NORTHEAST SNAPSHOT, OCTOBER 2008

Worcester, Massachusetts Office Market

The city of Worcester is currently undergoing a bit of a transformation. New, Class A office buildings totaling 50,000 square feet and above are cropping up, commanding above-market rents in the $18.50 to $26 range that have translated into a stronger office market. The City of Worcester has seen an increased level of leasing activity in the past few years, particularly in the central business district (CBD). Vacancy rates for Class A space are trending downward, currently ranging from 8 to 10 percent, with Class B rates coming in slightly higher.

Worcester has more than $1.5 billion in development projects in the pipeline, proposed or recently completed, and none are more notable that CitySquare. The project consists of a $563 million, smart growth transformation of 20 acres of downtown Worcester. Existing retail buildings will be demolished to make way for a new, 2.1 million-square-foot, mixed-use urban district. 

Anchored by a proposed stadium-style multiplex cinema, CitySquare will re-shape Worcester’s CBD with 650 units of new housing 400,000 square feet of world-class, shop-style retail and entertainment uses, and 1 million square feet of Class A office and medical space.

The impact to the city’s office market will be of major significance, as it will provide efficient Class A space in a market that hasn’t seen this significant of a development in more than 30 years. The new office and medical space will provide tenants with maximum efficiency, on-site parking, and many urban amenities. CitySquare will complement the established biotech, financial services, insurance and manufacturing base in Worcester, and further fuel the fast-paced regional population growth

The Worcester Business Center, located at 67 Millbrook Street, is also of major significance. Formerly housing the Thom McCann shoe factory, the property was recently acquired in a joint venture between Franklin Realty Advisors and Suffolk Ventures for $10.4 million. It is currently undergoing an $8 million renovation, which includes an extensive renovation of the five-story, 75,000-square-foot “north wing.” When complete, the property will offer more than 225,000 square feet of office space, along with more than 1,000 on-site parking spaces. The building aims to be one of Worcester’s most attractive Class A facilities outside of the CBD.

In addition to the strong financial, legal, accounting and biotech presence in the city’s office market, medical-related office users are making their presence felt. Tenants such as UMass Memorial Health Care, Inc., Fallon Community Health Plan and Fallon Clinic have all signed significant leases recently totaling approximately 120,000 square feet. With CitySquare devoting a large portion of its office space for medical users, expect the presence of health care-related companies to only increase into the future.

— William D. Kelleher IV is vice president of Worcester, Massachusetts-based Kelleher & Sadowsky Associates, Inc.

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