Business 2018: Valley’s economy is riding high, experts more optimistic than they’ve been in years

Bullish. Robust. Growing.

Those words aren’t bandied around lightly by experts who track the Pioneer Valley’s economy year after year, but economic development directors, real estate agents, developers and job placement bosses uniformly agree that the economy in western Massachusetts is in its best shape since before the Great Recession that began at the end of 2007.  

“The overall economy here in the Pioneer Valley is strong and has shaken off all the negatives that came with the Great Recession,” said Timothy Brennan, executive director of the Pioneer Valley Planning Commission.

Rick Sullivan, president of the Economic Development Council of Western Massachusetts, agrees that the outlook is strong, and likely as good, if not better, than a survey done in 2016 that showed $5.2 billion in public and private investments in economic development projects in the region.

“You can see economic development happening in literally every part of the region,” Sullivan said.

Sullivan said he is receiving inquiries from as many as 40 companies looking to bring back manufacturing from “off shore” to an area with a built-in employee base of college graduates.

“Our colleges and universities are an extremely important calling card for us here,” Sullivan said. “Businesses want to be located near where research is being done and where advancements are being made. I think we’re well placed for that.”

“There is nothing on the horizon that would suggest that there are any problems ahead,” said Robert Nakosteen, a professor at the Isenberg School of Management at the University of Massachusetts, and executive editor of the MassBenchmarks, a biannual journal that tracks the performance of the Massachusetts economy and examines its prospects.

It’s not all roses for the local economy, however. Nakosteen notes that the economic expansion that began under President Barack Obama is now in its ninth year. That’s old, and means the potential for an accumulation of problems, Nakosteen said, explaining that “all expansions at some point come to an end.”

“This expansion is long in the tooth, and the longer an expansion exists, the more build up of risks,” Nakosteen said.

Downtowns, though, continue to survive and even thrive, even as the traditional “bricks and mortar” retail businesses continue to face battles from internet sales, high rent and demographic trends, Nakosteen said.

“They live in a really different world right now,” he said.

Officials in Northampton are excited about several developments in their downtown, even though several storefronts remain vacant throughout its bustling business district. The remake of Pleasant Street is humming along with construction of two mixed-use developments — Live 155 in the former Northampton Lodging spot and Lumber Yard Apartments – under way. With a combined 125 housing units, the developments will bring more residents downtown and are illustrations of how well the local economy is faring, according to a local realtor.

“People are starting to take notice,” said Patrick Goggins, president of Goggins Real Estate, adding that he is bullish because of the renewed comfort investors have in the commercial market. “My optimism for greater downtown is as high as it’s been in quite some time.”

Goggins is not only working with downtown’s largest property owner, Eric Suher, to fill 15 empty sites, but he’s also getting tenants into the street level commercial spaces in the Live 155 Way Finders project.

That five-story, 65,000-square-foot building will house 70 studio and one-bedroom apartments, as well as the 3,500 square feet of rental space, opens this spring.

The nearby Lumber Yard, overseen by Valley CDC, will have 55 affordable apartments

In Amherst, there are few downtown vacancies, says Sarah la Cour, executive director of the Amherst Business Improvement District.

“In general, business is very good,” la Cour said. “I think things are going well and in the right direction.”

Like its neighbor to the west, Amherst is seeing more “feet on the street” with people living and working in the center, economic payoffs that are coming through the completed Kendrick Place and the under construction One East Pleasant.

Kendrick brought 36 housing units to downtown, with a Mass Mutual center for data science on its street level, while One East Pleasant will add 143 residents, in 135 apartments, and commercial or office space on the first floor.

“For this downtown, getting people living here is really, really important,” la Cour said.

La Cour said what she notices in Amherst is a shift in the type of products being sold. “It’s a more experiential retail, things you can’t get online,” la Cour said. The BID, she said, is part of this “place-making” experience.

Brennan said disruptions caused by e-commerce are noticeable in continued closing of stores, especially at shopping malls. This includes Hampshire Mall, where anchors like JC Penney, Target and Dick’s Sporting Goods remain, but with other space once filled by smaller retailers now occupied by entertainment and lifestyle venues.

Goggins said he sees Thornes Marketplace in Northampton as an entity that has adapted well to the changing times.

“I think a lot of our downtown merchants deserve a lot of credit for having done a good job of dealing with that. We are fortunate to have sustained activity and options downtown that continue to bring people,” Goggins said.

He credits the Greater Northampton Chamber of Commerce, the Downtown Northampton Association and police for ensuring shoppers and diners feel welcome.

Jerry Guidera, interim executive director of the Amherst Area Chamber of Commerce, said the “live, work and play” philosophy is being embraced.

“Everybody is struggling to figure out how to adapt to the model that the retail base is changed,” Guidera said.

While the Valley’s longtime bedrock industries – higher education, health care and government – continue to drive the economy here, two new industries set to launch this year will have a huge impact on the economy, experts said. In July, recreational marijuana sales are expected to begin statewide. And in the fall, the MGM Springfield will open its $800 million enterprise that will include a flagship casino, hotel and numerous entertainment and retail shops.   

Nakosteen said the MGM arrival is uniformly positive, and has already provided benefits to the region in the construction work and future jobs. The casino has also pledged to purchase goods and services totaling $50 million from local supply chains.

“Anything like this that can promote economic growth and jobs is a good thing,” Nakosteen said.

Brennan said MGM will have 3,000 permanent jobs and the company is aggressively trying to meet a goal of 35 percent of this workforce made up of Springfield residents.

One worry, Brennan said, is if these workers depart from other jobs, leaving other vacancies that will have to be filled.

Sullivan said MGM will help with travel and tourism, whether it be to the Dr. Seuss and Basketball Hall of Fame museums in Springfield, to Yankee Candle in South Deerfield to the Eric Carle Museum in Amherst.

“The ability to grow that tourism industry is significant,” Sullivan said.

Recreational marijuana should be a boon, Nakosteen said, pointing to the experience in Colorado, where the industry accounts for $1 billion in annual sales.

Still, U.S. Attorney General Jeff Sessions lifting an Obama-era order to not prioritize enforcement of marijuana could create problems.

“The attorney general’s comments have put a damper on expectations, but I would expect the situation to evolve because so many states have made it legal,” Nakosteen said.

Geoff Kravitz, economic development director for Amherst, said the town is ready to welcome a limited number of marijuana shops. He said the impact won’t be known until they open, but having agreements means revenue will be generated.

One potential risk to the economy is the change in the federal tax code, though Nakosteen said that it would be more acutely felt in areas near Boston, where there are more high-income individuals and corporations.

The MassBenchmarks Editorial Board in January wrote that the tax bill would lead to winners and losers: “Lower marginal tax rates, a higher cap on the alternative minimum tax for individuals and families, a doubling of the standard deduction, and a significantly lower federal tax rate on corporate profits will all benefit Massachusetts residents.”

The board added, “However, a cap on the deduction of state and local taxes, and the reduction of the allowable interest rate deduction for new mortgages will have a negative impact, especially on the Commonwealth’s higher income households. The net effect on the state is not easy to determine at this point, but it does not appear to be large in magnitude based on what we know today.”

Brennan said the long-term implications could cause certain municipal tax bonds to be less attractive and higher interest rates with more debt.

In the short term, though, Sullivan said the bigger risk is the unknowns with policy decisions by President Donald Trump.

An older and slow-growing population in Massachusetts is another challenge, with retirements creating openings, but uncertainty about how quickly these can be filled.

This is illustrated at the Franklin-Hampshire Career Center, where nearly one third of those served are over the age of 55, according to statistics provided by Executive Director Teri Anderson.

This proportion of older workers indicates that there may be layoffs in which workers don’t have the skills, but also aren’t ready to retire. “Our goal here is to work with employers so we know what the retirements will be,” Anderson said.

There are also current employees who need better skills, especially with computers and technology. “We’re seeing demand out there in terms of needing skilled workers,” Anderson said.

With an aging and retiring population comes increased demand for health care and social service direct care workers. The top three industry sectors with in-demand occupations, Anderson said, are health care and social assistance, such as personal care attendants and certified nursing assistants, education, including teachers and paraprofessionals, and manufacturing, such as production workers and machinists.

The labor force is projected to grow at a slightly slower rate than the state’s population, a rate of just below 0.5 percent a year, according to Benchmarks. While in the past some of these jobs could be filled through immigration, changes in federal policy are having a negative impact on this outlet.

“Our biggest challenges have to do with the workforce issues,” Brennan said. “There’s a shortage of workers to fill positions across the region that are increasingly being vacated by retirements.”

Gov. Charlie Baker has asked regional appointed planning commissions to come up with a blueprint for how to move forward, appreciating that workers will be needed.

The high price of housing stock also has an impact on getting workers to the region, though Brennan and Nakosteen both argue that the issue is less pronounced in western Massachusetts than in Boston and its metro region.

“We have a need, but relative to the Boston area our needs are more modest,” Brennan said.

Goggins said Northampton still suffers from a lack of inventory, but at the same time more first-time, or entry, buyers are able to get into the marketplace. “They’ve been able to make a dent in their credit card and school debt,” Goggins said.

Guidera said the deficit of low-income and workforce housing does add challenges. Another complication remains the natural gas moratorium which makes developments more costly.

Transportation connections through both rail and bike play a key role in giving people, especially young workers, options to live both closer and farther away from their jobs.

The ValleyBike Share launches this year in Northampton, Amherst and South Hadley, along with Holyoke and Springfield.

“That will be a nice asset to the region, making those communities more attractive to young workers and to tourists,” Brennan said.

But it is rail that Brennan said he continues to see as the “game changer.”

The Knowledge Corridor is providing daily commuter trains from Greenfield to Northampton and Holyoke and Springfield.

Brennan said that a north-south connection to Hartford will become active in May, allowing more trains to run to Union Station in Springfield. This could lead to added train runs of the “Vermonter” in the upper Valley as well, and help the region to attract and retain more younger workers.

Longer term, it is essential to build an east-west rail to Worcester and Boston.

“That’s a way of connecting a region that is hot with one that is white hot, meaning Boston,” Brennan said.