@Brian Z. thanks those are all great points. I think it's great that you have though deeply about the market and the reasons you are still bullish. I have my own problematic bias of anchoring to the Boston I knew growing up with the Whitey Bulger connected folks, the chain link fences and the rotten 3 deckers. (I lived in one of those in my youth). Boston has changed so much and I have to remember that. I do know that it is a world class city, truly, for medicine and biotech.
However google the relationship of Kendall Sq office space to the poll numbers of Dems who promised to "crack down on drug pricing". How many drugs being developed in Cambridge and environs could tolerate price caps? Could they make money back selling to other markets, that already have price caps? Maybe a lot could, I don't know the number, and I would want to know the number.
I watched the most fascinating video in a long time a couple of weeks ago--I watched it to learn more about what top doctors are saying about Covid. But what stuck with me also was the statistic on cancer meds (where a huge amount of pharma development money is moving). This is from a top UCSF doctor who has written books examining the problems with trials and studies:
"Last 15 years an increase appetite for uncertainty at time of regulatory approval for drugs and drug products. Things would be approved without us know yet if they cause someone to live longer or live better. The promise was “Post market we will learn those 2 facts”. A number of empirical studies have shown post market knowledge is very weak, a broken process. Cancer meds: 1/3 come to the market with no control arm, 2/3 based on a surrogate endpoint. After 5 years on the market we only know that they improve survival in maybe 10% of those drugs. Capital in pharma has flown to cancer and rare diseases"
https://www.youtube.com/watch?v=Bf5UrB5vgRY
Again I think Boston /Cambridge metro is world class for biotech and pharma but is this industry anti-fragile from regulatory scrutiny on the efficacy of these meds? I'm not even touching on how much they cost--I'm just saying, do they work?
Onto hospitals. Yes there are world class hospitals and medical schools there and I know there will always be millionaires and billionaires who fly there for treatment and cash pay it. But what % of say MGH revenue is from that, or would be in the future? The thing no politician will talk about is that a big part of the unending rise in medical costs in the US has been driven by hospitals. No politician will touch it because these are often the biggest employers in a district or even a state. But there has to be some upper limit on medical costs in the US especially that outcomes at a broad level are not really improving given the headwinds of obesity etc, even if you can make a tenuous case for better outcomes in a given cancer (I spent hours researching this recently).
Young doctors will get themselves into mega debt to go to medical school if there is the promise of making it back through the high pay specialities. Are these immune from regulation?
Moving onto finance. I personally believe active equity/fixed income management is very challenged on a 10 year view (top consulting firms like BCG agree). Private equity may be in better shape but there are pension consultants who are now calling into question the Endowment model of investing as well. What % of jobs are there. Fidelity may be fine because they have essentially become a fin tech and make a good amount of money on trading and low cost access to the market. What % of Fidelity's revenue relies on active management anymore? This is a slower moving trend because it takes ages for pension capital to change their asset allocations and they have their own serious underfunding problems that might cause them to keep hoping for outperformance. Look at the number of attempts at M&A in large scale asset management in the past 10 years--they try to merge to solve the PnL issues but mergers are hard to execute in this area. When the market goes up, it kicks the can down the road for a while because revenue is % of asset values. So there will be so many rich people from these areas that made money in recent years that spend cash on properties--but I'm wondering about the pipeline of young people entering these areas. New job creation.
Then look at how many of the top lawyers are making their big fees working for bio tech and finance, so it's a bit of the same bet.
BCG / Bain probably ok although there has been a lot of scrutiny on them too.
Onto universities. The top tier ones especially with healthy endowments will indeed be fine but middle or lower tier private schools that don't offer value for money are in trouble. I think the university argument is probably one of the stronger ones over the long run. There might even be short term opportunities coming up this autumn from the fact that many foreign students can't even enter the country (right?-I think?).
There are so many spin offs from these universities that are awesome, but what % are biotech. For example how much money is MIT making in terms of spin offs in other areas eg Mars space project.
The next thing is that Boston needs to compete with other markets who have similar types of jobs (tech, biotech) but offer a lower cost of living. I think Colorado is probably still slightly less, and N.Carolina seems less still.
Don't get me wrong there is nothing in the world better than autumn in New England, my friend just posted photos of her at the beach on Cape Ann, it's awesome, but I just wonder how long the explosive prices can continue.
I think the suburbs especially ones with walkable downtowns and cute restaurants may have become relatively underpriced compared to the 3 decker play.
None of this is sour grapes: I benefited from the biotech, medical, university play in Boston for some years. I just want to probe the depth of the strength of the market.
Lastly - I would check the FEMA flood map for properties there too--no downside to looking at this to see for example if you are 1 block over from an existing flood area now that might become one in 10 years. I am conscious too that many areas that flood are not even classed as flood zones (though I think that was more of an issue in Houston)
I might look at opportunities to do a SFH with ADU that is not far from a good commuter rail station. You may not get the explosive growth like you'd get from condo conversions but it might be more risk adjusted.
