Out-Migration Threatens MA Workforce, Economic Growth

Massachusetts Grapples With ‘Deeply Concerning’ Trend Of More Residents Moving Away

Massachusetts faces a concerning trend of increasing resident out-migration, intensified by high housing costs and competitive pressures from other states.

Mass exodus: Massachusetts ranked 2nd to last (#49) for growth last year, with a United Van Lines report highlighting it among the seven states with the highest net out-migration. Outbound moves accounted for 56% of all relocations nationwide in 2023, painting a concerning picture of the state’s population stability.

Workforce impact: Concerns over the out-migration’s effect on the workforce are rising, especially among professional and tech sectors. In 2020, nearly 38K 26-to-35-year-olds left MA, contributing to a total loss of 100K residents between 2020–2022. This threatens demand for new development and could lead to workforce aging and shrinkage.

Economic slowdown: The state’s economy grew at a slower pace compared to the national average in 4Q23, recording just a 1.2% increase. Factors such as a constrained labor market, housing supply issues, and high interest rates are cited as reasons for the deceleration, reflecting the broader challenges facing the state.

➥ THE TAKEAWAY

Retention strategies: To address the out-migration challenge and enhance competitiveness, Governor Maura Healey proposed initiatives like the $4B Affordable Homes Act and implemented the MBTA Communities Act. These efforts aim to stimulate housing development and retain talent, crucial for sustaining MA’ economic growth amidst increasing migration pressures.

Urban Investing Challenges Create Upside

In this weekend edition of CRE Daily, we welcome back guest contributor Brian Milovich, Co-Founder and Managing Principal of Calvera Partners, to discuss how urban real estate investment is transforming.

The landscape: Urban investing has always been challenging. Usually, it involves investing in an up-and-coming city pocket. Developers work in tandem to create new neighborhoods—restaurants, bars, and retail shops open as new amenities. Adventurous people move into apartments and condos to give the neighborhood a soul. Everything feeds off of one another to generate a palpable energy. This is what makes urban areas great.

The challenge: But when any one piece of an urban neighborhood starts to crumble, the energy changes. Anyone who has lived in an urban setting has put up with some level of discomfort. In San Francisco, widespread homelessness, visible drug use, car break-ins, and unclean public transit was (still is) the norm. A baseline level of this activity was simply part of the experience. Unfortunately, a pandemic-induced spike in this activity hasn’t dissipated and drives people away.

The role of government: How a city government functions is one way to assess downtowns. This is particularly true for investment. Is the city government more interested in re-naming schools than improving public safety? Is rent control a hot topic around City Hall rather than solutions for more apartment supply? Is a landlord persona non grata or can she operate under common sense policies? City and state government policies do impact a property’s bottom line.

What about supply? Urban areas often experience concentrated new development, leading to rental market volatility. While new investments can enhance neighborhood appeal, an oversupply can depress rents and increase concessions, making timing a crucial element in urban real estate investment.

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Shifting focus: Calvera’s urban investment background is key to our approach, but the challenges of managing urban properties, like complex regulations and crime, are wearing. Despite potential high returns in certain markets, the risks often outweigh the benefits. We’re shifting focus to suburban locations with urban features, a niche market where we already have a presence and see great potential. For now, I’m avoiding riskier urban investments in specific MSAs, questioning whether the effort is worth the reward.

For the complete article, please visit Calvera’s website using this link.

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