Monthly Archives: March 2009

New Tax Incentive for Small Businesses

On March 16th, 2009 the IRS released information on a new tax incentive to help small businesses with deductions in excess of their income. Small business owners who are realizing losses in 2008 can use a new tax provision to get a refund on taxes paid in prior years. The influx of cash is expected to boost this struggling economy by providing an avenue for owners to handle a tough year.

Given the downturn in the economy, a record number of small businesses are expected to take advantage of new net operating loss tax provision, covered under the American Recovery and Reinvestment Act, to get a refund of taxes paid over the past five years instead of the usual two.

“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”

Businesses that have been searching for their own government bailout program can consider this tax incentive a step in that direction. For some, it will provide a necessary boost to keep the shop running and allow more time for recovery. For others, it will only delay the inevitable demise of a struggling company.

The program is only slated for the 2008 tax year, so if companies wish to take advantage of the opportunity they must do so in their current filing. To qualify for the five-year carryback, the business must have less than $15 million in gross receipts over a three-year period ending with the tax year of the net operating loss. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years. For more information, go to: http://www.irs.gov/newsroom/article/0,,id=205329,00.html
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Why Medical Office is Boston’s Best Bet

The Medical Device Industry, the new face of Boston’s Biotechnology industry, continues to make progress in an otherwise bleak economy. What makes medical device development so attractive is the short time required for research, development and FDA approval.  The medical device pipeline totals 5-6 years as opposed to the longer development pipeline for drugs of 15 years. According to the Donahue Institute study in 2006, 10% of U.S. venture capital went to medical device firms. In Massachusetts alone last year, medical devices accounted for $5.5 billion of sales, representing a 38% increase since 1997 according to the National Real Estate Investor. As a result of such robust growth, many medical device companies are expanding current facilities, leasing or buying new buildings.

Medical devices include equipment used in heart surgery, minimally invasive surgery (laparoscopy), implantable devices such as pacemakers, orthopedic implants, x-ray devices and other small devices or items used to conduct procedures on a daily basis in hospitals. Research and testing of the new devices is often performed at teaching hospitals where surgeons can be consulted about the utility of these new devices. Due to the high concentration of world-class universities and teaching hospitals, including those affiliated with Harvard, Tufts and Boston University, the greater Boston area is especially attractive to the medical device companies.
Many medical device companies first sprung up in Cambridge, near the Harvard and MIT campuses, where real estate can be as high as $60 per square foot. As a result of such high prices, many have moved out to the surrounding suburbs where the prices are much lower. Many of the current medical device company offices occupy previous machine shops or old mill buildings in the area where the cost per square foot is less. For these companies expanding to the suburbs, easy access to Cambridge is considered highly desirable, allowing consultants to commute between the company office and the university campuses.

For those considering buying or leasing commercial property in the Boston area in 2009, medical commercial real estate reigns supreme. In an economy where other real estate sectors are downsizing, medical real estate is maintaining its value and transaction volume much better. Patients will continue to require physicians, the care they provide and the devices used to treat them regardless of the current economic situation….and the population is only getting older. And when you consider the potential for continued expansion of the medical device industry in Boston, you can further hedge your bets that medical commercial real estate is the way to go!
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Menino Asks Tenants to Stay in Boston

Boston is an ideal location for many businesses, with the convenience of public transportation and the prestige of the high-rise in the big city. For most, it is worth the higher rental rate to boast a Boston address on their letterhead.
However, there is a concern that the lower rents and increased vacancy in the suburbs will draw some tenants out of the downtown area.
Mayor Thomas M. Menino recently announced plans to target business in Boston whose leases expire in the next 24 months and offer “financial and technical assistance” as an incentive to stay in Boston.
The flight to the suburbs will be a wake-up call to Boston landlords who are not willing or able to adjust their rental rates for struggling companies. The question remains as to how much funding the city will contribute to this effort and how effective it will be in keeping tenants aboard.
Owners in the suburbs are well advised to find ways to be at the top of the list of alternatives for any business facing lease expiration in the next two years. Rest assured, they will be scouring the market for suitable alternatives, and in some cases the savings will be worth the cost of printing new letterhead.
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Greater Boston Office Buildings Provide Suburb Appeal

Budget relief can come in many forms, and smart companies are taking a close look at the details to save on spending. Technology companies in Boston are no exception.

There’s not much they can do about insurance costs, real estate taxes, and payroll, so what gives? Perhaps savings can be found in the monthly cost of rent.

The prestige of a Boston or Cambridge address loses some appeal when the rents creep up to $80 or $90 per square foot. Landlords may be willing to discount the price during a renewal, but the question is how much and is it enough? The tenant can compare that pricing to what is directly available in nearby suburbs, typically at $10 per square foot less than downtown rates, and the price becomes be too good to ignore.

In a February 20th, 2009 article posted by Inside Real Estate on high-tech firms in the Boston area, Bridget Botelho writes

“…Tenants are approaching leasing decisions with extreme caution and renewals have become increasingly popular. Many of the companies that are in leases they signed four or five years ago expect to get their leases renewed at lower prices, or they can find less expensive space once their lease is up…”

In some cases, these firms cannot justify the expense on rent when viable alternatives are less than 10 miles away. At the least, a responsible tenant will conduct an analysis of rental expense and consider all alternative options before signing a new lease.

The author of the article goes on to say

“Landlords are likely to continue losing tenants throughout 2009 due to company downsizing and bankruptcies, and feel pressure to lower prices to attract new tenants…”

Technology companies in Boston have the option to renegotiate in place, and may have success based on a landlord’s fear of an empty building. Armed with strong data, a successful technology firm has a strong leg to stand on in this type of negotiation. The worst the landlord can say is NO, and the tenant knows that there are alternatives available just around the corner.

Landlords in the b must prepare for this opportunity and appropriately market vacancy to firms who may be in the process of making a decision. A message to the suburban landlord with large vacancy – do not lament the situation! Find a way to be one of the top alternatives on the list for a nearby high tech firm and chances are the deal will be too good to pass up.
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