Writer: Esteban Pages
Regional Review is a year-end series from Capital Analytics that looks at key developments throughout the year and sets the stage for what’s to come in the near future.
3 min read December 2023 — Viewed as a global higher education epicenter, Greater Boston continues to produce a strong talent pipeline, but with an overall high cost of living the challenge heading into the new year will be retaining the best and brightest.
On average, Boston’s cost-of-living index was 48% higher than the national average in 3Q23, according to the Council for Community and Economic Research (C2ER), as cited by Axios Boston. The largest gap was found in housing: 127% higher than the national average, while the lowest were grocery items at a 5.9% markup. While Boston certainly isn’t the most expensive city to live in (San Francisco is 69.5% more expensive than the national average), such a premium could push away the highly skilled talent produced by Boston’s higher ed ecosystem. Once they graduate, young professionals may opt for less expensive cities offering employment opportunities in their industries of choice. MIT’s Living Wage Calculator estimates an adult without children needs to earn $22.59 per hour to make a living wage, or $47,000 per year.
According to the latest data from the Bureau of Economic Analysis (BEA), personal income is competitive, as the per capita personal income of the Boston-Cambridge-Newton metropolitan area ranked No. 8 among the 384 metros analyzed, reaching $94,082 in 2022. Yet, the prevalence of the remote/hybrid workforce does pose a threat if Boston’s live, work, play and quality of life attributes do not measure up to less costly metro areas. Case in point, nearly half of the 22 to 24 year olds with a bachelor’s degree and 25 to 29 year olds with a graduate degree leave Boston upon graduation, according to the Boston Planning and Development Agency.
Public and private stakeholders are teaming up to address these “brain drain” concerns, however. One such joint initiative revolves around connecting students to internships and job programs to tip the student scales toward staying in Boston. Both the Mass Technology Leadership Council and the Greater Boston Chamber of Commerce have launched internship listing sections in their respective websites, while the Massachusetts Life Sciences Center offers interns $7,200 in stipends to direct them toward job opportunities with small companies that lack the financial resources to recruit or hire them.
To curb the region’s cost of living, the city of Boston announced changes to its Welcome Home, Boston initiative to unlock affordable homeownership opportunities in city-owned land, starting with 63 new affordable homes in the first phase of the plan.
New industries are also entering the fray to provide new, high paying jobs and foster talent retention in the region. RISE, a Boston-based real estate developer, inked a deal for a 123-acre movie and television production-dedicated campus in Braintree. The project includes 272,500 square feet of office and industrial space to house pre- and post-production facilities and sound stages.
The more established drivers of the regional economy, such as life sciences, have gone through a year of mixed results. About one-third of the 17,000 nationwide layoffs in the industry between 2022 and 2023 took place in the state of Massachusetts. Moreover, lab space vacancies in the Boston region reached an 11.7% vacancy rate in 3Q23; a number not seen since 2010, according to Colliers. That amounts to about 5.38 million square feet of available space. The report’s encouraging sign lies in the 11% increase in occupied inventory between 1Q22 and 2Q23, as well as 954,404 square feet of absorption for 2Q23 and 3.07 million square feet of absorption between 3Q22 and 3Q23.
Business confidence in the state took a dip earlier this year in May 2023 as reported by the Associated Industries of Massachusetts (AIM) Business Confidence Index to end at 49.6 (below 50 is considered “pessimistic territory”), the first since December 2020. By July, however, confidence bounced back to optimistic territory. Sara Johnson, chair of the board at AIM, credits this performance to “A strong job market, vibrant consumer spending and resurgent business investment.”
