Boston’s Real Estate Market – Too Hot for Startups?

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As far as commercial real estate markets go, Boston is among the best in the country. According to real estate research firm Reis Inc., the retail-vacancy rate fell 10 basis points in the past three months, and the city is now tied with Austin as the 12th best in the nation. What does this mean for start-ups who want a piece of the thriving Boston business world?

There’s no denying that Boston is a great place to start a business, but the rewards do not come without risk. There is clearly more competition for space and higher rents seem to be the norm in all sectors. Reis reported that Boston was one of only 11 markets in the country where rents increased at least 2.5 percent – far above the national average. Only small businesses with sufficient capital to get up and running will have a chance downtown, and even then there are risks.

Boston will still continue to be a bustling hub you can depend on, but there may be some bumps in the road along the way. Don’t jump in if you’re not committed for the long haul.

Massachusetts Tax Holiday – Setting Up for Boom or Bust?

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A two day tax holiday is being promoted in Massachusetts in an attempt to increase sales and drive the economy. It is the belief of many, both in government and in the business community, that this small break in taxes will increase sales and be beneficial to the economy. However, not all business owners are sure if they are in favor of this type of tax holiday. Many believe that this will encourage consumers to delay purchases and will skew inventory tracking.

Benefits Of A Tax Holiday

The main benefit of this type of tax holiday is the psychological impact it will have on consumers. Consumers feel they are being given a break by not having to pay taxes and will increase their purchases on those days. Some proponents here in Massachusetts point to Florida businesses having been so successful that the state has increased their back-to-school tax holiday to 10 days and now have a tax holiday for hurricane supplies at the end of May each year. Businesses have been able to easily adjust their inventory levels and have benefited from the increased sales.

Drawbacks Of A Tax Holiday

In some cases, consumers delay making larger purchases until there is a tax holiday. This delay can disrupt regular inventory and alter sales cycles. Many businesses can counteract this issue by either running promotions prior to the holiday to make purchases more enticing, or run large promotions coinciding with the tax holidays to boost sales. And, of course, any reduction in tax revenues – however temporary – can cause problems with the budget further on down the road.
Overall, the changes that take place in inventory and sales figures during the implementation of a tax holiday can quickly be overcome during future tax holidays. Businesses are encouraged to take advantage of the data they generate during this type of event and plan for the future.

Are Non-Compete Clauses Fair?

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An increasing number of employment contracts are including a non-compete clause, and that has sparked a legitimate debate. Most non-compete clauses say that a person cannot work for a company in a similar industry for one to two years after leaving their employment.

Is that fair? Let’s look at both sides of the argument.

A Non-Compete Clause Preserves A Company’s Investment
When a company hires a new employee, it’s also investing money in training that employee and providing that employee with the expertise they need to do their job. The resulting intellectual property becomes critical in helping the company to compete in its industry. In this way, a non-compete clause makes sense because it helps to protect the company’s investment.

Non-Compete Clauses Can Cause Employment Issues
In a society where people are supposed to be free to work wherever they want, non-compete clauses restrict employment options and can make life unnecessarily difficult for workers. It is often unrealistic for a company to expect a departing employee to find gainful employment in a brand new industry so, in this way, non-compete clauses are unfair and restrict a person’s ability to make a living.

The Company Owns The Property And Not The Employee
Trademark and patent laws are created to allow companies to protect their intellectual property. In some ways, it could be argued that companies are using non-compete clauses as inexpensive patents or trademarks. The company owns the property, but not the employee that created that property. If the issue is the intellectual property, then there are ways to protect that property without restricting an employee’s ability to work.

More Unrealistic Than Unfair
So, are non-compete clauses unfair? The real answer is that non-compete clauses are more unrealistic than unfair. A company that takes the necessary steps to protect its intellectual property should not fear employee turnover. It is simply unrealistic to allow a company to dictate the employment options of an employee a year or more after that employee has left the company.

Whether you call non-compete clauses unfair or unrealistic, the truth is that they should be unnecessary to a properly-run company.

Should Cape Wind Receive $150 million Federal Loan Guarantee?

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The U.S. Department of Energy has announced that it will grant a $150 million loan to advance the Cape Wind energy project in Massachusetts, provided backers can secure an additional $2.6 billion in financing. If successfully built, Cape Wind will consist of 130 wind turbines capable of producing 360 megawatts of electrical power.

The project has been controversial since its inception. Cape Wind has been praised by supporters as having the potential to transform Eastern Massachusetts into a national hub for wind power production. Backers say that Cape Wind is a model for wind projects being considered in other parts of the country. Wind power is often cited as a key component of “clean energy” alternatives to fossil fuels, and is praised for producing very little pollution while being endlessly renewable. Greater use of wind power would reduce reliance on fossil fuels, while construction of the wind turbines is estimated to create about 400 jobs. An additional 50 permanent operational jobs will be created once construction is completed.

Not everyone is impressed. Critics point out that the number of jobs divided by the money spent means that each job will be created at a cost of over $300,000 apiece. Some suggest that is too much money for too few jobs. Critics also point out that even with government subsidies, wind energy is more expensive to produce than more traditional energy sources. Fisherman have complained that the wind turbines will upset their fishing opportunities by restricting access to areas that are now available for fishing. Meanwhile, free market conservatives argue that the project represents a potentially disruptive intrusion into the energy market that will have unintended consequences.

Despite the offer of the Energy Department money, it remains to be seen whether the rest of the $2.6 billion in financing will come together in order to trigger the $150 million loan, although European investors recently came forward with an offer of $600 million. However, political, regulatory, financial and environmental hurdles remain, leaving it still uncertain whether supporters or critics of the project will ultimately prevail.

 

Should Partners HealthCare System be Allowed to Acquire More Boston-area Hospitals?

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A three week comment period has been ordered by a Suffolk Superior Court Judge before a final ruling permitting or denying a settlement between Massachusetts Attorney General Martha Coakley and the giant Partners Healthcare System. The proposed deal allows Partners Healthcare to expand in size by acquiring three hospitals while hiring more employees in exchange for stricter controls on their pricing policies and increased regulatory oversight.

Supporters of the deal argue that Partners Healthcare is likely to grow in size over time no matter what is done, therefore, the deal between the Attorney General and Partners Healthcare represents a chance for the government to have a role in monitoring and controlling their growth. Because of its size, Partners Healthcare has an outsized influence on prices and policies throughout the Massachusetts healthcare system. Coakley has argued that her agreement to allow some further growth, but only in exchange for greater regulation, represents a sensible balance between the rights of Partners Healthcare and the interests of healthcare consumers.

Critics are calling the settlement a sweetheart deal. They say that the restrictions on Partners Healthcare are vague and mostly to be determined at a future date. They point out that Partners Healthcare will be allowed to increase their revenues ten-fold under the settlement, which critics say is too much for a company that is already four times bigger than their next largest competitor. They fear that the resulting overwhelming market dominance by Partners Healthcare will actually serve to increase prices rather than restrain them.

Much controversy centers around the settlement’s placement of a cap on price increases based on the rate of inflation. Coakley believes this will place a significant break on future price increases, resulting in savings for consumers and taxpayers. Critics reply that economic indicators suggest that the rate of inflation will increase in coming years at rates that would make the caps meaningless.

Both sides are certain to use the three week comment period ordered by the judge to aggressively present their arguments. The question remains whether the court will then approve the settlement, or order it renegotiated.

 

Did the $525,000,000 Massachusetts Poured Into Biotech Generate 571 or 17,994 Jobs?

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Yes? No? Maybe? The state of Massachusetts has spent $525 million encouraging the development of the state’s biotech industry, just over half of the $1 billion budgeted for this purpose. This public investment is being applied to grants, tax breaks and business loans for companies planning on moving to Massachusetts or expanding their operations in the state, and is intended to encourage a healthier state economy. But, just how many jobs are really being created by this taxpayer investment?

One academic study by Pioneer Institute claims that Massachusetts’ $525 million directly created only 571 new jobs in life science industries. This figure applies to a period starting in 2009 and ending in 2013. In contrast, consider a study from Northeastern University that claims that between 2006 and 2012, life sciences and related industries added 17,944 jobs in the state. While Northeastern’s period of study doesn’t exactly match Pioneer Institute’s, the astounding variance of the results illustrate that questions remain about public investment Massachusetts biotech industry.

Questions need to be answered. Should the government of Massachusetts take tax dollars collected from businesses and individuals and give them to other businesses? Should government be picking industry winners and consequently with businesses that pay taxes but don’t receive tax breaks and cash investment by government losers? If government should take money from some businesses and give it to other businesses, should the alleged investment be made from politicians who are being lobbied by special interests or independent professionals?

Creating new jobs isn’t the only way public incentives can aid select businesses and potentially the economy of Massachusetts. Specifically for a more complete picture of how biotech incentives are working, other questions should be answered. For example, one could ask how much private capital biotech firms have attracted and what kinds of returns backers have seen on their investments.

It is also useful to ask how much extra tax revenues the state may see from capital gains. Until questions like these are answered, it will remain impossible to know just how much Massachusetts has received for its $525 million biotech investment.

Is Refugee Resettlement Good for Mass. Businesses?

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There has been a lot of controversy lately about the effectiveness of refugee resettlement programs that the federal government employs to settle refugees in the United States. Earlier this month, Dominic Sarno, mayor of the Massachusetts city of Springfield, wrote to prominent Massachusetts politicians urging a moratorium on resettlements in Springfield, claiming that the refugees have overwhelmed the ability of social services to meet their needs. Other New England mayors in Maine and Rhode Island have expressed similar complaints.

But what effect do these immigrants have on Massachusetts’ businesses? From this narrower perspective, the issue becomes more complex. Here are some of the ways that refugees can have an impact on the businesses in the communities in which they relocate:

Customer Base

Obviously, any increase in the population of a community increases the size of the customer base that businesses have to draw on. When refugees first arrive in a community, the relocation agencies and social welfare programs provide them with money. Coming almost always from a poverty-stricken background, these refugees have to buy many basic goods and services. Therefore, at least initially, the refugees cause a surge in economic activity for the businesses in the communities in which they relocate.

 

Crime

The financial aid that refugees receive lasts only so long. According to the government, about 75% of refugees become self supporting within a year of arriving in the United States. Unfortunately, the remaining refugees sometimes fall back into poverty and become problems to law enforcement. The resulting crime can be directed against the business community.

 

Employment

Those refugees who get jobs are usually good workers, often more eager to please and willing to do difficult or unpleasant tasks than native workers. Therefore, refugees often become hard-working members of the local labor pool and are valuable employees to many businesses.

Although some refugees can be a problem to the business community when they fail to adjust well to resettlement, the overwhelming majority of refugees make good customers and employees for Massachusetts’ businesses. The key appears to be how successfully the refugees are integrated into the community at large.

 

Should the New Pro Soccer Stadium be in Boston?

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The New England Revolution is on the search for a new stadium to call home, and Boston might just be it. While some soccer fans are eager to see this stadium come to town, especially as the sport becomes increasingly popular in American society, others are saying that the city already has enough traffic and congestion.

Building the stadium in Boston can help to drive the economy. With the presence of a stadium, jobs will emerge for concession vendors, seat escorts, marketers and the like. For those who are experiencing the side effects of a downtrodden economy, the soccer stadium could be a true boon. Additionally, the stadium can help to drive more tourism and travel to the city. People who are looking for family-friendly activities in an outdoor setting can purchase tickets to the soccer game. This stadium will give travelers and residents a choice amongst more sports to watch.

On the other hand, Boston is a city with a lot of traffic and congestion. Adding a new soccer stadium will likely increase the influx of individuals to the area. Furthermore, it will cost money to build the stadium, and some residents feel that these funds could be better allocated. Other cities and areas are also hoping that the stadium will be built within their limits. Soccer stadiums have the ability to revitalize areas that are hurting or that have problems with crime. While Boston has some areas that could use a bit of uplifting, other cities in the New England region are in-need of more help.

Whether or not the new professional soccer stadium should be built in Boston is going to depend upon many factors, and quite a few of them relate to financial or economic means. Only time will tell if the New England Revolution will soon grace the streets of Boston.

 

Mass Raises Minimum Wage to Highest in U.S.

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In the aftermath of the Obama administration’s failure to garner sufficient support for a federal minimum wage increase, some states are taking action on their own – including Massachusetts. State Governor Patrick has signed a measure that would raise the state’s minimum wage to eleven USD hourly by year 2017.

Although this will place Massachusetts at the top of the list of high minimum wage states, other Democrat-predominant states also are following suit. Democrats point to stagnating wages, persistent poverty among employees working a majority of the weeks of the year and an increased concentration of wealth in top percentiles as ample justification for mandated pay increases. Maryland, Hawaii and other blue states also are shifting towards a $10.10 minimum wage rate that’s identical to the one Barack Obama originally proposed for federal workers. Since these wage increases won’t trigger for several years, in theory, businesses are given ample time to adjust.

However, Republican objections to generalized minimum wage increases have been consistent. A minority of Republicans have expressed support for minimum wage increases of smaller quantities, but the majority remain steadfastly in opposition, claiming that businesses will be hurt by being forced to pay under-skilled workers non-competitive wages. Their party’s opposition was instrumental in blocking the president’s proposed federal minimum wage increase in 2013.

By way of contrast to their Democrat counterparts, Republican states tend towards low minimum wages that are intended to maintain a business-friendly environment that maximizes theoretical job growth. Of these states, Arkansas, Georgia and Wyoming maintain the lowest minimum wages ($6.25 for Arkansas, $5.15 for the latter two states). Minnesota also maintains an unusually low minimum wage for a predominantly blue state, with rates alternating between $5.25 or $6.15, dependent on the size of the employer.

Out of the fifty states of the US, thirty-eight have considered some form of minimum wage increase this year. Eight of them – all of them blue – have actually enacted the proposed bills, along with Washington DC.

Northborough-based Aspen Aerogels (ASPN) Closes Above IPO Price

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Aspen Aerogels, a Northborough-based company specializing in aerogel insulation, has had their stock price rebound. With products used throughout the energy sector for everything from heat buffering to cryogenic insulation, Aspen Aerogels put out an initial public offering (IPO) on June 13th, 2014. Their initial opening price was $11.00 on 6.67 million shares released to the public. Their IPO, managed by Barclays, J.P. Morgan Chase and Citigroup, opened the trading day at $11.00 and dipped lower, in part because of the Friday announcement day, and in part due to an offering near the end of a calendar quarter, when profit taking tends to sit in the minds of investors.

After an initial dip to $10.53 per share, and trading bounded between $10.25 and $10.60 per share for the last week, Aspen Aerogels’ stock is on the rise – closing 7% above their IPO price at the beginning of this week, with trading volume roughly doubling over the previous week.

Aerogels, commonly called “solid smoke,” made up of silica structures riddled with nanopores, maintaining 97% of their volume as trapped air. This makes aerogels a near-ideal insulation material. Aspen’s proprietary technologies include processes that reduce manufacturing costs and increase the durability of the materials. Aspen’s development strategy has targeted energy sector companies, who have immediate, and extreme, needs for insulation, and ones where weight and efficiency are paramount.

Typical investment strategy with Aspen Aerogels is a buy-and-hold. As an industrial-facing supplier, they do not currently have a direct-to-consumer product. Increasing demand from the energy sector has caused them to double production at their East Providence, R.I. facility, and this IPO is targeted at further expanding their production capacity, with some funding aimed at maintaining R&D partnerships with companies like BASF Construction Chemicals, to create aerogel-based insulation for commercial construction, including products that can be retrofitted into existing structures.