Sam Bonacci of the Worcester Business Journal
Sam: But I’m here to talk with you about the city. You know I’m sure a lot of you know what’s going in your own neighborhoods probably better than I do, but it’s part of my job to keep track of what’s going on when it comes to especially commercial real estate but real estate overall throughout the city. That involves looking at a lot of different things. Right now, there are a couple of big projects happening in the city.
The CitySquare project, I’m sure a lot of you are aware of the CitySquare project. The mall is gone; Front Street is open. So there’s a lot of development there, and for a while all that really was the mall being demolished and clearing up that space. But now there have been a lot of new announcements. There is a new upscale hotel building in. There is roughly $8 million of cityscape going on in Main Street, and there is the tower that – the Telegram is it –was just recently purchased and they’re planning on completely revamping that property.
What all these means is that Worcester property values or the commercial real estate prices that those properties can get are going to start climbing up, especially when you’re talking downtown. That’s actually going to work its way around the city. That’s good news for everyone in the city when those values are going up. You’re going to see, just more reinvestment coming into the city and that’s what we’ve been seeing. It’s drawing in some really big companies.
The CitySquare development is kind of the premier development that’s going on from the city side. A lot of government officials from all the way up to McGovern, all the way down to the city planner are really pushing that development, and so, it’s kind of led a little bit by the government but there is a lot of potential there. It’s not a lot and going along with that redevelopment, we’re seeing a lot of residential going in downtown. So whether it’s housing specifically for students or hotels going in, there’s going to be a lot more people coming in downtown, so that’s kind of the effect on the CitySquare project.
Also the nice thing about that is that it offers the ability to really boost the downtown Worcester, which will make the entire community more viable, more people downtown, and more things going on.
Essentially all of this comes down to also building more value into Worcester. Right now, Worcester’s commercial property values and it’s very hard to get data on this because most of the companies that look at this are looking at Boston and they stop at the 495 corridor. But in Worcester like what you’re looking at, is the high $20s per square foot, and in Westborough you’re looking at the mid to high $30s or approaching roughly $30 per square foot, and all that is in contrast to Boston, which you’re looking at every $60 per square foot.
Worcester still stands as a bargain but that bargain as more amenities come in is going to be able to command higher prices. And so what this also means for anyone who owns property in the city is that there are going to be more people coming in with better jobs, whether it’s a company coming into Marlborough like GE coming into Marlborough or whether it’s just more students coming into U Mass Med, there are more opportunities to rent to more valued people who are going to be able to pay a little bit more. We’ve seen that, the demand for more high-level housing is there.
The Voke Lofts– I don’t know if any of you are familiar with them – but they went in. They’ve reconditioned the Worcester Vocational High School. The former building was reconditioned, and it was fully leased or fully rented within 2 months, so those are not inexpensive apartments. There is a market for that in Worcester, especially when you start talking around the colleges, and downtown is kind of being built up as that. But the nice thing about Worcester is that everything is downtown accessible, so that’s the upside of say from your perspective.
Then the other area that is also seeing a lot of new development from a more grassroots perspective is Kelley Square. Now Kelley Square has been known – Kelley Square and Green Street leading into it have kind of been known as bar scene area. But there are a lot more businesses going in there and there is more residences going in there and it’s – there’s a lot of grassroots movement to make that not just a nightlife location but a well-rounded location where you can go get brunch, you can go shopping, and people can also live there comfortably.
But it’s very much in contrast to what’s going on in CitySquare. In CitySquare, you’re seeing large developers come in. You’re seeing businesspeople who have been around Worcester for a long time put their own money in and put their own effort in to Kelley Square. In Kelley Square, it’s experiencing kind of an organic growth in comparison to the push that’s going on in CitySquare.
Some of the citywide issues that are facing Worcester right now when it comes to – my focus is much more in ‑ well not much more but my focus is in commercial real estate. One of the things that kind of ends up hurting Worcester when it comes to commercial real estate is that we don’t have a lot of – we’re in this odd middle ground where we don’t have any ready-to-build land, and also our buildings are too old or most of them are too old to go in retrofit.
If you’re familiar with Marlborough, Marlborough has a lot of buildings that were made in the ‘80s and ‘90s, and a lot of those companies have left. That was a tough period for Marlborough. I also worked up there for a year and a half. So that was a tough period for Marlborough, but they are primed to have new companies move in, redevelop those properties, and they’re built to suit on the inside but the development time is much shorter than building new and much less expensive. In Worcester, you have to clear the property first before you can really go in and build something new.
I don’t know if you’re familiar but just yesterday, the city council took a vote. They had been moving away from a split tax rate for commercial industrial versus residential, and they just moved it more in favor of the residential tax rate. If you own your property, I would imagine that would work out to your benefit, but when you’re talking about overall for the city, [unintelligible 0:08:44] of you especially by the chamber of commerce as a hurdle to get over when they’re trying to talk the city to come, talk a company to come into the city.
Some of the – one other issue that was mentioned that I bike around the city. Alternate transportation has kind of come to the forefront in the discussion with the redevelopment of Main Street. There were moving parking spaces in order to be able to put in bike lanes. This is not something that a lot of businesses downtown are in favor of but it’s required because of where the funding is coming from. But it’s also Worcester is a very accessible city and it’s easy to get from one place to another. Like I said, it would be really nice to be able tell a potential tenant that you’re a 5-minute bike ride away from or a 10-minute walk away from downtown where everything is going on, and there is an effort in the city to make sure that because walking somewhere isn’t just about being able to have a safe sidewalk or a bike lane. It’s also about having things along the way that are worth visiting as well as that infrastructure and this city is pushing to trying to build up all that at once. So those are some of the city issues that come up as a result of both of those developments that Kelley Square and the CitySquare.
But overall, you probably know this if you’ve tried to sell a property recently but multifamily houses have appreciated much, much quicker than any other kind of property. We crunched the numbers for a recent story and it’s obvious there’s a print edition, and so the median price of a three-family home in Massachusetts in general has jumped 83 percent since 2009. So, those are great numbers [applause]. Yeah. I’ve been told anecdotally if you have a really good triple-decker, there will be a bidding war as soon as you put it on the market and you kind of expect to have it off the market within the week. That’s just how it is.
To put that in perspective, to put that 89 percent figure into perspective, the median price of a single-family home during that time rose only 16 percent statewide, so just to give that some perspective but so that’s great if you’re going to sell your house. If you’re going to buy a multifamily property, it causes some problems because as we all know, the Boston market has become really tight and a lot of those people who would be buying property in Boston are beginning to look to Worcester to buy their rental properties. This comes about because it’s simple math. If you could pay $300,000 for a property in Worcester that would cost $800,000 in Boston but your rent is only a quarter less in Worcester than it would be in Boston, then you’re going to go with the Worcester property.
A lot of that bidding war that’s happening when you do go to put your property on the market is coming from people coming in from Boston to invest here in Worcester, which is a good sign for the city, but it’s making it highly competitive, so that’s the flipside of it if you’re looking to expand in the area.
Just an overall kind of global view of jobs, Massachusetts still has one of the lowest unemployment rates in the country and we’re sitting at a very low rate. That isn’t to say that people are underemployed and that people who are looking for work haven’t just kind of gone off the books but Massachusetts still does have a very strong job market which bodes well for the rental market in the area.
I also wanted to talk about what makes Worcester attractive because I think for a long time, Worcester has sold itself as the affordable alternative to Boston, and affordability has always been at the forefront of the sales scheme for Worcester as a city, and that’s great. But at a certain point, you need to sell yourself on something more than just affordability, and one of the great things that Worcester has going for it is its art and culture in the area. It seems like Worcester has more restaurants per person than any other city in the nation, and we have great bars, we have great nightlife. I can list five places off the top of my head that would have live music today. So that is not one of the things that Worcester has going for it and really needs to capitalize on moving forward in my view.
We have a really strong artist community and if you’ve seen what Lowe’s been able to do, they’ve really been able to capitalize on that, and they’ve done it in a very specific way with maker live/work spaces. So if you’re an artist, your options are to have a studio and then a home but traveling back and forth between those, most artists have a day job. Going back and forth between those two gets very tiresome and there are – Providence has this. Lowe has this. Their live/work spaces that incorporate often they’re built into old mills especially in Lowe and they incorporate all the space, the studio spaces that an artist would need bout also loft-style living so they can live and work in the same location. Lowes has done this to great effect. The city got behind the movement to do this and – let me get the date here.
Lowe began with 51 apartments in 2000 that were of this nature and now they have over 200 apartments and even more studio space, so they have 200 of these live/work spaces. But in addition to that, that’s also created a community that brings in more artists who want studio space but may not want that living style, and so it’s become a hub for that and Worcester has that ability to do that.
Actually, our neighbors to the north, Fitchburg, is undertaking one of these right now. The Fitchburg Art Museum has partnered with the Twin Cities Community Development Center and they’re creating 55 apartments out of 94,000 square feet of former mill space that has been sitting vacant for years.
This might be a little bit grander and a little bit larger than what you’re dealing with on a daily basis, but these are the kinds of projects that can come in and really transfer a city if the city has a vision and if people commit in that vision. It’s something that Worcester is primed for because of the artistic community but also because of the spaces that we have. The former Worcester Courthouse I felt was a prime candidate for this sort of live/work space, and it’s going to be a fairly straightforward build out. There will be some retail involved but it’s mostly going to be just straight apartments, and that’s great, but I feel like the city needs something to set itself apart and I feel like there’s an opportunity there for that. Other people I have talked to have agreed with that.
So overall, Worcester is going in really good direction. So I went to Clark and my uncle also went to Clark in the ‘70s, and so when I started in Clark, my uncle came up to me on Thanksgiving. He was like, “So how do you like Worcester?”
I’m like, “It’s good, good. I am really exploring.”
He was like, “So, is Worcester still up and coming?”
I was like, “Yeah, yeah. I heard it’s all up and coming.”
He was like, “Yeah, it was up and coming in the ‘70s, too. It seems like it’s always up and coming [laughter].”
But I honestly do think at this point that Worcester is primed to not just be up and coming but finally come up. One of those and I think there are lots of little steps along the way, and there is just one thing that I kind of neglected to mention. The commuter rail is key especially when it comes to the CitySquare Project. There is an announcement that we have some accelerated lines coming in that cut down the time that it takes to get to and from Boston. They’re not at the best time ever, but they’re a step in the right direction.
So I really feel like with all of this coming together in the space that the state Worcester is in, both within the city and for the state itself, I think we’re primed to be able to be in a really good position moving forward.
I think it’s a really great place to own property and it is up and coming finally, so thank you, thank you very much [applause].
Rich: All right. I don’t know how far this cord is going to go without tripping Sam but does anybody have any questions about any of the stuff that’s going on in the city? We can put Sam on the spot to see if he knows the answer. Did anybody have any questions? I made cake and ice cream, stuff like that. I found that and a lot of the stuff, I kind of knew a little bit about but I mean I didn’t realize that all that stuff is going on and you had written an article about $15 million of grants coming in for art in Worcester, right?
Rich: So that’s big dough, so people are coming to Worcester and dropping off money, so that only be good for like he was talking about for selling properties or rents. Rents have been pretty strong the last couple of years, haven’t they?
Rich: Yes, okay, and the more stuff, the more good things that happen, the better that can only get for us. If we don’t have any questions – last chance. I have a question for somebody. Where do I put my tickets for the raffle? Sam?
Sam: Right [unintelligible 0:20:49].
Rich: Sam – no, the answer. Let’s hear it for Sam Bonacci [applause].