During his time in office, the late Boston Mayor Tom Menino would frequently joke that his favorite bird was the crane. With the tremendous amount of construction going on in the Greater Boston market today, one imagines that if he were alive today, he would be grinning from ear to ear. This robust level of construction activity should continue in 2017 and beyond, given the number of large projects either set to break ground or in the development pipeline. On a national scale, total U.S. construction starts for 2017 will grow by 5% to $713 billion, following gains of 11% in 2015 and an estimated 1% in 2016, according to an October report by Dodge Data & Analytics. That positive outlook was seconded by a slightly more conservative estimate of 3.5% growth in non-residential construction spending in a report issued by Associated Builders and Contractors (ABC) in December.
As encouraging as those estimates may be, the immediate future for Greater Boston’s construction looks even brighter. In addition to the $2.1 billion Wynn Resorts project starting last August, there are a number of large developments getting underway in the market in 2017. A mixture of multifamily, office, and retail projects will break ground this year, including the Fenway Center (550 housing units, 160,000 square feet of office space, 50,000 square feet of retail), Arsenal Yards in Watertown (350,000 square feet of retail and entertainment plus over 500 rental apartment units), and the GE headquarters in Fort Point. Industrial property construction may be on the rise as well. In recent years there has been little construction of industrial space, but 2016 saw 3.8 million sf in warehouse and manufacturing space being built in Massachusetts, with an additional two million square feet in southern New Hampshire – fueled largely by e-commerce distribution centers. The legalization of marijuana by the Commonwealth is also expected to spur warehouse and distribution construction, as evidenced by plans by AmeriCann, Inc. to construct as much as one million square feet of space in Freetown, with a groundbreaking for the first phase scheduled for this spring.
But there are some potential storm clouds ahead in this otherwise sunny forecast. Production of multifamily housing units fell from 6,900 in 2015 to 6,500 last year, with the reduction largely attributed to the saturation of high end luxury housing in Downtown Boston. What is more concerning however, is last year’s decline in multi-family housing permits for projects in Greater Boston with five or more units. According to the 2016 Greater Boston Housing Report Card, permits are down from 9,042 in 2015 to 6,140 in 2016, a one-year drop of 32 percent.
While the overall boom in construction is a positive for the industry, it is leading to labor shortages that will only worsen as the projects in the pipeline fire up. Area contractors are having difficulty finding qualified workers to fill jobs, particularly journeyman, skilled trade labor, and project managers. The national construction unemployment rate was 5.7 percent in November, according to data from the Bureau of Labor Statistics (BLS), but Massachusetts had the lowest rate of all the states – 2.6 percent – the state’s lowest November rate on record going back to 2000 when the estimates begin. New Hampshire also posted its lowest November rate on record with a 3.4 percent rate. And while organizations like the Massachusetts AGC are expanding efforts to recruit and develop a well-trained workforce, labor shortages will be one of the industry’s most pressing problems in the New Year.