COVER STORY, JANUARY 2006

A PATH TOWARD THE FUTURE
Three economic development organizations discuss commercial real estate growth in their areas.
Dan Marcec

Northeast Real Estate Business recently spoke with three economic development officials regarding the commercial real estate climates in their respective regions. The city of Warwick, Rhode Island, the borough of Brooklyn, New York City,   and Franklin County, Maine, all are completely different in regards to population density, demographics and landscape, yet all three have similar goals: to attract economic development that will foster positive growth in their communities.

Warwick, Rhode Island

Carpionato Properties is expanding The Crown Plaza at the Crossings in Warwick, which already boasts the second most convention and meeting space in the state of Rhode Island.

“We're really a natural fit for new development, as we're centrally located close to the airport with easy access to both interstates 95 and 295,” explains Karen Jedson, director of the department of tourism, culture and development for the city of Warwick. “We make it easy for businesses to locate here, and having tourist amenities such as 39 miles of coastline, several public beaches and several public golf courses make Warwick a great place to be.”

Concurrent with the train station project, the Warwick hospitality sector has seen increased activity as well. The Metro Center, in which $150 to $175 million of private funds have been invested, is a development featuring two hotel properties located directly across from the intermodal train station site. A Hilton Garden Inn already has been completed, and another hotel will be developed on the site; in addition, luxury housing facilities and an upscale restaurant also are being planned. At the Crowne Plaza Hotel at the Crossings, Carpionato Properties is again planning to expand its operations. The hotel already has the second most convention and meeting space in Rhode Island, only trailing the state convention center. Carpionato also is active in retail development, purchasing land for the construction of a Lowe's Plaza, a $31 million project that includes a 169,000-square-foot Lowe's Home Improvement Warehouse, a 72,000-square-foot Super Stop & Shop and 47,000 square feet of ancillary retail space.

Also on the retail side, the Inskip Auto Mall is undergoing a $50 million redevelopment that will position it as New England's premier luxury car franchise. Situated on a 20-acre site, the development will feature 272,000 square feet of sales, service and manufacturing capabilities upon completion.

“From a marketing perspective, we make ourselves available to businesses interested in coming into the area, and we have a database that provides information for them,” Jedson says. “We have a very sound retail base, as Warwick has been known as the retail capital of Rhode Island, and people are naturally drawn to our Route 2 area, which houses hundreds of stores.”

The city offers help with both permitting and building processes for companies interested in locating in Warwick, and it offers information on obtaining loans and what companies to contact to aid the relocation process. With a full-time staff dedicated to these processes, Warwick considers economic development a high priority. When businesses come in, the commercial growth naturally has positive effects across the city.

“I expect that the economic impact from the current development in Warwick will be huge,” says Jedson. “Having access to both the train rail and the airport will create a lot more traffic and a lot more interest in our city. We're really intent on relating the positive aspects of Warwick to the public, but the transportation component speaks for itself.”

Brooklyn, New York City

Boasting a population of 2.5 million, the New York City borough of Brooklyn would be the fourth largest city in the United States if it were categorized as a municipal entity unto itself. Characterized by strong growth across the commercial real estate sector, the borough of Brooklyn is seeing residential development in underutilized industrial areas due to rezoning, in addition to strains on historical neighborhoods in danger of being overrun by larger scale commercial development. Since Brooklyn is under-retailed, interested retail tenants are learning to operate within the borough's unique marketplace and are negotiating different kinds of space than they are used to occupying on a national level. In addition, downtown Brooklyn has the third largest commercial office space market in all of New York City. The entire borough harbors 430,000 jobs and 38,000 companies, and looking toward the future, Brooklyn is becoming even more of a center for commerce, as is demonstrated by the current activity across the board.

“The demand for space in Brooklyn is such that we do not have to seek development specifically; it's more of a process to be managed,” explains Margaret Nelson, director of real estate programs for the Brooklyn Economic Development Corporation (BEDC), a private, non-profit development organization. “We focus on how economic development affects local residents, and we try to attract industries that have growth potential and those that will have a connection to providing high wage jobs for our citizens.”

New York City has various incentives for companies that are moving to designated commercial areas of Brooklyn from Manhattan or from outside the city   through its Commercial Expansion Program (CEP), which provides a package of incentives, including discounts on effective rental rates through a reduction in property taxes in buildings that have been upgraded. The building has to be approved by the city in terms of its upgrades, but ultimately, companies can receive up to $2.50 per square foot off rental rates. Businesses also may qualify for Real Estate Assistance Program (REAP) benefits, which provide a $3,000-per-job tax credit for up to 12 years. In addition, the Industrial Commercial Incentive program provides real estate tax abatements to companies who plan to upgrade properties they have purchased; this incentive is designed to encourage new construction and more improvements to existing buildings. Furthermore, there are three zones classified as New York State Empire Zones in Brooklyn, in which companies that demonstrate job growth are eligible for a wide range of corporate, real estate and sales tax benefits.

The BEDC itself deals more specifically with individual companies seeking to locate in Brooklyn. For example, Nelson notes the organization's involvement with retail growth in the area.

“In addition to working with local retailers, we've worked with a variety of different neighborhoods in Brooklyn to contact both franchises and chain stores, basically to show them what we have available,” she says. “A lot of the available retail space in Brooklyn is on the ground floor of apartment buildings, and that can be a difficult format for some retailers, but overall, I think the trend will see these companies recognizing the demographics here and strategizing to penetrate this market.”

Across the borough, development has been booming, and several projects of note stand out significantly. The Department of Planning and the New York City Economic Development Corporation (EDC), in partnership with the Downtown Brooklyn Council, have initiated a project known as the Downtown Brooklyn Plan. Basically, this initiative aims to strengthen Downtown Brooklyn as a major office district in New York City. The rezoning involved with the Downtown Brooklyn Plan allows 4.5 million square feet of new commercial office space, which could create up to 18,500 office jobs and 8,000 construction jobs. The initiative also includes residential development to accommodate the office workers, and overall, its mission is to foster a vibrant mixed-use environment for residents, businesses, cultural and academic institutions.

One of the largest projects in development is the Brooklyn Atlantic Yards project, which includes approximately 8 million square feet of office, residential and retail space, as well as a 20,000-seat arena for the Nets of the National Basketball Association.

“There has been a lot of excitement surrounding this project, because it will bring significant retail and housing to an underutilized site; right now, the center of the site is basically an open rail yard,” explains Nelson. “However, we also have concerns regarding its size, traffic impacts and the lack of a full public review.”

So despite the fact that this development would be a positive economic boost for Brooklyn, there has been significant debate surrounding the project, which has not yet been approved. In particular, since the project is located between two historic, brownstone neighborhoods, many Brooklyn residents feel that 60-story towers will rise out of scale with the overall Brooklyn landscape.

“This is a boom time in Brooklyn's economy in terms of residential and commercial construction. We're excited about the economic impact development in Brooklyn will have; it provides more housing for the people that want to live here, and that density will provide opportunities for retailers,” Nelson says. “Overall, we're trying to maintain the economic diversity of Brooklyn—we've been concerned about the manufacturing sector because it's been shrinking recently due in large part to residential conversions. While the added housing is a positive development, we can't lose the manufacturing community, for it would be a great economic dislocation for Brooklyn.”

Franklin County, Maine

The Greater Franklin Development Corporation (GFDC) works to attract new business and development to Franklin County, Maine. With a population of approximately 30,000, this rural county has changed over the past few years. Despite the fact that some of the county's manufacturing business has left the area, leaving it with a high unemployment rate, the demographics boast a highly skilled labor force with a high volume of manufacturing type skills.

“Franklin County is in a period of transition, where we're moving toward more advanced technology businesses and services,” explains Alison Hagerstrom, executive director of the GFDC. “We're trying to find those niche manufacturers that need things that we have to offer, such as a high quality of life and the skilled labor force.”

To this end, Hagerstrom has been marketing the county through various publications as well as working with the state of Maine to find companies that will fit in her Western Maine mountain communities. With several call centers and services, the hospital in Farmington, Maine, which is part of the Franklin Community Health Network, and the University of Maine at Farmington all serving the county at large, Franklin County has a lot to offer. These nationally recognized institutions draw a mix of residents from across the country, but finding jobs is not always easy. Thus, the county does its best to attract different kinds of manufacturers; currently, one of the largest spaces available is the former G.H. Bass Manufacturing Distribution Center in Wilton, Maine, which has a 300,000-square-foot vacancy.

“The biggest deal we're trying to attract is the Poland Springs bottled water plant, which has the potential to create 200 jobs with good wages and benefits,” says Hagerstrom. “We've been working on this project for nearly 3 years, and it's not a done deal, but if they locate here, it will be a catalyst for future development.”

If approved, the Poland Springs plant would encompass approximately 500,000 to 600,000 square feet, and it would have a huge economic impact on the area. Currently, pump testing has been built to see if the water supply can support a manufacturing plant, and a tax economy study is also underway on the project; after those decisions has been made, the process will continue to move forward, hopefully, Hagerstrom says, with successful results.

While the manufacturing industry is a strong component of the Franklin County landscape, the region has a lot more to offer as well. Boasting popular ski resorts such as Sugarloaf USA and Saddleback Mountain in the Rangeley Lakes area near Rangeley, Maine, the county is a hot tourist market. Among the lakes and the mountains, residents and visitors enjoy a variety of outdoor activities year-round, and with strong communities and nationally recognized schools, Franklin County has a high quality of life. Jay, Maine, retains a strong paper industry, and a lumber field north of Sugarloaf sends product all over the Northeast. In Farmington, the county seat, retail has started to boom. Super Wal-Mart has opened a location, and The Home Depot is in the process of securing space for a new store.

“Both Wal-Mart and The Home Depot are providing an impetus for more retail, and the image of Franklin County really has changed,” Hagerstrom explains. “Our communities still have vibrant downtowns with full and busy storefronts.”

Overall, the Poland Springs plant would have the biggest economic impact on Franklin County, but Hagerstrom is focused on promoting development across the board. Providing potential businesses with demographics of the labor market, information about particular towns and communities, and other eclectic cultural events and programs, the GFDC markets the positive and inviting aspects of the growing sense of community its county offers.

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