David O'Sullivan, O'Sullivan Architects

We are in the middle of summer and things sure are hot, at least with the weather! The real estate market still remains hot in Boston. The mortgage foreclosure rate this spring was 1% the lowest since 10/07 so it is a non-issue these days. The 11,000 net new jobs created in May was dismal but June with 287,000 new jobs was spectacular. The short term rates have remained low which is keeping mortgage  and commercial loan rates low. Borrowing has not become as expensive as feared back in January and while the Brexit has created turmoil and confusion worldwide, it has also made the U.S. economy the undisputed largest economy. The EU had a larger collective GDP prior to Brexit at $18.5 trillion but drops to $15.5 trillion while the US is pegged at $17.4 trillion. As the world adjusts to the shock of Brexit, the markets seem to be taking it in stride.

So what does all this mean looking forward to the second half of 2016? There is good momentum in the market as investors look for strong markets to buy properties with good returns. Boston seems to meet their criteria and continues to attract investors from the U.S. and overseas. If you own commercial property in Boston you are undoubtedly fairly happy now. Rents for office space continue to be strong and the diversified economy of biotech, high tech, medical and financial services makes great options when looking for tenants.

As for the residential market, there is some softening in the high end rental market as more units come on line. The Commerce Department released June housing starts with a 4.8% increase. June was the highest month since February. The national increase was fueled by a surge of building in the West and Northeast.  There is a transition in residential building type as demand for the condominium market increase due to confidence grows in the economy. Boomers are also able to sell their existing homes for top dollar without much effort which is increasing demand in the city as well as surrounding small town centers ringing Boston.

In our practice, which tends toward urban style mixed use residential, small commercial fitouts and smaller multifamily for both rental and for sale, we are seeing growth in all segments.  The small commercial clients usually involves branch banks, automotive use, rehabs or small service businesses and we are seeing people expand or start new small businesses. Many seem to have a health slant such as smoothies stores, exercise salons or medical uses.

The urban infill seems to be most popular project at the moment, with either all residential or a mix of ground floor commercial with residential above. Traditionally we have been designing these projects in neighborhoods of Boston, Cambridge, Somerville and Brookline.  What is occurring now, this current  market, developers are looking beyond the core and searching for properties in upscale close in suburbs for properties that often mix renovation with new construction in a revitalized downtown with access to transit. Not all Boomers and Millennials want to live in Boston or Somerville. Many find they want to stay in the community they have lived in for years and are familiar with but want a change of lifestyle. The small downtown business districts have become reinvigorated with new restaurants and small businesses and the local town governments want people on their Main St. to patronize these businesses. So there has become a movement to provide infill housing where residents can grab food, go to the health club, stop at small specialty stores and hopefully grab transit to their work in Boston. I think this trend will continue as the true urban lifestyle comes with high rents or expensive condominiums while suburbs can offer a taste of that and good transit connection to downtown at a much more affordable price.

So I look forward to the rest of 2016 and think it is a great time to be in our industry.

David O’Sullivan, AIA, is the president of O’Sullivan Architects, Inc., Reading, Mass.