Daly Appraisal Newsletter - Vol 6

Appraisal Insights

Welcome to the sixth issue of Appraisal Insights! We've launched this newsletter to share customer stories and illustrate the power of real estate appraisals to provide valuable property and market insights.

Recent appraisals that we’ve written or are working on include:

*A mixed use building in East Boston with a ground level restaurant and apartments above.

*A group home in Wilbraham.

*An office condo in North Andover near Merrimack College.

*An industrial warehouse in Woburn.

*A retail store strip in Somerville.

*An office condo in South Boston.

*A retail building under construction in Greenfield.

*A mixed use building in Lowell with a ground level laundromat and 10 apartments above.

Boston's Changing Face: The picture above, taken circa 1968, is the marquee for South Boston's Broadway Theater. The long vacant building is being developed into 42 condominiums or apartments. Plans include a shared roof deck and 42 underground parking spaces. The back portion of the building along Athens Street has been demolished and is being replaced with a six-story, 44,000-square-foot addition. The old theater's lobby will reportedly become a lobby for the complex.

Featured Article

Micro-Housing:

Changing the Way Cities are Organized

By Linda Sakelaris, Staff Writer

Plans to create micro apartments and other new housing options in Boston could pick up steam if area zoning uncertainties are addressed.

The Boston real estate market is poised to embrace innovative “compact” living spaces now being constructed throughout the country. However, the patchwork of variable zoning regulations in towns and cities throughout the area makes development difficult.

Municipalities “have been over-restricting housing development relative to need,” according to a recent report by the Massachusetts Smart Growth Alliance and six other organizations, which surveyed multi-family zoning activity for 100 Boston-area municipalities.

By 2030, as many as 50,000 new residents are expected to enter Boston, a city already experiencing an affordable housing shortage. City planners intend to handle the influx by creating 69,000 new housing units, in part by redesigning existing dense structures to form smaller, micro apartment units.

To accommodate this vision, the city has lifted its square-foot minimum mandates. Studios can now be under 450 square feet (SF), one-bedrooms under 625 SF and two-bedrooms under 850 SF. Boston launched a compact living pilot program in November to show that with the proper design, a 1,000-foot two-bedroom unit could be comfortably reduced to 600 SF, according to program plans.

Development has been stymied in part by zoning laws. Currently, Massachusetts lawmakers are examining a century-old state law that requires a two-thirds vote of a municipal body to authorize zoning changes. Proponents of the existing law say it too easily allows a vocal minority to block a project, and seek instead a simple majority vote. Other politicians fear that with a simple majority method, towns would build luxury and market-rate housing rather than affordable housing.

Developers, meanwhile, are looking for a coordinated approach among city, state and community leaders on zoning, permitting, and other regulatory matters before going live with this new national trend.

The Village Concept

Micro apartments, many of which will be leased, not only provide affordable housing, with access to transit, amenities and other city offerings, but also represent the 21st century “village” housing approach. Developments will include community space such as lounges, laundry facilities, study areas, gyms, and rooftop gardens.

The village concept meshes with the recent change in civilization, points out a study in Sweden. Two key factors are driving the future: digitalization and urbanization. Urban areas attract a large number of young workers, which have dense electronic social and professional networks. These residents do not seek large housing, but are more influenced by on-demand transportation, delivery services, open spaces, and other urban offerings. Older Americans shedding single-family homes are also expected to be drawn into urban micro units.

This change in resident demand will change the way cities are organized, states the Swedish study, which was produced by the Royal Institute of Technology and the Department of Real Estate and Construction Management. Micro unit apartments are often furnished by the developer or landlord with space-savers such as Murphy beds and convertible seating. Use of modular design and panelized construction could help reduce cost. The theory behind the micro unit is that personal space is minimized without reducing livability and shared community space fosters more personal connectivity.

Micro Units

Developer & Investor Point of View

Developers and investors are interested in micro units for several reasons:

· Units are generally established in prime urban locations in cities like Boston, where the tech industry attracts the millennial workforce.

· Demand for micro apartments is expected to be strong from young professionals as well as empty nesters. Micro units are increasingly used by tourists as Airbnb rentals, a positive factor for a tourist-rich city like Boston. Overall occupancy rates could be stable.

· Square-foot rental rates for micro-units can be higher than for traditional apartments, resulting in attractive yields.

· For redesign developers, expansion of the existing number of units can maximize per-square-foot profitability.

· For investors, financing for micro-units can be hard to obtain due to the small size of the unit. A large down payment may be needed, according to Mashvisor.

· Micro units have become attractive for new investors, who can get in for less money. Also, two micro units could be purchased for the price of a single traditional property, spreading the risk across multiple rentals.

Covering Boston, Worcester, Springfield

Daly Appraisal Newsletter - Vol 5

Appraisal Insights

Welcome to the fifth issue of Appraisal Insights! We've launched this newsletter to share customer stories and illustrate the power of real estate appraisals to provide valuable property and market insights.Recent appraisals that we’ve written or are working on include:

• A racquetball club in Worcester County converted to an office building.
• A refurbished Brimfield farmhouse on 77 acres used as a single family dwelling and working animal farm with horses, pigs, chickens, and goats.
• A six house subdivision in Worcester.
• A dilapidated retail strip in Dorchester that will be redeveloped for retail and apartments, or just apartments.
• An industrial complex in Boston's Hyde Park neighborhood.
• The old Jordan Marsh building in downtown Lowell.

The picture above is of the old Jordan Marsh department store in downtown Lowell. The property is known as the Bon Marche' (translated as “bargain price”) building because that was the name of the department store that occupied the property from 1887 until the Jordan Marsh company took it over in the 1970s. Jordan Marsh went out of business in the mid 1990s. The property was refashioned into office and retail space and now houses, among other tenants, the Lowell Public School administrative offices.

Featured Article

Greater Boston's Housing Crisis:A 21st Century Village ApproachPart IIBy Jim Daly

Two recent stories in the news show how the housing crisis affects the old and young. The first is about how cruel the effects of gentrification can be, the second about how landlord mismanagement continues to plague students seeking livable dormitories and off-campus housing.Story 1: A Princeton University study estimates that 43 tenants per day are evicted in Massachusetts. It's almost double what the rate was in 2005. Boston Globe Magazine profiled one tenant facing eviction. Jerome Stanley, 64, a Boston school bus driver, was evicted from his Roxbury apartment after living there for 27 years. New landlords were seeking to raise his rent by 70%. He couldn't afford it and became one of an estimated 20,000 people in the state who are homeless. "Close your eyes and imagine the joy you have with your work, look at your home and imagine the time you have with your children," he wrote the Globe, ". . . then tomorrow suddenly after 30 years it's gone." A link to the story detailing how he represented himself in housing court is below.The second story is about the calamities that befell students occupying the first-ever dorms at UMass Boston. The two new dorms, which opened in Fall 2018, have 1,077 beds. In the first weeks of school, elevators with students inside abruptly fell several floors. According to the Boston Globe, "water shot out of one toilet when you flushed another . . . the rooms are often stifling hot, but the showers are frigid . . . and the hamburgers in the dining hall are sometimes raw." A link to the story, in which the development company tries to explain what happened, is below.These two stories are linked because they illustrate the need for a coordinated approach to dramatically increase not just housing, but housing that fits the needs of the region's changing population.Suffolk County's population has increased by 9% since 2010. Boston's population of 675,000 is expected to increase to 725,000 by 2030. Mayor Marty Walsh has pledged to increase housing by 53,000 units during the interim. His initiatives have gained momentum, according to the Greater Boston Housing Report Card 2017 from Northeastern University.One sign of progress is that there were 12,900 permits issued for new structures in Greater Boston in 2017. Two-thirds of those were for multi-families. Also in Boston, the wait time for new building permits has decreased from 425 to 120 days.There are few other signs of progress. Home prices continue to soar. Rents, the fourth highest in the country, show some signs of the leveling off and decreased slightly (<3%) in 2017 after increasing 6.9% per year from 2009-2016. Inventory of both single family houses and apartments are at record lows.Barry Bluestone and James Huessy, the authors of the Greater Boston Housing Report Card 2017 study, are calling for a more coordinated approach. Their 21st Century Village concept calls for housing that fits the needs of Boston, which increasingly is becoming younger ~ students and Millennials ~ and an aging population ~ people like Jerome Stanley, many of whom live by themselves.Bluestone and Huessy think the units need to be built quickly but worry that cities and towns will fail to take a coordinated approach. I have seen little in the news that suggests that leaders, with the exception of Mayor Walsh, are endorsing the plan. The study's main points are that:

1. A consortium approach is needed from political and business leaders such as the governor, regional mayors, hospital CEOs, and local university presidents.
2. The authors propose villages comprised of multi-story buildings that range in height from five to 35 stories.
3. Each "village" could contain a range of units from "micro" apartments to studios and multi-bedroom units.
4. Each village would have a community space with lounges, laundry facilities, seminar rooms, study areas, gyms, and roof gardens.
5. Construction would incorporate modular design and panelized construction using new materials and high productivity building techniques.
6. Leaders should investigate the feasibility of opening a state-of-the-art manufacturing facility in Greater Boston, where modular units and panels could be fabricated.

Further reading suggestions:1) Greater Boston Housing Report Card 2017.2) “As rents soar in Boston, low income tenants try to stave off eviction," by Jenifer McKim and Alejandro Serrano. Globe Magazine, February 19, 2019. 3) “Falling elevators, raw hamburger, lax security at UMass Boston dorms," by Laura Krantz. Boston Globe, November 11, 2018.