2006 Recap
The year the housing bubble deflated
To pretty much no one’s surprise, the region’s inflated housing market came back to earth this year after years of record price appreciation, tight inventory, and homebuyer bidding wars. Although real estate and economic experts began the year predicting a mild correction, (see Jan. 9, 2006 issue.), they ended 2006 wondering whether the cooled market had bottomed out.
As the correction set in, real estate agents and construction industry experts stressed that while swelling inventory and slower sales felt bad, the market was actually normalizing. In early January, price increases slowed to single digits, and the state’s housing inventory increased to the equivalent of a 7.6-month supply; well above the sellers’-market level of 5.7 months, but within the 7.5- to 8.5-month range considered a "balanced" market for buyers and sellers. In the second quarter, Mass. Association of Realtors reported that the median home price had stayed level with a year ago and sales had dropped 8.9 percent.
Then in July, single-family home sales dropped a record 26.9 percent. Some blamed a wet spring, but by September it became clear the housing market slowdown was here to stay. Analysts and industry experts agreed that the state would likely have a soft landing, although some economists predicted a stable market is four to five years away.
As the year closes, expert views differ on whether the market has hit bottom. MAR reported in late November that the market had stabilized in October with a 2 percent median price decline from the previous year – despite a 16.5 percent drop in single-family home sales. Supply had dropped to the 12-month level. The Warren Group painted a more dire picture, however, reporting a 6.9 percent median price decline for the same period.
– Micky Baca
Bristol-Myers Squibb Co. chooses Devens
Pharma giant Bristol-Myers Squibb Co. chose Masssachusetts as the site for a $660 million, 750,000 square foot manufacturing facility that’s expected to grow into a $1.1 billion investment for the company at Devens. The firm’s decision to locate in Massachusetts was seen as a major victory for the region’s economic development task force, which teamed up with the business and academic communities to present a unified sales pitch to BMS.
The company will utilize $33 million in up-front tax credits and the project will receive a $34 million bond for infrastructure needs such as water, sewer and power needs. The town of Harvard, in which the factory site is located, agreed to waive its height limit to accommodate the 100-foot towers the facility will include. BMS will manufacture its rheumatoid arthritis drug Orencia at the 80-acre site, initially employing 350 people with expansion to a staff of 550, and possibly more in future expansions. It’s expected to open in 2009, with commercial production beginning in 2011.
Shortly after the deal was announced on June 1, the Massachusetts Office of Business Development began receiving other inquiries from pharma companies that previously had avoided Massachusetts.
Meanwhile, Devens itself went back to the drawing board when a vote to grant it independent municipality status, making it the state’s 352nd town, was defeated. The towns of Shirley and Ayer voted yes, while Harvard voted no. Devens would have retained 3,000 acres but would have given back parcels of the former army base to the three towns. But some of the towns expressed concern about the cost of upkeep on the land they’d get back. The proposal to make Devens an independent town is now on hold.
– Christina P. O’Neill
CitySquare ramps up
for ‘07 launch
The redevelopment effort at CitySquare in downtown Worcester gained ground in the second half of 2006, despite falling short of plans to start demolition of the former Worcester Common Outlets mall this year.
The $563 million private-public partnership between the City and Boston-based Berkeley Investments won a $1.75 million grant from the Commerce Department in May for help with the renovation efforts. Berkeley and the city reached a formal agreement in June, and signed a development agreement in October, which effectively green-lighted a process that began in April of 2004.
Berkeley can now demolish the former Worcester Common Outlets, which sits on over 20 acres of soon-to-be-developed retail and commercial space.
Berkeley also signed a contract with Portland, OR-based Hollywood Theaters, the country’s seventh-largest theater chain, in November, to create a 12-screen, 2,000-seat complex on the second floor of an entertainment building included in the master plan for CitySquare.
Other downtown projects underway this year included the Hilton Garden Inn next to the DCU Center and the new courthouse. Construction on the city’s newest hotel wrapped up in the fall. The $180 million Worcester Regional Justice Center should be finished early next year.
The city is also determining which CitySquare development expenses can be paid through District Improvement Financing bonds, which would defray demolition and road-building costs, as well as construction of an underground parking garage with 1,025 spaces.
One of the roadways slated for development is the newly-renamed Major Taylor Boulevard. A redesign of that road includes several new connector streets and intersections, all helping to draw traffic in to the revitalized downtown. In addition to the $1.75 million federal grant, the city will contribute the remaining half of the $3.5 million price tag for the roadwork. City and state funding of CitySquare totals $89 million through grants and bonds. The project is expected to wrap up in 2009, creating 2.2 million square-feet of entertainment, retail, office, and residential space. It will create 3,100 full-time jobs when complete.
– Jeffrey T. Lavery
A merger, and concerns at Boston Scientific
Boston Scientific made headlines in April after its $27 billion deal to acquire Indianapolis-based Guidant Corp., beating out rival Johnson & Johnson to become the world’s largest maker of medical devices for the heart.
The deal gave Natick-based BSX a leading edge in two markets: Implantable defibrillators, Guidant’s core product, which regulate a patient’s heartbeat, and drug-eluting stents, which prop open coronary arteries to allow blood to flow through.
But with the merger came concerns over the safety of those products. In October federal regulators reported that drug-eluting stents carry a slightly higher risk of blood clots than bare metal stents, clouding the $2 billion market for the products.
Stents have been a major driver for the 27-year-old Boston Scientific, the largest life sciences company in New England with 1,550 employees in Central Mass. and 28,000 worldwide. Sales of its TAXUS stent system slowed last year when concerns about the devices first surfaced. BSX hopes to gain regulatory approval for a new line of drug-eluting stents, called Liberte, in 2007 or 2008.
Questions also arose over the safety of Guidant-made defibrillators, after it was revealed that seven patients died when their defibrillators malfunctioned.
Quality control problems also dogged BSX, after a letter from the FDA in January raised concerns about manufacturing process at six of its sites. The company faces reinspection next year.
– Kenneth J. St. Onge
Mass. health care reform
The state passed a landmark Health Reform Act in April with the goal of providing health care coverage to 95 percent of the roughly 500,000 uninsured in the Bay State (see page 16). The first phase of the plan went into effect in October, with a $295 per worker fine assessed to companies with 11 or more employees that do not offer coverage – about 280,000 Massachusetts workers.
Insurers say affordable products for low- and moderate-income customers will require high deductibles and copayments in exchange for lower premiums. The new law subsidizes premiums for workers earning less than $29,400, or three times the federal poverty level.
Of particular concern to the business community is the combination of small-group insurance and individual insurance policies. Insurers will begin bidding on that combined market on January 1, and have those products ready by July 1. Some benefits experts fear the combination of those two products could drive up the cost of small-group coverage by as much as 8 percent. Insurers say they will design their products to minimize any increase, but there are no guarantees that they could provide the prescribed $300 per month plan to an individual earning $30,000 a year.
Whether the $295 per person penalty - far less than the cost of offering group insurance - will be enough to motivate employers to participate remains unknown.
Nonetheless, the nation is now looking to Massachusetts as a potential model for a national health insurance program. "Everybody has their idea of what perfect reform could be, but we can’t let perfect be the enemy of good," said Massachusetts Hospital Association spokesman Paul Wingle in November.
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