Finding office space in northern Rhode Island for a Massachusetts company that wanted to relocate proved so difficult recently that it required some quick thinking.
iXblue Defense Systems Inc. finally got what it needed after working with a developer who bought an industrial building in Lincoln, remodeled it into offices and leased it to the company.
“We had to be very creative to get it done,” said Mike Giuttari, president of MG Commercial Real Estate Inc. in Providence.
Giuttari was working with iXblue as the company transitioned from Natick, Mass., to Lincoln.
Growing demand for commercial space and low inventory has made it tricky to find new spaces for companies, requiring solutions such as the one devised for iXblue.
“We have low vacancy, which is a good thing, but it’s tough to find space for tenants. When you’re out looking with clients who want to come here, there’s no inventory,” Giuttari said.
[caption id="attachment_324104" align="alignright" width="768"]
NO INVENTORY: Michael Giuttari, president of MG Commercial Real Estate in Providence, helps business clients find locations. He says there’s not much space right now in Rhode Island for tenants. / PBN PHOTO/MICHAEL SALERNO[/caption]
To compound the problem, construction costs had been on the rise in part because of the demand for contractors in Boston, where projects had been springing up before the coronavirus pandemic led to a ban on construction work in the city on March 17.
“We have exceptionally talented tradespeople here in Rhode Island, but we are competing in the same geographical area [as metro Boston] for a carpenter, or a laborer or an electrician,” said Colin Kane, principal at Peregrine Group LLC, a real estate development firm with offices in East Providence, Newport and Boston.
Skilled laborers were hit especially hard by the Great Recession, and many turned to other lines of work, he said. More than a decade later, many of those building professions haven’t bounced back.
“We haven’t seen a super embrace of that labor by the millennial generation, so we’re competing not only in the same labor market as Boston, but we’re also competing in a much smaller labor pool than we would have 15 years ago,” Kane said.
Work for contractors is plentiful and more lucrative in the Boston area, where apartment and condo buildings, office and retail space, and hotels and parking garages are queued up for construction.
Progress could begin this year on a 14-building project that includes 800 apartments, offices, retail and community space in Newton’s Upper Falls area, and the Boston Planning and Development Agency recently greenlighted several proposals.
Included in the list are a large apartment building on Bremen Street, a five-story condo building in South Boston, another five-story condo building in Brighton, and a complex in Boston’s Chinatown that would contain 168 apartments and condos, a 200-room hotel and a parking garage for Tufts Medical Center.
Approvals were also granted for three other large apartment buildings. At least two major Boston hotels are undertaking large renovations or additions, and there is a proposal afoot for a 17-story condo and hotel complex near a parcel adjacent to the Mass Pike in Boston.
All those projects mean plenty of work for Rhode Island contractors who are willing to make the longer commute, and construction prices here reflect that, Giuttari said.
“The numbers are huge, what they’re making,” he said. “All the labor has gone up to Boston. If somebody really wants a job down here, the contractor says, ‘I can make [more] in Boston, so I’ll bid [higher in Rhode Island].’ ”
‘It’s tough to find space for tenants.’
MIKE GIUTTARI, MG Commercial Real Estate Inc. president
About six months ago, he worked with a company in the Lincoln area that put a new warehouse project out to bid three times only to scrap the idea after realizing it was unaffordable.
Construction costs came in at $155 to $175 per square foot, when in years past, the price tag would have hovered around $90. Rent, too, was exorbitant, hitting $18 per square foot. Typically, rent is closer to $5.50 a square foot, Giuttari said.
Still, construction of hotels and apartments is fairly healthy in Rhode Island, said Neil Amper, vice president of Capstone Properties, a real estate and property-management firm in Providence.
“There are quite a bit of projects,” he said of pending work in Providence.
While office space, especially in the city, is available, large buildings for industrial use are a different story.
“If you want to buy a 20,000-square-foot industrial building in Rhode Island, it’s hard to find,” Amper said. “The office market has been a little bit challenging over the past decade.”
Kane, of Peregrine Group, noted that his firm is building both public and private projects in downtown Boston, downtown Newport and downtown Providence. From a business standpoint, Boston’s higher rents make the city a more lucrative place to build, and higher-paying jobs for skilled workers go with the flow.
“It’s not so difficult for that tradesman to drive to Boston,” Kane said.
