A lack of downtown office space suitable for high-tech companies may be keeping some of New England’s premier technology firms from considering a move to Rhode Island. Brad Waugh, formerly with CBSI in Providence and now a president at Akibia, a 400-plus employee software company outside of Boston, had considered moving a substantial facility to Providence, but instead will open only a recruiting office here because there’s no available suitable space.
Lack of “smart” buildings of adequate size and difficulty getting financing are hampering Rhode Island’s competitiveness for companies looking outside of Boston for lower rents and less expensive parking.
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”It’s a problem,” said Michael Giuttari of NAI MG Commercial Real Estate of Providence. “You’re not going to find (large high-tech space downtown), short of buying a building and kicking everybody out.”
Waugh said Akibia “did speak to the state and actually worked with a local real estate firm. The problem is the amount of space we need – about 80,000 square feet there was nothing available.”
An 80,000 square foot building in downtown Providence? “It’s impossible,” said Jay Fluck, a principal of CB Richard Ellis, Rhode Island’s largest commercial real estate firm.
”Clearly if you’re looking for 2,500 square feet, it’s there,” Fluck said. “If you’re looking for 15,000-20,000 square feet, pickings are slim, and 80,000 square feet, it’s impossible.”
All this at a time when the Rhode Island Economic Development Corporation continues its Mass. Exodus campaign, an aggressive Web-based effort to lure some of Massachusetts finest companies to Providence and Rhode Island, where rents and parking are cheaper.
”The lack of space is something we’re very concerned with,” said Joseph Hammang, director of science and technology at the Rhode Island Economic Development Corporation. “The companies we’re dealing with through Mass. Exodus in particular have a very short time frame they’re looking at.”
Fluck said he hears the same, even from companies in-state that are looking to expand, but unwilling to wait the “two or three years” for proposals for “smart” buildings, those wired for high-tech (fiber optics) to become a reality..
Hammang is more optimistic, suggesting “there’s plenty of buildings in the Jewelry District and Downcity area. The problem is they’re not ready to go. There are numerous proposals on the table to get these buildings brought up to be rehabbed and to have proper fiber optic access, and we’re working with a number of developers now to get them to pull the trigger and provide the necessary space.”
But the lack of space now, he suggests while “not causing people to say forget it in Providence or Rhode Island in general,” may still be leading companies to make choices to go elsewhere.
”Of course there are people who need something right now,” Hamming said. “There are companies that are here that need to upgrade their space, something that’s more up to date, but I don’t think we’re losing a tremendous amount of business.”
But there are some substantial obstacles to building new buildings.
Ask Edward Sammartino, the former owner of Calart Flowers, who has been trying for the last 12 years to build a second Calart building – 60,000 square feet — next to the existing one on Reservoir Avenue at the Cranston/Providence line, not far from Route 10.
The current projected location is in Providence, just over the Cranston line and at least two failed efforts and two to four years of frustration trying to win a zoning variance in Cranston, Sammartino said. And then there’s the three and a half years it took the state Department of Environmental Management to finally approve a plan that required Sammartino to build a culvert under the building to accommodate an existing stream to end up in a pond in front of the building.
And now, after a million dollar investment, Sammartino said he is struggling to find the remaining $5 million needed to finance the building’s construction.
”Right now we’re trying to get the bank to give us the financing,” Sammartino said. “They want at least 75 to 80 percent pre-lease.” He hopes to have the building completed in a little over a year.
Fluck agrees. “One of the issues in Providence is that the lenders are requiring a fairly high percentage of pre-leasing. You’re not going to see them (buildings) built on spec. An 80,000 square foot tenant needs to partner with a developer and have a two year lead time” And, he said, “companies don’t look out that long.”
”I’d love to see a spec building,” Fluck said. “It’s a tough go. What you really need to have is the tenants first.”
