While the poor economy has left a higher than normal occupancy level in Boston’s office buildings, the Providence market appears to have sidestepped tough times.
Office vacancies in Boston increased to 11.7 percent, up from 4.7 percent available at the end of 2000, according to Spaulding & Slye Colliers International, a full-service real estate company in Boston.
Each year, Providence real estate firm Hayes & Sherry conducts a similar survey of 170 Providence office buildings, with attention to availability and rental rates, among other factors. The survey conducted in late 2000 showed a 3.97 percent vacancy rate in the city’s class A spaces, down from 9.46 in 1999.
Hayes said he expects that number to be increased slightly this year, to about 6 percent.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
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"Supply isn’t that high, and there is still demand," said Peter C. Hayes, principal at Hayes & Sherry. "In a market like Boston, because it’s so big, (developers) will start building on speculation," he said. "Developers will take more risks and that’s fine, but it’s like musical chairs."
In late 2000, Class B vacancies reached 12.29 percent, up from 11.06 percent the previous year and Class C vacancies decreased from 30.16 percent in 1999 to 13.18 by late 2000.
A new study should be out sometime in the coming weeks, said Hayes.
"There’s a perception that there’s a lot more space than there is," he said. "Under 10 percent is pretty low."
Whereas Boston has lots of vacancies right now, Hayes said the Providence market is tight, largely because developers here are less inclined to build on speculation. Providence simply doesn’t have a surplus of new office stock.
Construction of Nine Waterplace is set to begin in late winter or early spring, and will mark the first new office building since One Citizens Plaza was completed in the early 1990s.
The $50 million development project, directed by Starwood Wasserman, has a target completion date of early 2004.
Originally conceived in 1998 as a basic retail building and later revised to incorporate office space and restaurants, the building is to be located at Francis Street and Memorial Boulevard, directly across the street from Providence Place.
Providence law firm Edwards & Angell will occupy almost half (90,000 square feet) of the building’s 220,000 square feet of office space, according to Starwood Wasserman.
The building will also have 50,000 square feet of retail space and parking for 500 cars. Most of Nine Waterplace’s retail space has also been sold.
Hayes said it is not uncommon in Providence for developers to wait for a building to be 50 to 75 percent pre-leased before seriously approaching investors.
Rental rates for any new developments, such as Nine Waterplace, could reach the $40 per square foot range, according to Hayes.
Michael Giuttari of NAI/MG Commercial Real Estate in Providence said the Renaissance City doesn’t experience the same types of dramatic industry swings as our neighboring city to the north, because the supply and demand for office space tends to remain essentially the same.
George Paskalis, also of NAI/MG Commercial, said he has noticed a slight slowing in the Providence market compared to years past.
"Right now, in view of where the economy has been going over the past year and since September 11, things are slowing down," he said. Paskalis said many vacancies in downtown Providence – some the result of failed business ventures, including several high tech companies – have been filled by subleasers.
And some companies, he said, are downsizing and relocating to more affordable leases in towns like Pawtucket and East Providence.
"Rental rates, of course, are the bottom line," he said.
Other factors that come into play: parking, location of a company’s labor pool and access to technology. Specific industry districts can play a role in selection too.
Paskalis said businesses can expect to lease space in Providence at $14 to $30 per square foot, compared to Boston at $30 to $50.
