We love comeback stories. We love rooting for the little guy. In this case, the comeback story of 2019 is the story of Worcester, Mass. Worcester proper boasts a population of 180,000 residents, the second most in New England, but for the last century has been riddled with crime, poverty, and tax rates that discourage businesses from moving in. Similar to Lawrence and Lowell, Worcester was an industrious mill town that took advantage of its strategic location right in the middle of New England. Every major train line had a hub in the city which made logistics easily accessible and convenient for any manufacturer who wanted to disseminate its goods throughout the country.
After the Industrial Revolution gave way to the Post-War Era, Greater Worcester County fell into a nearly intractable depression. Worcester Polytechnic Institute, Holy Cross, et al provide students an exceptional education, but so few employment opportunities exist in the immediate area that alumni from Worcester’s 20+ colleges needed to move much closer to Boston or leave New England altogether to find opportunities that suited each individual’s skill set.
However, with the burgeoning demand for commercial real estate within the Rte.128 beltway around Boston, tech companies, retail giants, residential development, the highly anticipated Encore Boston casino in Everett, Mass., and the marijuana revolution has each contributed to the migration away from Boston to the next available hub.
Worcester is that hub.
How does industrial real estate benefit? Here are five reasons why Worcester industrial real estate is experiencing a boom the city has never seen before now.
1) The Worcester Red Sox development on the Wyman-Gordon site next to Kelley Sq. is anticipated to cost over $100 million in construction and associated costs in the next few years. This development will drive further retail, residential, and mixed-use development within a number of square miles around the site. The industrial sites around the stadium have been slated for redevelopment, pushing the companies inhabiting the real estate to find new locations, devouring the already minuscule vacancy rate in Worcester proper.
2) Developers who build industrial sites on spec are finding tenants before the construction is even completed. For example, leading New England developer GFI Partners (Boston) purchased the former U.S. Steel Distribution Center building on Blackstone River Rd. in Worcester and was able to procure cornerstone tenant Imperial Distributors (brokered by The Stubblebine Co.) for a 325,000 s/f lease on a long-term basis before the site had been completed. They also acquired Kim International (brokered by The Stubblebine Co.) and Mid-States Packaging to bring the facility to full tenancy within 24 months of completing construction.
3)Large corporations in the area are growing, moving, and upgrading their space. Curtis Industries consolidated their space occupied on Higgins St. in Worcester and leased 163,000 s/f at 70 Hartwell Ave., West Boylston, right over the border from Worcester on a long-term basis (brokered by The Stubblebine Co.). As earlier mentioned, Imperial Distributors also consolidated their operation from numerous buildings into their flagship location at 150 Blackstone River Rd. Also in West Boylston, National food distributor Bunzl renewed its 147,000 s/f lease at 180 Shrewsbury St. due to its strategic location in as a distribution point in New England (brokered by The Stubblebine Co.). Very recently, FW Webb more than doubled its size and purchased 33 Sword St., Auburn a 75,000 s/f distribution and retail facility located on the southern border of Worcester (brokered The Stubblebine Co.). Lastly, Unified Global Packaging Group, formerly Atlas Box Co., leased 126,000 s/f in Whitinsville. Unified Global Packaging Group transacted on this space due to its demand for more warehousing and manufacturing space on Rte.146 which runs in and out of Worcester (brokered by The Stubblebine Co.). These transactions represent the unmet demand for modern warehouse and distribution space by companies in Worcester County and the greater Central Massachusetts area.
4) The mill buildings, that at one time were the only industrial buildings in the city, are being purchased and repurposed as residential or mixed-use sites. The companies that used these buildings as warehouses or manufacturing facilities are moving out of them and finding single-story industrial buildings to scale up and grow. This net absorption effect is turning single-story Worcester industrial buildings into a highly sought-after and increasingly expensive commodity.
5) The unprecedented growth and development which emanates from the epicenter of Boston and ripples to New Hampshire, Rhode Island, and even Central Massachusetts out to Connecticut may be the most significant contributing factor to the blossoming growth in the Greater Worcester area. Projects that are due to open in the next months, such as the Encore Boston casino in Everett, Mass. have absorbed many companies in that immediate inner Boston suburban ecosystem who have relocated between Rte.128 and I-495, pushing other companies to the next submarkets like Providence, Lawrence, Mass., and Worcester. Other notable developments include Boston’s Industrial Seaport District being utterly transformed from a lower-level industrial park into a world-class center for international headquarters for companies like General Electric, Reebok, and pharmaceutical giant Vertex.
These ripple effects may take a few years to be fully realized, but Worcester is poised to make the most of these seismic shifts in the New England Industrial Real Estate market. Wise investors and corporate officers should be aggressively looking at Worcester and taking advantage of the competitive pricing before rents and sale prices hit uncontrollable levels, which they are sure to do, sooner than we may think.
David Skinner is an associate with The Stubblebine Co./CORFAC International, Lexington, Mass.