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Commercial Real Estate

Commercial Real Estate

Sign of the Times

Republican Publisher George Arwady says the newspaper’s staff can fit into perhaps one-third of the space in the building on Main Street, prompting an effort to sell or lease that real estate.

The sign just went up on the top of the structure a few months back. But the Republican building on Main Street in Springfield has been for sale or lease, on one level or another, for the better part of a more than a decade now.

Thus, it has become part of a regional and national story involving newspapers and commercial real estate. Technology has changed, papers have consolidated operations, and staffs have become smaller — those last two trends accelerated by a sharp decline in the fortunes of most all newspapers as interest in print advertising has waned. Thus, those papers’ real-estate needs have changed accordingly. And sometimes dramatically.

So it is in Springfield and at the Republican, part of Advance Publications, where publisher George Arwady estimates that the business — meaning the non-commercial-printing side of the venture (he stressed that repeatedly) — now requires not even half, and perhaps not even a third, of the roughly 64,000 square feet in the office building opened more than a half-century ago.

“We had maybe 500 people working in this building in the heyday — that’s when we were producing three newspapers, the Daily News, Union, and Republican, that were all competing against each other. There were competing newsrooms, competing circulation departments … they threw things over the fence at one another,” said Arwady, who came aboard as publisher nine years ago but certainly knows the history. “We might have 100 non-production people here now; we certainly don’t need all this space.”

Which brings us back to that sign. It announces loudly what has been widely known for years now — that there are large quantities of what Jack Dill, a principal with Colebrook Reality Services, which is now marketing the property, described as flexible, conveniently located space available for lease or sale as business condominiums.

And if someone wanted the whole building (again, not the huge commercial-printing operation), they can have that, too, if the price is right, said Arwady.

Indeed, he said the staff at the paper could easily be relocated into 20,000 square feet of space, and perhaps even less, in any of a number of downtown office buildings.

The fact that there are a number of properties that could accommodate them, including all the major office towers and several other buildings, including Union Station, helps explain why there has been little movement on the Republican space over the years, and why the sign has gone up on the property.

“It’s a buyer’s market, and certainly not a seller’s market,” said Arwady, noting, as area commercial real-estate brokers and managers have for some time now, that there is what amounts to a relative glut of office space in downtown Springfield, at least when compared with much hotter markets such as Boston, Cambridge, and even Cleveland.

In that last city, another Advance newspaper, the Plain Dealer, has relocated to smaller quarters, and its now-former headquarters has been sold and redeveloped. Something similar has happened at a number of other Advance publications, said Arwady, including the one in Grand Rapids, Mich. (the Press), and the Gazette in nearby Kalamazoo, where he once worked, where the newspaper property was acquired by a hospital group.

“They kept a portion of the old building, designed by a famous architect, and they built a large addition with offices,” he explained. “And the paper moved into nice space three blocks away in downtown Kalamazoo.”

And in Grand Rapids, he went on, the Press building was sold and redeveloped; it is now part of what’s known as the Medical Mile, a renowned healthcare destination.

“We’ve done this stuff all over the country, so we’re experts,” Arwady said of the Advance group, noting that the story has been replicated, to one degree or another, with newspapers — and communities — of all sizes.

The pattern has continued regionally as well, with a number of newspaper properties, perhaps most prominently the Boston Globe’s former headquarters building on Morrissey Boulevard in Dorchester being sold and redeveloped.

The Globe left its 700,000-square-foot complex in 2018 after nearly 60 years at that location, and took up residence on Washington Street — not far from where it had operated starting in 1870. It sold the Dorchester property to developer Nordblom, which is reshaping it into something called BEAT (Boston Exchange for Accelerated Technology). Plans call for 360,000 square feet of office and 300,000 square feet of flex, light industrial, and lab space that will likely include a craft brewery.

“It’s a massive project; the site is being totally redeveloped,” said Dill, who attended Boston College High School across the street. “That’s an example of what’s happening in cities across the country.”

And the Republican almost had a success story to top all these others. That’s almost.

“The solution for each market has been different. And at the end of the day, all real estate is local, as Tip O’Neill said about politics, and you have to find solutions that are available and practical and economical in the place that you happen to be located.”

Flash back to 2013 when there were briefly three Springfield casino proposals vying for the coveted Western Mass. license. In addition to the South End blocks now occupied by MGM Springfield and a short-lived proposal to build where CRRC is now assembling subway cars, Penn National, which now operates the slots casino in Plainville, wanted to build a casino on a large parcel that included both the Peter Pan bus terminal (now home to the Way Finders headquarters under construction) and the entire Republican parcel, including the massive printing operation.

“Somewhere, I have an option to buy that’s this thick from Penn National,” said Arwady, placing his thumb and index finger roughly two inches apart. “They were going to take the whole shooting match and build me a new production facility — the city was trying to get me to go into the industrial park; we were going to move all the office people downtown. And they were going to pay for the whole thing.”

Since the MGM plan got the nod in Springfield and then with the Gaming Commission, Arwady has essentially been trying to forge a successful plan B, and he acknowledged that doing so will be somewhat challenging because the market remains soft in Springfield. But he nonetheless remains optimistic that the property can regain the vibrancy it had 30 and even 20 years ago.

This optimism is based on a number of factors, starting with that prime ingredient in commercial real estate — location. Indeed, the property is visible from — and lies almost underneath — I-91, and also just off 291. Meanwhile, the bus and train stations are right across the street.

Beyond location, the building, described by Arwady as a “concrete fortress,” has abundant free parking (a rarity in the downtown area) and flexibility in that he believes it can accommodate everything from retail to professional offices to a variety of different cannabis-related businesses.

“We even have a large vault,” said Arwady. “And a vault is the most attractive thing you can have, from a commercial real-estate perspective, for a cannabis company, because it’s still an all-cash business and they can’t use the banks.”

Dill told BusinessWest that he can envision a number of different potential redevelopment opportunities at the site, including office space, education-related uses, and perhaps co-working space. And flexibility — meaning the ability to respond to a market’s needs — is an important quality when redeveloping such structures, because each real-estate market is unique.

“The solution for each market has been different,” he explained. “And at the end of the day, all real estate is local, as Tip O’Neill said about politics, and you have to find solutions that are available and practical and economical in the place that you happen to be located.”

Over the past several years, a number of entities, from law firms to education-related facilities, have toured the property, said Arwardy, adding that he believes this interest will eventually translate into a transformation of the property into other uses — perhaps several of them.

This has been the trend — or the story — when it comes to newspapers and commercial real estate, and the story is ongoing. u

George O’Brien can be reached at [email protected]

Commercial Real Estate

Changing the Landscape

An aerial drone shot of the Northampton/I-91 Professional Center on Atwood Drive.

Ken Vincunas says he started getting into drone photography years ago — well before most practitioners.

There was a lengthy learning curve, and in some ways it’s still ongoing, he acknowledged, but overall it’s been a fun, intriguing experience as the technology has improved and its capabilities have grown. Meanwhile, it’s become a very practical — and much-needed — work tool for Vincunas, president of Development Associates, the Agawam-based commercial real-estate management firm and developer.

Indeed, he uses drone shots to help market the myriad properties in the company’s portfolio from Greenfield to East Granby, Conn.; shots from above often provide a unique perspective.

Shots like the one on this page, which Vincunas took last fall — probably in the early morning, by the looks of the parking lot and the lack of traffic on nearby I-91. Perhaps better than any thousand words could — even these — the picture tells how the development on Atwood Drive in Northampton, known officially as the Northampton/I-91 Professional Center, has changed the landscape in that area, once home to the Clarion Inn and Conference Center (Vincunas told BusinessWest he has some powerful drone shots capturing the demolition of that facility).

Today, the site has become home to a wide range of businesses and institutions, including the Massachusetts Trial Court, now a major tenant in the third building to be developed on the property, known as 15 Atwood, the large one in the center of the picture.

But Cooley Dickinson Hospital (CDH) is the dominant tenant on the property, with facilities in all three buildings and a presence summed up with the collective ‘Atwood Health Center.’

The hospital, a Massachusetts General Hospital affiliate, has its name on 22 Atwood (Cooley Dickinson Health Care), which houses a number of facilities, from Atwood Internal Medicine to Hampshire Cardiovascular Associates; from integrated behavioral-health services to women’s health. Meanwhile, at 8 Atwood, the first building developed, CDH has located its occupational-therapy, physical-therapy, and speech-language facilities, and in 15 Atwood, opened last spring, CDH has placed general surgical care and infectious-diseases facilities and Oxbow Primary Care.

Thus, the facility has become a true healthcare destination, similar to the Brightwood section of Springfield’s North End, although, as Vincunas noted, it is home to a wide variety of tenants, including an engineering firm and an accounting firm slated to move into 15 Atwood later this year (buildout on the latter is much further along than the former).

Which means the parking lot generally doesn’t look anything like it does here. And it’s likely to become even more full in the coming months as Vincunas looks to fill the remaining spaces in 15 Atwood, roughly 8,000 square feet in total.

“We’re seeing a good amount of interest in this space,” he said while sitting at a table in one section if it. “We had one caller interested in the whole thing and several others interested in pieces of it.”

But he’s already looking beyond those spaces — both literally and figuratively — to the undeveloped property at the back of this parcel, adjacent to the highway. There is room for additional development there, he said, and already a search is underway for the anchor tenant or tenants needed to greenlight new construction.

“We have site-plan approval for another building, which is a significant milestone,” he said, adding that the permit will allow something between 40,000 and 50,000 square feet, somewhat smaller than the 66,000-square-foot 15 Atwood. “We’ll need someone there to be the anchor, as it was with these other buildings.”

For this issue, BusinessWest takes an in-depth look at the Atwood Drive complex and how it remains an important work in progress.

A Vision Comes into Focus

Despite how it might look to some, Vincunas stressed repeatedly that this venture was certainly not an overnight success.

Indeed, it’s been more than a decade in the making, he said, and the story really begins when the Clarion property, located on the north side of Atwood Drive, was acquired at auction by the O’Leary and Shumway families in the early ’90s. Other sites on both sides of the street were acquired over the ensuing years, and eventually a vision developed for a professional office complex, said Vincunas, one that would be built in stages as need — and anchor tenants — emerged.

“We’re seeing a good amount of interest in this space. We had one caller interested in the whole thing and several others interested in pieces of it.”

Redevelopment of the south side of the property, undertaken by a partnership of the O’Leary and Shumway families, with Development Associates as leasing agent and construction property manager, began with 8 Atwood, with construction commencing in 2011. It is now home to Clinical & Support Options, several CDH facilities, as noted, and New England Dermatology. The building known as 22 Atwood was built in 2012. It is now home to 17 different CDH services, including the diabetes center, fertility services, geriatrics, podiatry, radiology and imaging, rheumatology, and spine medicine.

Construction on 15 Atwood — led by the O’Leary family as managing partner, again in partnership with Development Associates — began in 2017, with the trial court as the anchor tenant; the facility had been located in cramped quarters in downtown Northampton and needed an upgrade.

Ken Vincunas stands in the space being built out for the construction firm BluRoc in 15 Atwood, the latest addition to the complex just off I-91 in Northampton.

The court, now occupying roughly 22,000 square feet, moved in last February, and since then, a number of additional tenants have signed on, including Cooley Dickinson, which moved in last fall; the state Department of Developmental Services; Assurance Behavioral Health; Staffier Associates, a mental-health clinic; OnaWay, LLC, an accounting firm relocating from Holyoke; and BluRoc, a construction firm now located in Hadley.

This diverse mix of tenants was drawn to the Atwood Drive complex by a number of factors, but especially accessibility (the site is just off exit 19 of the highway), parking, the large footprints available, and the ability to shape these spaces to fit specific needs.

“One of the big draws is the parking — it’s very hard to find a very large space with this kind of parking in Northampton,” Vincunas explained. “And it’s very accessible, which makes it attractive to a wide range of businesses and facilities like the courthouse.”

And also BluRoc, which will soon be occupying more than 6,000 square feet of space on the third floor of 15 Atwood.

“They have three offices in three different buildings in one little area, and they needed a consolidated office; they’re going to have 30 people here,” he said, adding that buildout of the space should be completed by late spring.

With the third and first floors fully leased, there are now just those two spaces remaining on the second floor, he said, adding, again, that there has been a good amount of interest expressed in those footprints.

Looking ahead to the last remaining parcel and development of that space, Vincunas said there is no definitive timeline on construction, but he believes there is solid demand.

Shutter to Think

The accounting firm OnaWay has its own aerial shot of 15 Atwood on its website, accompanied by the words “our new home in 2020 is underway, and we’re stoked to live and work where we call home.”

There’s a growing list of companies saying similar things about this location, which has been completely transformed over the past decade — from unused property and a tired hotel and conference center into a state-of-the-art professional complex and healthcare destination.

As Vincinas said, it wasn’t an overnight success, certainly, but it has developed — yes, that’s a photography term — into one of the better development stories in the region.

As that drone shot clearly demonstrates.

George O’Brien can be reached at [email protected]

Commercial Real Estate

A Tale of Two Cities

Evan Plotkin says congestion and sky-high rents in Boston demand creative solutions. One of them could be incentivizing companies to move west, into Springfield’s downtown.

Evan Plotkin was talking about how “something has to give.”

With that one phrase, he was talking about the commercial real-estate markets in the central business districts of Boston and Springfield.

In the Hub, said Plotkin, president of NAI Plotkin, rents are sky-high and continue to climb — to more than $100 per square foot in some locations and to roughly $63 per square foot on average, with more space being built to accommodate soaring demand. Meanwhile, traffic, congestion, and problems with mass transit are strangling businesses, he said, to the point where meetings can’t start until 10 a.m. and overall productivity is impacted.

Meanwhile, in Springfield, rents are low — less than one-third the average in Boston — and they are flat, as in consistently flat. “They really haven’t gone up at all in maybe 25 years,” said Plotkin, who noted that there are several reasons for this, but especially the fact that there is, by his estimate, roughly 600,000 square feet of vacant class A space in Springfield’s downtown.

Exacerbating this relative stagnancy in the City of Homes has been new and seemingly unneeded inventory coming on the market — especially the 60,000 square feet at Union Station and the redeveloped property known as 1550 Main — and movement among a growing number of businesses to reduce their physical footprint by enabling (or in some cases requiring) employees to work from home.

This is where the ‘something has to give’ part comes in, said Plotkin, in a very candid interview with BusinessWest, noting that things need to change in both cities. And both would seemingly benefit if just some of the state offices now based in the Hub, as well as many different types of private businesses, would change their mailing address from Boston to Springfield when their leases expire.

“There’s 70% rent inflation in Boston, so when these businesses’ leases expire, they’re looking at incredibly high turnover rent,” said Plotkin, who co-owns a portion of the office tower known as 1350 Main St. He noted that class A rents in Boston have climbed $12 to $15 per square foot over the past few years. Meanwhile, in Springfield, property owners are charging $15 to $20 per square foot of class A space.

“It’s outrageous what’s going on in Boston — and everyone can do the math,” he said. “If state agencies don’t have to be in Boston, they can be decentralized and relocated to office space in Springfield or perhaps Worcester. They’re looking for creative solutions for Boston, and this could be one of them.”

Besides these opinions, all Plotkin really has at this point are those numbers he mentioned earlier (as well as some other statistics) and what appears to be that sound theory — that businesses and state agencies that don’t really need to be in Boston could and should be incentivized to seek other locations, including the 413 and especially downtown Springfield.

He has meetings planned with other downtown property owners as well as Rick Sullivan, present of the Economic Development Council of Western Mass., to discuss what can and perhaps should be done to at least raise awareness of what Springfield has to offer and perhaps create some migration west.

Plotkin said he understands there are reasons why state agencies and businesses want to be in Boston — especially because they know there’s a skilled workforce there — and he understands that moving about 90 miles west on the Turnpike is expensive and presents some risks, especially when it comes to workforce issues.

But he says the numbers speak for themselves, and if those paying sky-high rents in Boston could come to understand the numbers in this market, they could become inspired to relocate.

And if high-speed rail between Boston and Springfield becomes a reality, then people could, in theory, live in the Boston area and work in businesses and agencies relocated to the 413 — a decidedly differently spin on how that service might change the business landscape in the Bay State.

That’s a very large number of ‘ifs,’ and Plotkin acknowledges this as well. But as he said at the top, and repeatedly, something has to give in both cities.

Space Exploration

As he talked with BusinessWest, Plotkin continually leafed through the pages on a white legal pad he brought with him.

They contain various notes he’s collected over the past weeks and months on the Boston real-estate market and the overall business climate in New England’s largest city.

There are some statistics he’s collected — such as those regarding average rents in the Hub, the amount of new space under construction (2.5 million square feet was the number he had), and the current vacancy rate in the city — an historically low 6%, according to the New York-based real-estate giant Cushman & Wakefield.

But there were also some general thoughts, observations, and notations from various publications and other sources.

Among them was a quote from the Massachusetts Biotechnology Council citing a survey which revealed that 60% of the life-science employees working in Boston would “change their job tomorrow” if they could get a better commute. There was also something he read in another publication (he couldn’t remember which one), noting that many Boston-area residents had simply given up on mass transit because it was so unreliable and were instead driving to work and getting there mid-morning.

“In one report I read, business owners in Boston said they had to add staff to make up for transit delays,” he said, putting a verbal exclamation point behind that comment. “Think about how disruptive that is to your business. We don’t understand that here — there’s no such thing as traffic in Springfield.”

Summing up all he’s read and heard about Boston and possible solutions to its congestion problems — everything from incentivizing employers to let workers telecommute to taxing motorists for using certain roads at certain hours — he said the situation is fast becoming untenable for many living and trying to do business there.

“You have inefficiency, spiraling upward costs, shortages of affordable housing, transportation problems, congestion, and sky-high cost of living there,” he said. “Businesses locate in Boston because they can attract that workforce, which makes sense, but if that workforce can’t afford to live there and can’t deal with the congestion, then what’s the point of being in Boston?”

Which brings him back to Springfield and its downtown. And for this subject, Plotkin didn’t need a legal pad.

He’s been working in, and selling and leasing commercial real estate in, downtown Springfield for more than 40 years. He knows what’s changed and, perhaps more importantly, what hasn’t, especially when it comes to demand for space in the central business district, and what would be called net gains.

Indeed, Plotkin said that what the region has mostly experienced — there have been some notable exceptions, to be sure — is companies moving from one downtown office building to another.

In this zero-sum real-estate game, one building owner loses a tenant, and another gains one — but the city and its downtown don’t gain much at all, he said.

“There’s been negative absorption in the downtown for many years now, and I don’t see anything really changing,” he told BusinessWest. “I’m seeing people moving from one block to another, one office building to another, but not many new businesses moving in. Meanwhile, everyone’s vying for the same tenants, which drives the rental rates down even lower than they have been historically; it’s a tenant’s market here.”

It’s anything but that in Boston, which has seen a surge of new businesses moving in — everything from tech startups to giant corporations, like GE. The real-estate market is exploding, and traffic woes and mass-transit headaches have been consistent front-page news. All this calls for creative thinking — as in very creative — and perhaps looking west, said Plotkin, who did some simple math to get his point across.

“Using the example of a 20,000-square-foot tenant paying $63 per square foot in Boston … if the same tenant came to Springfield and paid $18 per square foot, we’re talking about millions of dollars,” he explained, adding that these numbers should strike a chord, especially when it comes to businesses and agencies that don’t have to be in Boston.

Many of those who think they do need to be in Boston are focused on workforce issues, he went on, adding that he believes the Greater Springfield area can, in fact, meet the workforce requirements of many companies.

And over the past several years, the city has become more vibrant with the addition of MGM Springfield, said Plotkin, adding that there are certainly other selling points, like a high quality of life and a cost of living that those residing in and around Boston might find difficult to comprehend.

Bottom Line

As he talked with BusinessWest, Plotkin all but acknowledged that getting businesses and agencies to trade Boston for Springfield will be difficult, for all the reasons stated above.

But the situation in the Hub could be reaching a tipping point when it comes to affordability, traffic, congestion, and quality of life.

And these converging factors might, that’s might, finally convince some decision makers to seek a very creative alternative.

George O’Brien can be reached at [email protected]

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