Housing costs take a mounting toll on Boston-area businesses, survey says

The Roundtable poll, conducted by McKinsey & Co. on a pro bono basis, did show some promising signs: Fewer companies (63 percent) are having a hard time finding talent than what respondents reported a year ago (75 percent). It’s a shift that Chesloff largely attributed to a softening labor market.

For the first time in three years, the mid-sized and large employers that make up the Roundtable membership are more likely to increase their overall real estate footprint in Massachusetts than decrease it. This is a change from trends seen during the COVID-19 pandemic. Many companies have apparently already completed their downsizing in the state: In 2023, 47 percent said they planned to shrink their in-state presence, but that has dropped to 21 percent this year. While more employers still appear to be shrinking their footprints in Boston and Cambridge instead of growing in those cities, that trend improved significantly from a year ago.

The report contained another ominous statistic: Nearly 40 percent of employers said they are planning to grow their workforce outside of Massachusetts, or to reduce their presence here. That’s around twice what was reported last year (21 percent), and a nearly six-fold increase from 2022.

“This year, we would say the warning sign is no longer flashing,” said McKinsey’s Lucy Pérez, one of the report’s authors. “It is solid red. The business community is really recognizing this is a moment to come together and look at how we address this.”

Along those lines, the Roundtable has made advocating for a multibillion-dollar housing bond bill one of its top priorities for Beacon Hill this year, although it’s among many business groups opposed to Governor Maura Healey’s proposal to add a transfer tax to high-dollar real estate sales that would subsidize affordable housing.

The Roundtable backs state spending for continuing so-called C3 grants to help child-care providers, along with a public-private partnership proposal the Senate included in its version of the state budget to help employers support child-care programs for workers. The employer group is also advocating for an economic development bond bill that would support several key industries, as well as climate legislation that would expedite and streamline permitting of energy infrastructure projects, ostensibly to curb electricity costs.

More than half of Roundtable members cite the inability to get people to relocate here, due primarily to the high cost of living, as their largest recruiting hurdle.

“There are a lot of times when someone says, ‘I’d love to come there, but I just can’t swing it,’” said Mike McCarthy, a vice president at sign fabricator Design Communications Ltd. in Avon. “The housing market certainly makes it difficult from that perspective.”

But McCarthy noted Massachusetts still has drawing power; he cited its vibrant arts and culture scene and academic institutions as well as the robust tech and life sciences sectors where many spouses of recruits might likely find a job. And Roundtable members generally rated the access to world-class talent and the state’s educational system as big pluses for Massachusetts.

Hybrid work has become the norm among Roundtable members — only one reported requiring everyone to be on site five days a week — but the approach to hybrid work varies widely in terms of the number of days required, if any, to work in person.

Lisa Murray, the Roundtable chair and Citizens Bank’s Massachusetts president, said the report underscores the need for public and private investments in affordable housing, child care, and transportation.

“Quite honestly, these are things we should have been talking about a decade ago,” Murray said. “Massachusetts has so much to offer. We’re always going to be competitive and in the mix. But we have to tackle these things that are headwinds.”

Jon Chesto can be reached at [email protected]. Follow him @jonchesto.