact that property will continue to be inaccessible to a family of 4 making 65k/year to purchase.

    We need to be smart with the resources we have, which means we need to build in a way that we have high density development, both commercial offices, retail and residential. We don’t want a shell of a neighborhood after 6pm because everyone goes home or between the hours of 8 and 6 because everyone goes to work.

    PS. I am all for a consistent style of building to drive ‘character’ in a neighborhood, however that falls relatively far down the list

  9. BeatriceAM says:

    Mr. Shelton sure paints a rosy picture of how people are ready to develop in Boynton Yards, especially when the property needs updated sewage and roads. Who are the “two commercial developers” ready to “do major projects in Boynton Yards now” and are they going to pay 50-100million dollars needed in infrastructure updates?

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