KYLE WARWICK
Boston's overstated 'exodus'
By Kyle Warwick | May 27, 2006
RECENT NEWS stories have described an exodus from Boston. With the portrayal of this negative population trend has been news of a corresponding lack of job growth locally. Combined, these two factors imply that Boston is in trouble, but a closer look at the data shows a different conclusion.
Of course, Boston does face its share of challenges: a high cost of living and housing, energy prices above the national average, and a challenging regulatory and planning environment. The marketplace is, however, sending more positive signals.
For example, there is robust demand in the commercial real estate market, including near record net absorption last year in the office market, sub-4 percent vacancy in the apartment market, a cooling but certainly not collapsing housing market, and hotel occupancy and room rates that are on the rise. These positive market dynamics, counter-intuitive to the notion of an exodus, motivated us at the real estate firm of Spaulding & Slye to take a closer look at the data.
We found that Boston's population losses are overstated. The methodology of Census estimates undercounts population for Boston. Of course, Boston is not growing as fast as Las Vegas or Phoenix, but it is not losing population as fast as the Census has reported.
There are many problems with the methodology used by the Census estimates:
Only domestic migration is included, not immigration. Boston has always had a high volume of immigration that would offset some of the domestic net out migration and perceived exodus.
The Census methodology is not able to properly account for population growth that occurs in group quarters (i.e. dorms and graduate housing -- where Boston has added over 4,600 dormitory beds in 13 dormitories between 2000 and 2005).
The methodology for accounting for changes in housing stock (including only new units and not conversions) and administrative records (income tax returns) are suspect given Boston's housing construction and demographic trends.
Possibly the most compelling case for the overstated losses is recent history. The Census Bureau's 1999 population estimate was below the actual population count of 2000. The ``error of closure" was approximately 8 percent.
The Census had reported similar population losses between 1990 and 1999 and then a dramatic 8 percent increase in 2000. This was not the case. Rather, the Census had built up a cumulative undercount over those years and the error became apparent with the actual population count in 2000.
The same misrepresentation is occurring this decade. We estimate, using the 1990s error of closure as a guide, that the population change between 2000 and 2005 for Boston is far less than the 5 percent loss reported by the Census.
Recent revisions to last year's employment figures as well as accelerated growth this year show that Boston's job market isn't as bad either. Particularly striking was the revised growth rate estimate from office-using sectors, which more than doubled from 0.9 percent to 1.9 percent. These are not new jobs this year, but rather jobs that were added last year but somehow not counted originally by the Bureau of Labor Statistics.
The largest positive revision impacted the financial sector, the technology-related information sector, and the education and healthcare services sectors, all typically well-paid, sought-after jobs that Boston has long depended on. In its March 2006 revision the Bureau of Labor Statistics found 8,700 jobs in these three sectors that were not originally counted.
In addition to the 2005 revisions, job growth has accelerated in the first three months of 2006 in many sectors. More than 25,600 jobs were added from March 2005 through March 2006, with construction, financial activities, professional and business services, and educational and health services leading the way. The improved fundamentals and healthier job market should increase the comfort level of many with Boston's economy, and the increase in jobs would suggest that people are more likely to stay.
Last, the real estate markets are healthy. The office market in Boston continues to recover, having just started its fourth consecutive year of positive net absorption. Apartment vacancies are low and the inventory has grown, and owned units (i.e. condos) have also increased in the city.
The positive change in employment, population, and the real estate markets are reinforced by public infrastructure investments, planned and permitted avenues for growth, and savvy private investment dollars that have flowed into Boston in recent years. These, along with the recovery and growth of the education, technology, biomedical, and financial services industries that fuel Boston, suggest that the future of Boston is not as dire as one may think.
Kyle Warwick is regional director of Spaulding & Slye.
? Copyright 2006 Globe Newspaper Company.
