Rhode Island Office Market Remains Steady
In Providence, the Class A office market continues to maintain vacancy rates under 10 percent, with an overall office vacancy of about 14 percent. This trend should continue as there is not any new Class A office development on the horizon for the capital city.
There have been a few larger market transactions in Providence over the past 12 months. Waldorf Capital Management, a local real estate investment firm, purchased the Turks Head Building (150,000 rentable square feet) in late 2014.
In addition, 170 Westminster Street (65,000 rentable square feet) recently traded; according to local rumor, the property will be converted to residential apartments. If 170 Westminster comes out of circulation, this will have a positive impact on the Class B vacancy rate in the city.
Just south of the city on the 195 redevelopment land — dubbed “The Link” by the 195 Commission — work is just about complete to make the 19 available acres “shovel ready.” The 195 Commission has been successful in fully negotiating two purchase and sale agreements. The first is for student housing and the second is mixed-use residential. However, both projects are contingent on an acceptable tax stabilization agreement from the city, which has yet to be proposed.
Recently, local headlines have announced the potential for a minor league baseball stadium in the area. The new owners of the Pawtucket Red Sox have proposed relocating the team from Pawtucket to Providence, on what was planned to be open park space on the former 195 land. Public response has been mixed, and the results of the ownership’s due diligence and how the stadium would be financed should be made more transparent in the coming weeks.
Work on the former South Street power plant should commence this summer. Developer Commonwealth Venture Properties is working with the University of Rhode Island (URI), Brown University and Rhode Island College (RIC) to redevelop the 120,000-square-foot facility. RIC and URI will utilize the building for their nursing programs, while Brown would utilize it for administrative office space. In addition, Brown will build a 600-car parking garage just north of this project.
The West Bay suburban office market continues to battle down vacancy rates ending 2014 at about 16 percent. Activity has been steady with most interest in space of less than 10,000 square feet. As a result, landlord concessions have waned and base rental rates have increased slightly for Class A office space, now averaging $23 to $24 per square foot.
Regarding new development, Michael Integlia & Co. has begun site work for One Metro Center Boulevard in Warwick, which is planned to be a 125,000- to 150,000-square-foot office building. In addition, Integlia is in the process of completing the demolition of the former Elizabeth Mill. This work will clear the way for One City Center, a 400,000-square-foot mixed-use development with direct access to TF Green Airport and Amtrak. This site was acquired as a part of their purchase of the former Leviton property in Warwick.
In Northern Rhode Island, the acquisition and redevelopment of 1301 Atwood Avenue by Hobbs Brook Management has yielded them Dassault System (100,000 square feet) and New York Life (25,000 square feet).
Looking forward, most of the proposed new development and redevelopment around Providence is geared for student and residential apartments. Statewide on the office front, pricing should remain at current levels at least through the end of the year, but with continued tightening of tenant concessions by landlords. Current interest rates continue to convince former tenants to become building owners, which is resulting in a lack of office product to purchase. While vacancy may be waning slightly, unemployment rates continue to drive market hesitation and have precipitated mostly lateral movements within the marketplace.
— By Leeds Mitchell IV, Senior Vice President, MG Commercial Real Estate. This article originally appeared in the June/July 2015 issue of Northeast Real Estate Business magazine.