Cape Business Trends newsletter February 8, 2007
Expect higher energy bills
By signing an agreement to have Massachusetts rejoin other northeast states in Greenhouse Gas Initiative, Gov. Patrick has raised fees on power plants by an estimated $100 million to $260 million per year. The long-range benefits can be significant, but in the short term, expect those costs to be passed on to consumers in the form of higher energy bills.
Housing inventory on rise again
After seeing the inventory of residential properties continually decline through the last two months of 2006, we’re watching the number rise in early 2007. From November 1 to December 31, the number of properties on the market had declined from 6,490 to 5,050. But it rose to 5,410 properties by January 31.
Most forecasts continue to see a recovery in the market by the third quarter of this year. In the meantime, here are some key building trends culled from Cape Business’ builders’ panel: Business remains surprisingly strong at the high end of the housing market; builders are diversifying beyond home construction to weather the storm; there is less speculation and more custom remodeling and home improvements; boomers and second-home owners will continue to move here; a breather in home-price increases may not be so bad after all – it is increasing confidence that homes will become more affordable for younger families.
On the commercial side
Demand is as strong as ever. Vacancy rates are low. Long-term fundamentals are good, as population, income and jobs increase. Capital is available for commercial construction. Yet the supply of good quality office, industrial, retail, multifamily and hospitality properties is weak. New commercial projects already in the pipeline are few and far between. Nationally, commercial construction has increased and helped fill the slack in residential construction – not so on the Cape.
Two major mixed-used developments in the Golden Triangle of South Sandwich are still seeking final regulatory approval, as is the 152-acre CanalSide Commons at the Bourne Rotary. Mashpee Commons is planning an expansion. Some modest projects may begin soon in downtown Hyannis, which has received the green light for redevelopment along with Dennisport Village on Route 28.
Elsewhere on individual sites, plans are in various stages of discussion for office condominiums, second-floor office development, environmentally friendly industrial areas and technology parks.
What’s the holdup? Essentially, the problem is twofold: soaring land costs and tough regulatory hurdles.
The employment picture
The year ended with the state’s unemployment rate at 5.3 percent, up from 4.8 percent a year before. The healthiest job sectors: professional services, education and health services. While some parts of the Cape remain tied to a seasonal economy, towns in the Upper Cape registered lower unemployment rates than the statewide average. Not just year-round, but in the winter. Sandwich, for example, reported a 4 percent jobless rate in November, a number comparable to Waltham, a Boston suburb.
Speaking of employment, Sovereign Bank and Greater Boston Chamber of Commerce just released a survey of businesses showing 41 percent of employers expected a slight increase in employment for 2007, while 40 percent expected no significant change. Only 13 percent expected a significant increase.
E-commerce can beat the winter retail blahs
For many retailers, especially in traditional areas like galleries and gifts, the dead of winter means closed doors and cash flow challenges. If you drive by the Giving Tree on Route 6A in East Sandwich, you might think this gallery is shut tight. Yet in its basement, up to three staffers are working every day fulfilling the company’s rapidly growing Internet business. In only three years, this mother-daughter business has seen its Internet sales grow to 95 percent of total revenue. Rachel and Judith Smith concede their business could be located almost anywhere now that it is so virtual, except that the Cape Cod brand is a major magnet for their online sales.
Yarmouth: an emerging home depot
Yarmouth is rapidly becoming a hub for the home and building supply market. Ferguson/J.D. Daddario opens its newest location in Yarmouth this week, with an official ribbon cutting on Friday. The Route 28 operation is a plumbing and electrical supply “Mega Xpress” store that will cater to contractors and tradesmen. Meanwhile, Supply New England is constructing a new facility in town. They join the likes of Snow and Jones Inc. on White’s Path and Simon’s Supply on Higgins-Crowell Road. Watch out, Home Depot.
We will profile the town’s business community in our upcoming The Villages of Yarmouth special publication (May/June issue).
When will we have answers on health insurance?
Anxious businesses won’t have the answers anytime soon as to what the new state health insurance law will mean to their employees and the bottom line.
What is clear is that insurance providers are not ready to provide coverage as affordable as lawmakers expected when they passed the landmark legislation last year.
“All of the major insurers in Massachusetts said they were going to be between $260 and $280 per month,” House Speaker Salvatore DiMasi, who has claimed credit for the majority of the reform, told reporters. “Now it’s higher, and I want to find out why.” Quotes are coming in at least $100 more per month.
The July 1 deadline for mandatory coverage is fast approaching. Gov. Deval Patrick said he’s still hoping he won’t have to relax that deadline. “I know that there is a lot of work yet to do.”
Health insurance as lure to attract, retain employees
While much attention is being paid to penalties facing employers who don’t offer insurance to employees by July 1, the head of the Commonwealth Health Insurance Connector said the real pressure on companies will be tied more to losing good employees to competitors who offer better health coverage.
Worries about how to hire, retain and not downsize will be “far, far greater on you as employers than any state requirement or penalty to buy insurance,” said Jon Kingsdale.
Under the new law, employers of 11 or more workers who don’t offer health insurance policies must pay their “fair share” penalty to the state of $295 per employee. And under the so-called individual mandate, adults who don’t have insurance by this summer face fines on their tax returns.
Depositing your checks via computer
Until now, many small businesses on the Cape maintained a relationship with a bank primarily for the convenience of depositing checks every day to a nearby location. That competitive advantage, however, may be short-lived.
Technology is making it possible for businesses of all sizes to make deposits from anywhere – by computer.
Banks of all sizes are investing in image-capture technology. Using a desktop scanner, you deposit checks directly from your office into your bank account. Scan the check and electronically transmit the image to the bank, where it is processed for rapid clearing.
A business can purchase this technology for about $1,500 to $1,800. Some banks are making deals to lease the equipment directly from providers.
While larger banks got a leg up on this technology, virtually every bank in 2007 – regardless of size – will be offering the technology and service to its customers.
This technology will be highlighted in Cape Business’ special report on banking in May/June. For more information, please call (508) 385-3811.
BizWiz is only a month away!
Find your “Recipe for Business Success” at the 4th Annual BizWiz Conference & Marketplace, set for Tuesday, March 6, 2007 at the Four Points by Sheraton Hyannis Resort.
Highlights include:
• Interactive business workshops in such areas as marketing and customer service
• Keynote speaker Billy Costa of NECN's "TV Diner"
• Hospitality Marketing Outlook 2007, presented by Mass. Lodging Association and Cape Cod Hospitality Marketing Association
• "Tasting Tables" on improving your business
• An exciting marketplace of business exhibitors
The cost to attend BizWiz 2007 is just $50 for Cape Cod Chamber, CCHMA and MLA members and partners; $60 for non-members. Register online now – don't wait!
Click here for a schedule of the day's events!
