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Cranes poised to rise in Boston: Universities, government, health care companies gearing up
Sunday, November 08, 2009 3:54 AM


(Source: Boston Herald)trackingBy Jay Fitzgerald, Boston Herald

Nov. 8--Experts think they can hear a faint pulse within the battered commercial real estate and construction industry here and elsewhere.

The sector is still clearly in dire trouble as construction sites sit empty, office-building values and rents fall, and foreclosure proceedings loom for some buildings, similar to what happened to Boston's Hancock Tower and Waltham's Bay Colony Center, two landmark structures that were recently dumped at bargain-basement prices due to heavy debt loads.

But institutions within three traditional stand-by sectors -- health care, higher education and government -- appear ready to test the markets for possible construction projects later next year, industry sources say.

Engineering and architecture plans are being pulled out of drawers and construction bids are being readied, as institutions eye tentative signs of economic recovery.

"We're not going to have a robust, quick recovery across the nation," said John Fish, chief executive of Boston-based Suffolk Construction. "We're going to see what's called "sector specific" projects possibly getting under way.

In previous recessions, health care, higher education and government projects were usually the saviors of the commercial construction industry, pushing ahead with projects while private-sector projects ground to halts.

But this hasn't been a typical recession, due to the historic chaos within capital markets and the drubbing institutions' endowments took during last year's Wall Street meltdown. Even normal stalwarts in the health-care, higher-ed and government sectors have pulled back from spending.

The most spectacular retreat has been Harvard University's halt, in the middle of construction, of its $1 billion-plus life-sciences center project in Allston earlier this year.

But now that tentative economic recovery seems to be occurring, things are starting to stir behind the scenes. Boston's Partners Health Care and the University of Massachusetts are among those readying construction plans, sources say, though spokesmen for the two institutions couldn't be reached for comment late last week.

"I do hear of clients starting up their master planning," said Jack . Hobbs, chief executive of RF Walsh Collaborative Partners, a Boston project management firm. Hobbs declined to name those clients, but he confirmed that some institutions are slowly gearing up.

David Begelfer, head of NAIOP-Massachusetts, a commercial-real estate association, said he's growing more optimistic by the day.

"There will be cranes on the horizon," he said of construction projects next year.

Begelfer even predicted that some long dormant projects, such as Downtown Crossing's Filenes block, might get restarted next year. He also expressed hope that work at Somerville's Assembly Square could get into full swing, thanks to government stimulus assistance.

Any type of recovery at this point would be welcome.

According to state data, the construction industry in Massachusetts lost 20,000 jobs in the last year alone, in the commercial and residential sectors combined.

The loss of millions of jobs nationwide with the unemployment rate jumping to 10.2 percent last month -- has hammered both real-estate sectors, experts say.

In commercial real estate, office lease prices have plunged 41 percent from ther peak in 2007, while home prices nationwide have fallen about 30 percent, according to Moody's/REAL Commercial Property Price Index.

As for the commercial sector, there won't be any construction recovery until prices stabilize, said Fish.

"Right now, people can buy buildings for less than what it would cost to construct new ones," said Fish.

-jfitz@bostonherald.com

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