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Fifty years ago, the futurist George Fieraru coined the term “BosWash” to describe the megalopolis that would arise as the metropolitan areas of Boston, New York,  Philadelphia, Baltimore and  Washington, D.C., merged into one another. While his prediction has yet to be realized, these five major economic centers—along with smaller regional markets such as Wilmington, Del., Hartford, Conn., and Providence, R.I., continue to drive the economic growth of the northeast corner of the United States. Many of these communities are associated with rapid growth in the population of young professionals, helping drive construction in both multifamily and commercial segments.

Take Massachusetts as a prime example of economic rebirth. At the beginning of the current decade, key policymakers set forth goals to establish the Bay State as a recognized leader of technological growth and innovation (i.e., to be the Silicon Valley of the East Coast). Between 2010 and 2020, these leaders aspired to promote the creation of 100,000 new technology jobs. 

As early as 2013, Massachusetts’ high-tech sector had become the second most concentrated in the country behind California, which has helped drive office space absorption, the development of additional incubators and accelerators, and position the Boston area as the global leader in robotics. New York has developed its own Silicon Alley, with small firms that conduct business with financial services providers supplying new technology and processes to accelerate communications and better protect data.

According to the Silicon Valley Competitiveness and Innovation Project, Boston boasts 18 percent of workers directly involved with the innovation process, compared to 26 percent in Silicon Valley. New York ranks fifth (14 percent) behind Seattle and Austin. 

Upstate New York also has begun to show signs of life, in part due to an aggressive campaign by policymakers to promote tax advantages, low costs and high quality of living in markets like Rochester and Buffalo—places with significant investments in health care and medical research. 

Rebounds in technology, financial services, tourism and other economic segments are neatly reflected in broad macroeconomic statistics. Seven of 13 Northeast states have unemployment rates below the national average.

Yet, the Northeast continues to expand less rapidly than the South. Between January 2014 and January 2015, Massachusetts added 68,000 net new positions (2 percent) to job totals, but that still trailed the national average pace of job growth (2.3 percent). New York added nearly 158,000 jobs during that 12-month period, which translates into 1.5 percent employment growth.

With respect to construction jobs, the fastest growth during the past 12 months was observed in New Jersey (8.9 percent), followed by Massachusetts (5.2 percent), New York (5 percent) and Connecticut (4.3 percent).

Construction Backlog Rebounds
In 2014, Northeastern regional construction backlog, as measured by Associated Builders and Contractors, expanded from 6
months to 7.2 months. With America’s service sector expanding more rapidly recently and with government contracting beginning to stabilize, office vacancy has been declining and construction has been edging higher. For instance, Pittsburgh and Philadelphia both experienced declining office vacancy rates during the past year (down to 9.9 percent and 17.8 percent, respectively). 

Downtown Boston is now home to 2.5 million square feet of office space under construction, with more than 900,000 square feet under construction in the suburbs.

In Baltimore, office vacancy has fallen to 14.4 percent. The city saw office-related employment climb 1.2 percent in 2014.

Looking Ahead
The Northeast is unlikely to emerge as the nation’s growth leader anytime soon. It doesn’t have populations like Florida or Texas. It doesn’t have youthful emerging cities like Seattle, Portland, Ore., and Phoenix. It also tends to be associated with higher taxes and regulation. What it does have is institutional strength. The Northeast is associated with Wall Street, the nation’s capital, Broadway, Boston’s technology corridor, Philadelphia’s pharmaceutical industry, the National Institutes of Health, the National Security Agency, Ivy League schools, military institutions and many other permanent economic drivers. Plus, large ports in New York and Baltimore help render the East Coast a distribution powerhouse. Its relative proximity to Europe and Africa also creates prospects for ongoing globalization.

Anirban Basu is chief economist for Associated Builders and Contractors. For more information, visit www.abc.org.

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