appraisal and brokerage work.
Real estate agent shares insights to industry trends
Peter M. Scotti
Age: 52
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Position: President of Peter M. Scotti & Associates real estate
Background: Prior to starting his own real estate company in 1988,
Scotti was treasurer and principal of Providence Land Co. from 1980 to 1983,
and chief appraiser and principal at Henry W. Cooke Co. for five years.
Education: Bachelor’s degree in political science from Washington &
Jefferson University in Washington, Pa.
Residence: Edgewood
Q. What are the up-and-coming areas in commercial real estate?
A. There’s retail and office … from an office perspective, the Jewelry
District has really emerged in the last 10 years as both an office R-and-D and
as a hot residential area. The Jewelry District was really driven in the last
two or three years by acquisitions by Lifespan of the Coro Center, by Brown
of Speidel. … Those two big players have procured a great deal of space, which
means that the smaller typical Providence office-space user is now, in a sense,
competing with bigger players so that market is very strong. The Capital Center,
obviously with GTECH and Parcel 2 – that is retail, hotel, residential, and
Ron Marsella’s proposal for a hotel – those are the definite growth areas in
the city. The Financial District, primarily due to the high cost of parking
and taxes, is plinking along – the purchase of the old Hospital Trust building
by RISD will at some point take that out of the office market, so it should
tighten up the vacancy rate. Then you have what I call the Westminster district,
which is from Dorrance Street to Empire and from Washington to Weybosset, where
there’s been some residential development. But in terms of office and retail,
the big problem is parking; it will never work unless someone figures out a
parking plan. From a retail perspective, Thayer Street is very strong – $35,
$40 a square foot. Wickenden Street has really come up in the last eight to
10 years.
Q. What are some of the signature properties you have sold or are trying to
sell?
A. What we do here is about 50 percent appraisal work and 50 percent
brokerage work, so between the appraisals and the brokerage, we have dealt with
every big and well-known piece of property in the state – from the Heritage
Harbor Museum to the Swiss Village (in Newport). From an appraisal perspective,
we did the land for the Providence Place Mall. As far as sales in the last couple
of years, we’ve been involved with the sales of Newport Creamery, Saugy Hot
Dogs, Rocky Point, Lincoln Park, as well as some other pretty prominent buildings
– the Thomas House on the corner of Benefit and Thomas streets and the old Medical
Society.
Q. Does the branding of a property have any bearing on the selling price
it commands?
A. Not necessarily. It makes it easier to, on a local basis, identify
to people – Rocky Point is a great example of that. Those particular properties,
what’s driven the sales, and for Newport Creamery, was that we wound up with
significant competition for all five of those properties and consequently got
a strong sales price. That had more to do with the marketing effort than the
branding of the property. Rocky Point has more to do with the physical characteristics
of the property – it’s got more than a mile of shoreline on Narragansett Bay.
The other properties you want to look at – the Medical Society building and
Thomas Street – those are more driven by location and physical characteristics.
In real estate, everything is driven by location, physical characteristics and
from a (selling) perspective, it all has to do with the marketing of the property,
getting the highest price you can.
Q. Residential real estate prices have skyrocketed. Has commercial real
estate enjoyed the same spike?
A. The commercial market for the last two years – and by commercial
market I mean the investment market – the prices have risen dramatically, and
the reason for that is the low interest rates and the lack of alternative investment
opportunities, and by that I mean that many people have been scared by the stock
market. Properties like apartment buildings have gone up at a phenomenal rate.
Anything where you have a good, predictable, safe income stream has increased
dramatically in value. That increase will be maintained as long as interest
rates are low. You might want to look at an office building with a good anchor
tenant, retail centers with a good tenant history, even mixed-use properties,
and there are a ton of them in Rhode Island.
Q. Is the current market a seller’s or buyer’s market, and why?
A. Depending on what you’re dealing with, I would say in general it
would be a seller’s market, however, you still need a property that has to be
attractive to a buyer who’s going to use it and occupy it, or it has to be an
attractive investment opportunity. The typical property in Rhode Island is not
a big office building, it’s a small owner-used property, so if the buyer is
going to occupy and rent some other units, they know the portion of the building
they’re going to occupy will be solid. So from that perspective it’s still pretty
much a seller’s market. The other situation is that there is very little on
the market. The area I believe has softened up a bit and become a buyer’s market
is the (suburban park) industrial sector. East Providence, Lincoln, there’s
a lot of industrial areas spread throughout the state. What we’ve seen is a
significant increase in inventory and when you have that, prices tend to drop
a bit or the market terms become a little more flexible. The market was pretty
strong for four or five years, but the supply has increased …
Q. What is your reaction to Bank of America’s acquisition of Fleet, and
what impact will it have on the real estate market?
A. I don’t really think the acquisition is going to leave a big hole
in the state. Fleet just sold a bunch of buildings downtown, and sold them with
my understanding that it was a fairly long-term leaseback, so at least for the
near-term, they’re not going anywhere. We’ve been doing appraisal work for Fleet
since I opened the doors and before that, and we’ve done a good deal of brokerage
where Fleet has provided the financing. …
Q. What are simple steps a property owner should take before putting their
property on the market?
A. Just in general for residential and commercial, the first thing
to do is if there are obvious physical problems, you either cure them or you
address them, and by addressing them, you fully disclose what the problems are
and have an estimate of what they’re going to cost to repair. From a commercial
perspective, some of the big hurdles of almost every commercial deal now are
fire codes, compliance and environmental questions. Being aware of those problems
and any costs associated with those is very important. It’s like selling a car
– you want it to shine as much as you can.
Q. You just opened up a satellite office in Narragansett. What is the potential
for development in South County beyond residential? What are some specific areas?
A. The market in South County is hot. You’re talking anything, and
all you have to do is look at the population changes in the state and the overall
demographics. You have a lot of people with a good deal of wealth heading in
that direction, and you also essentially have the coastline being bought out
by people from Connecticut and New York, so you have dual pressures, so it’s
a good strong area. If you check the zoning maps, there is a minimal amount
of commercially zoned property, so areas like old Wakefield and the new developments
on Tower Hill Road are going to be very strong – all of Wakefield is very strong,
and eventually that will spill down to areas like Westerly. … It’s mostly
residential development, but you (also) need to have commercial retail services
to satisfy the population, and eventually I think you’ll get some office usage
down there.
Q. You service parts of southeastern Massachusetts. What is the market
like there, and are there any trends going on there different from Rhode Island?
A. We’ve done both sales and a number of appraisals all the way from
Attleboro through New Bedford and in Fall River. Each area is a little different.
For example, Attleboro is strong; office is strong. When you look at an area
like downtown New Bedford and you look at the prices of office buildings there
– and they have some nice quality buildings there – the price per square foot
is significantly less than what you’d find in Providence. But that goes directly
to supply and demand. We’ve had very good luck in selling mill buildings in
Fall River; we’ve gotten very good prices on them, so it depends on the demand
in a particular area for a particular product. Timing in the real estate business
is everything. Prices in Fall River and New Bedford have increased significantly
over the last five years. They’re not at the same levels they are in Providence,
but you’ve got some things going on there, and I think if they do ever get the
Mass. transit that’s going to make a huge difference. You look at New Bedford
for example – you have a much higher vacancy rate and a much slower market,
but there’s no question that it’s improved fairly dramatically over the last
five years, but it’s nowhere near Providence.
