Home Posts tagged Cannabis Industry
Economic Outlook

Higher Ground

Scott Foster says small cannabis businesses are being assailed with offers from large, out-of-state players.

The cannabis industry is in full swing in Massachusetts, with about three dozen dispensaries currently selling products for recreational and medicinal use — about a third of them in Western Mass. — not to mention cultivators, product developers, and a host of other related enterprises.

With 17% of cannabis sales going back to the state as taxes, and communities collecting at least 3% more — usually higher — it’s easy to recognize the financial impact.

But Scott Foster says said it’s important to remember the jobs being generated.

“You can get good employment in this field. A shop might have 20-plus employees working there,” said Foster, a partner at Bulkley Richardson, the Springfield-based law firm that launched a specialty cannabis practice last year to provide guidance for individuals, companies, and municipalities entering this very young industry. “These aren’t small businesses in the sense of 200 or 300 employees, but it’s not just four or five people working, either. It’s a pretty steady base of employment.”

And it adds up, said Jeff Hayden, vice president of Business and Community Services at Holyoke Community College (HCC), which recently launched a Cannabis Education Center to provide needed training and resources for people who want to enter this burgeoning industry.

“In Holyoke, 13 companies have applied for 21 different licenses,” Hayden told BusinessWest. “At present, 50 to 75 people are employed in cannabis-related businesses in Holyoke, but the anticipation is, within a year or two, that will be in the range of 400 to 500 people. It’s potentially a significant occupational opportunity for people. And if Holyoke is looking at 400 to 500, what is Springfield looking at? What about Northampton, Easthampton, Chicopee?”

This career potential is what inspired HCC to partner with the Worcester-based Cannabis Community Care and Research Network (C3RN) on the Cannabis Education Center.

“In Holyoke, 13 companies have applied for 21 different licenses. At present, 50 to 75 people are employed in cannabis-related businesses in Holyoke, but the anticipation is, within a year or two, that will be in the range of 400 to 500 people.”

“At HCC, we focus on what kinds of job skills people need in order to get jobs, whether entry-level or skills to do their job better. The fact that there is so much potential in this new industry in Massachusetts piqued my interest.”

No economic outlook is complete without touching on the early expansion of the cannabis industry in Massachusetts — and its immense promise for further growth, especially as dozens more shops plan to open their doors in 2020. Whether they’ll be able to maintain the sector’s early momentum remains to be seen — but most analysts agree the potential is certainly there.

On Fire

Foster recently came across an article that listed cannabis among the top four new legal practice areas, among heavyweights like cybersecurity.

“It’s interesting that cannabis has become a front-and-center legal issue across all the U.S., not just Massachusetts,” he said. “It’s becoming more recognized as a legitimate industry. Even though federal law hasn’t changed, it seems to be moving in that direction.”

Indeed, with Illinois joining the list this month, 11 states have now legalized recreational marijuana, and 19 others allow medicinal marijuana. With others set to follow this year, it’s not hard to imagine an eventual shift at the federal level, even if that doesn’t appear imminent.

As one step in that direction, the U.S. House of Representatives passed a bill in 2019 allowing banks to handle marijuana accounts; currently, most cannabis businesses are all-cash enterprises since they can’t use banks.

“Will banks ever start lending to the industry?” Foster asked. “I think yes, but most people in the industry think it probably won’t be in 2020. Maybe, but probably not. They’re expecting it to stall in the Senate, and Washington is occupied at the moment with lots of other stuff.”

For now, communities that have embraced this new world — like Holyoke, which is starting to fill its former mills along the canals with a mix of cannabis-related businesses — appreciate the additional tax revenue and retail traffic in town, but also, as Hayden notes, those jobs.

“Will cannabis provide thousands of jobs, like the state has predicted? Who knows, but 300, 400, 500 new jobs is significant,” he said. “More than 90% of the businesses in the Valley are small businesses — not by the definition of the Small Business Association, with 500 employees or fewer, but with 50 or fewer.”

Collectively, that’s a lot of positions to fill, especially as more of those small businesses come online.

“This is like any other business in the sense that they need people ready to work and have some skills to do the jobs they want to hire for,” Hayden said. “The more we can work as a community college on skills training that gets people ready for work, the better.”

In many cases, shops are hiring people who may face skill barriers to other types of employment; it’s a relatively even playing field in that, because the industry is so new, almost everyone needs training. HCC’s Cannabis Education Center is doing its part, both through courses and one-day programs like an upcoming workshop series on planning and starting a cannabis business, as well as getting into medical marijuana.

“Our goal is to get people into jobs, but in the context of a career,” Hayden said. “A job is a great thing, but if it’s just a 15- or 20-hour job, that’s not going to support you or your family for long. We want to get people on a career pathway through skills training.”

For example, he went on, “in cultivation, someone might come in trimming plants, working with growers, learning what the process is, and might become a cultivation technician, an assistant grower, even a master grower. There are definitely steps along the way to get not just a job, but a career in cannabis.”

Maturing Industry

Foster said he doesn’t have a crystal ball when it comes to the cannabis industry, but he does have his eye on some intriguing trends.

“We’re already seeing consolidation. Many of our clients are receiving unsolicited offers to buy them out. They’re not actively soliciting offers; people are contacting them. It’s mostly out-of-state money — and it’s not small money. That will be interesting to see, if the industry changes from being completely locally owned to being owned by out-of-state players, creating national cannabis businesses.”

Another murky area right now is the effectiveness of the state’s social-equity piece, which aims to provide priority access, training, and technical assistance to individuals and communities negatively affected by the drug war — a key target audience for HCC’s training efforts. “That’s another big unknown which may get some clarity in 2020,” Foster said.

What is clear is that the market, as it stands now, is humming along — and creating those jobs.

“All the folks I’m seeing are still trying to keep up with customer demand. At least from what I’m hearing, competition hasn’t slowed business. Will that change if New York and Connecticut were to legalize? Possibly,” he noted, citing casinos as a case study; there’s no doubt Foxwoods and Mohegan Sun have lost some business to their northern neighbor since the Bay State got into that business. “But for the moment, Massachusetts is the only game in town when it comes to cannabis.”

It’s a game with lofty goals and an uncertain — but undoubtedly promising — future.

“It’s a maturing industry,” Foster said. “So it’s going to have maturing-industry challenges.”

Joseph Bednar can be reached at [email protected]

Economic Outlook

Springfield Regional Chamber to Host Marijuana Professionals, Officials

There’s still a lot of confusion surrounding the cannabis industry.

Despite the fact that medical marijuana was legalized in Massachusetts in 2012, and recreational marijuana in 2016, the business community is juggling countless regulations and laws, whether looking to get into the cannabis industry themselves or just dealing with this new economy in general.

On Tuesday, Jan. 28, many of these questions will be answered.

From 12:30 to 5 p.m. at the Springfield Sheraton, the Springfield Regional Chamber will host “The Buzz About Cannabis: Marijuana in the Marketplace and the Workplace,” a collection of business, legal, and medical marijuana professionals, distributors, and entrepreneurs, as well as state cannabis officials, who will give attendees all the information they need to know about cannabis.

Nancy Creed describes retail cannabis sales as just one spur on the wheel of an industry that has pushed its way to the forefront over the last several years, and the president of the Springfield Regional Chamber is making plans to prepare business folks for this rising economic driver.

“The cannabis industry is clearly a, no pun intended, budding industry,” Creed said. “When you look at the revenue associated with it and the taxes, it really is the next economic engine of its time.”

It was a meeting with Cannabis Control Commissioner Kay Doyle that inspired Creed to begin researching this topic.

Nancy Creed describes retail cannabis sales as just one spur on the wheel of an industry that has pushed its way to the forefront over the last several years

“This, to me, was kind of a no-brainer,” Creed said. “We need to make sure that we are at the front of the industry and we are helping businesses either get into the industry or, on the flip side, deal with this new economy.”

The conference itself features an opening keynote from Doyle, breakout sessions focused on topics like “Business Structure and Banking in the Cannabis Industry” and “Cannabis in the Workplace,” and a closing keynote by Beth Waterfall, founder of Elevate Northeast, titled “Cannabis: What’s Next?”

Budding Goals

Chamber leaders thought carefully about what their goals were for the cannabis conference — the first time a chamber in the region has hosted an event of its kind.

Creed said this first conference will take a general focus, building a solid foundation on the basics of the industry — and leaving room for a potential focus on hemp, CBD, or other spokes on the wheel, as she calls them, next year.

The main goal of the conference is to educate attendees on what cannabis is, what they need to know when getting into the industry, and how it affects the economy.

“It’s a place for business people to come and get educated,” she noted. “I think it’s also an opportunity to recognize the growth of the cannabis industry and how that will positively impact our economy and be able to shine a light on it, so people see it as the future of our region.”

In order to accomplish this, she knew they needed to bring in several experts and professionals from different parts of the industry — including someone from the commission, Doyle, to talk about the landscape of the industry and the regulations entrepreneurs need to grapple with.

Next, Creed wanted to ensure the conference featured someone who could help businesses figure out what they needed to know about not only getting into the industry, but also what type of business they would be classified as.

Perhaps most importantly, they needed an expert in the banking industry. Because marijuana is still federally illegal, almost no bank will deal with marijuana businesses — although that could eventually change. Tina Sbrega, CEO of GFA Credit Union, will accompany Scott Foster, partner at Bulkley Richardson, to talk about banking and business structure.

“I want to make sure that businesses understand that, so they are successful when they start out, and aren’t just starting out not thinking through all of the things you need to think through to be a successful business,” Creed said.

She added that this conference is not just for people looking to get into the business, but also for people who just need to understand how it works.

Joanne Berwald, vice president of HR at Mestek; Erica Flores, attorney at Skoler Abbott; and Pam Thornton, director of Strategic HR Services at the Employers Assoc. of the NorthEast, will lead a breakout session about recruitment, retention, and employment law.

“There are a lot of complex laws that come into play,” Creed said. “We wanted to make sure, for the rest of the business world that isn’t interested in getting into the cannabis industry, that we had information about what is it like for the other folks working and hiring in a cannabis world.”

For the final breakout session, Creed explained that she wanted to bring in a panel comprised of a marijuana grower, a user, and a distributor, but did not have the internal resources to find people who fit the description. That’s when she reached out to Michael Kusek, cannabis journalist and publisher of Different Leaf magazine. He crafted a team — Noni Goldman, Leslie Laurie, Ezra Parzybok, Karima Rizk, and Payton Shubrick — to talk about their individual niches and how they navigate the cannabis industry in different ways.

Sowing Seeds

Overall, Creed hopes to help as many people as possible navigate a still new and quickly growing industry.

Because it is the first event of its kind, she is unsure just how many people will register, but believes that, once people learn more about the event, they will see the benefits of attending.

“I really don’t know how much the business community is going to understand the conference and embrace the conference,” she said. “Our hope is that they will, but it’s new.”

What she does know is that the cannabis industry is evolving at a rapid rate, and keeping up with the high demand is a must for the chamber.

“It’s a place for business people to come and get educated,” she said. “I think it’s also an opportunity to recognize the growth of the cannabis industry and how that will positively impact our economy, and be able to shine a light on it so people see it as the future of our region — because it’s here.”

Kayla Ebner can be reached at [email protected]

Community Spotlight

Community Spotlight

GTI’s cultivation facility in Holyoke

GTI’s cultivation facility in Holyoke has been operating since last summer, and many new ventures could be opening in the years ahead.

Alex Morse says his phone was already ringing — quite frequently, in fact — before he was interviewed on CBS This Morning late last June.

But then, it really started ringing. And his e-mail box became even more crowded.

That’s because, with that report, Holyoke’s efforts to roll out the welcome mat for the cannabis industry, pun intended, became a national story rather than a local story — although it was already well-known.

Yes, this was the detailed report where Morse told CBS that the city once known as the ‘Paper City’ might soon be known as the ‘Rolling Paper City.’ His tongue wasn’t in his cheek, and there was a broad smile on his face as he said it.

Getting serious, or more serious, because he was already serious, he told CBS, “it’s legal … people need to wake up; the days of the past are moving forward. Holyoke has embraced the industry, and we acknowledge that this is an economic-development driver for us.”

Morse, and Holyoke, woke up long ago, meaning just after (or maybe even before) recreational marijuana became legal in Massachusetts in the fall of 2016, and today it is making giant strides toward creating what officials are calling a ‘cannabis cluster.’

And they’re comparing it, in some ways, to the cluster that put this city on the map — figuratively and quite literally (this was a planned industrial city) — the paper and textiles cluster.

As they used that word ‘cluster,’ both Morse and Marcos Marrero, the city’s director of Economic Development, said it means more than the creation of a number a number of businesses and jobs in a specific sector, although that’s a big part of it. It also means establishment of an infrastructure of support services that can have a large multiplier effect, if you will.

“With a cluster, it’s more than the sum of its parts,” Marrero explained. “Once you have a cluster, then you have an expertise, just like Holyoke did when it was the Paper City. Just as you have an expertise with paper, you can have an expertise with all the expects of this [cannabis] business.”

Elaborating, he said cannabis-cultivation facilities require highly specialized construction, lighting, anti-contamination, air-movement, and security systems, and all this adds up to opportunities for companies in this area that can handle such work.

In many ways, Holyoke is well on its way to seeing this cannabis cluster become reality, said Morse, noting that one large cultivation facility, Green Thumb Industries (GTI), is currently operating in a former textile mill on Appleton Street. And there are several other businesses across the wide spectrum of this business — from cultivation to retail — moving their way through the involved process of getting permitted to operate and eventually absorbing some of the vast amounts of commercial real estate that are vacant or underperforming.

Holyoke at a Glance

Year Incorporated: 1786
Population: 40,341
Area: 22.8 square miles
County: Hampden
Residential Tax Rate: $19.29
Commercial Tax Rate: $39.87
Median Household Income: $36,608
Median family Income: $41,194
Type of Government: Mayor, City Council
Largest Employers: Holyoke Medical Center, Holyoke Community College, ISO New England Inc., PeoplesBank, Universal Plastics, Marox Corp.
* Latest information available

“For us, cannabis is another form of manufacturing that’s bringing buildings back to life, being a revenue generator and job creator,” said the mayor.

And as they say in the agriculture business, Holyoke is certainly fertile ground for the cannabis industry. Indeed, it boasts, by the mayor’s estimate, 1.5 million square feet of vacant or underutilized former mill properties. Meanwhile, it has, again, by Morse’s calculations, the lowest electricity rates in the state (Holyoke has its own municipal utility), and it has something just as important as those ingredients — a giant, figurative ‘welcome’ sign when it comes to this business, as will become clear later.

But cannabis isn’t the only positive development in this city. Holyoke is also making great strides in ongoing efforts to attract entrepreneurs and arts-related businesses. It is also convincing more people, especially the younger generations, that this is a place to live as well as work and operate a business. And it’s seeing many of those aforementioned mills being put to creative and momentum-building uses.

Mayor Alex Morse

Mayor Alex Morse, an early supporter of the cannabis industry, says its many components collectively form an economic driver in Holyoke.

All of the above can be seen in one high-profile project known as the Cubit Building, the structure on Race Street that takes that shape. The first two floors are now occupied by the Holyoke Community College MGM Culinary Arts Institute, a story that embodies education, workforce development, and economic development, and in the floors above are apartments that were leased out even quicker than the optimistic owners thought they would.

“You drive by at night, and it’s all lit up,” said the mayor. “People are living on the top two floors, and on the first two floors you see students in the chefs’ hats cooking and doing classes; there’s a lot of vibrancy on Race Street.”

Lights are coming on all over Holyoke, and for this, the latest installment of its Community Spotlight series, BusinessWest examines how this has come about and why Holyoke is creating a buzz — in all kinds of ways.

Budding Ventures

As noted, this cannabis cluster is a solid work in progress, with GTI now approaching a full year in business and several other projects in various stages of development.

Conducting one of those ‘if-all-goes-well’ exercises, Morse said he can envision a cluster that generates perhaps 300 to 400 jobs and many types of businesses, from cultivation facilities to cannabis cafés like those in Amsterdam. If that picture comes to fruition, marijuana-related businesses would constitute economic development in many different ways, from jobs to tax dollars; from revving up the real-estate market (aspiring ventures have acquired options on a number of properties) to giving tourism a boost; from creation of support businesses to helping give Holyoke a new brand.

As Morse told CBS — and BusinessWest — cannabis has become an economic driver. And city officials have had a lot to do with this by being so aggressive, welcoming, and accommodating.

As one example, Morse and Marrero cited the host-community agreements that such businesses traditionally sign in order to set up shop. Some communities have been excessive in their requests (or demands), while Holyoke has taken a different tack.

“These agreements have become another choking point for the industry,” said Marrero. “Communities try to negotiate, they go back and forth, and hold you down for a bunch of criteria. We’ve been very transparent and said, ‘we’re going to go for the maximum allowable benefits for the community by law in terms of impact fee, and if you sign here, you have a host-community agreement; we don’t become an impediment in the process.”

Morse agreed. “There have been communities that have tried to go above the state law in terms of percentage of annual revenues or have tried to negotiate for various line items such as a new fire truck,” he explained. “They say, ‘in addition to the percentage, you need to give ‘X’ amount to this nonprofit every year.’ We have a standard document, so it’s not intimidating in that sense; the burden is really on the companies to get through the state regulatory process — the local process shouldn’t be an additional burden to bear.”

Holyoke’s willingness not to push for every dollar or every concession, on top of its many other selling points, including available mill space and lower utility costs, have certainly caught the attention of the cannabis industry.

“There is political openness and stability to the industry, which is very valuable,” said Marrero. “We were, if not the first, one of the first handful of communities that had a permissive ordinance in place, so we were first to market on the government side to say, ‘we’re open to this business.’

“They saw the mayor’s advocacy, and they saw that the operational costs would be lower, and that is very, very significant,” he went on. “The energy savings alone … you can save 40% on your energy costs.”

This attractive package has attracted a number of interested parties, said Marrero, noting that two additional cultivators, East Coast Farms and Solurge, are working their way through the permitting process. Overall, a total of 15 host-community agreements have been executed, and seven special permits have been issued. Within a year, it is expected that another two or three cultivation facilities could be doing business in the city, and other types of cannabis-related businesses as well.

And as the cluster grows, it gains momentum and recognition, which fuels additional opportunities. Marrero drew some comparisons to Detroit (the car industry) and Silicon Valley (IT).

“The industry has to train a workforce on how to grow these plants and clip these plants, and as that workforce develops locally, other companies know they can locate in Holyoke and they will have an accessible workforce,” he explained. “They will have access to other vendors that know how to provide services or provide goods to cannabis companies.”

Marcos Marrero

Marcos Marrero says a cannabis cluster is bigger than the sum of its parts.

Building Momentum

As noted earlier, though, cannabis is just one of many intriguing economic-development-themed stories being written in what is still called the Paper City.

Others include everything from the culinary arts center and the sum of the Cubit Building’s many parts to ongoing evolution of the Holyoke Mall — one of the city’s main draws and largest employers — in response to a changing retail landscape; from redevelopment of two municipal properties — the former Lynch Middle School and the Holyoke Geriatric Authority building — to entrepreneurial-ecosystem-building efforts that are bringing new businesses, and jobs, to the city.

At the mall, as stores large and small shrink or disappear from the landscape (longtime anchor Sears closed its Holyoke store a few months back) and those that remain operate with a smaller footprint, the facility is changing its look and adding more entertainment-related businesses, said Marrero.

These includes more restaurants, a bowling alley, and a planned movie-theater complex, he said, adding that, overall, the mall is responding proactively to a changing retail scene.

“They’ve been very resilient … retail is changing, and the mall is putting a much greater emphasis on entertainment and making it more of an experience rather than just shopping,” said the mayor. “Whether it’s the escape rooms or the kids’ center or the laser tag and bowling alley, it’s about creating experiences.”

Meanwhile, additional retail will be coming to the city with redevelopment of the former Lynch School, located just off I-91, by the Colvest Group. The property is slated for demolition later this year, and the expectation is that it will become home to several retail outlets.

Reuse of a different kind is slated for the Geriatric Authority property, which closed several years ago. Indeed, Baystate Health and US HealthVest have chosen the site for its planned 70,000-square-foot behavioral-health hospital.

Plans calls for 120 beds in a facility that would represent consolidation of some of the existing beds in the region and creation of new beds as well.

“This is a great story of reactivating a site that had once been a money pit for the city, one that was draining almost $1 million of taxpayer funds,” Morse said of the days when the Geriatric Authority was operating was site. “Overall, we have two large, city-owned properties that are being developed, and that represents real progress.”

There is progress on many different levels in the downtown area and especially the city’s Innovation District, the area around the Massachusetts Green High Performance Computing Center, which opened in 2012.

On the municipal side, there will be several infrastructure projects undertaken in the area over the next several years, said Marrero, including street work, reconstruction of one of the canal bridges, and other initiatives.

Meanwhile, the city continues to add jobs and vibrancy organically through entrepreneurship-ecosytem-building initiatives such as SPARK, which recently joined forces with the Massachusetts-based program Entrepreneurship for All, or EforAll, to form SPARK EforAll Holyoke.

The new organization offers a number of programs, including a business accelerator, pitch contests, and co-working space currently being built out on High Street that will be available to program members.

Launched four years ago, SPARK has helped a number of ventures get off the ground or to the next stage, and most of them have settled in Holyoke, said Morse, adding that these startups, in addition to some others started organically, are bringing more vibrancy to the downtown.

He listed a catering venture, a salon now under construction, and a microbrewery on Race Street, among others.

“There are things that are happening organically, and I think these businesses are tapping into the momentum happening in the downtown and the ecosystem they feel here and the support they see,” said Morse. “They feel they can be viable here opening up a catering business or a salon or a brewery in downtown Holyoke.”

Marrero agreed. “We’re tilling our own soils, and stuff grows,” he said, referring to organic growth of the business community. “Every now and then, a business moves here, but a lot of this is organic.”

And these businesses are helping to fill more of those vacant or underutilized properties.

“We’re seeing this dynamic where more square footage is coming online,” said Marrero. “It’s being rehabilitated and filled by these businesses.”

As for the culinary arts center and the Cubit Building on the whole, it is bringing many different constituencies to the Innovation District area, adding to this vibrancy there. These include college students, their professors, those attending functions, and, yes, Morse himself, who has signed up for two night classes, one on how to make macaroons, the other involving a chiffon layer cake.

After those, he’ll be even better suited to answer the question, ‘what’s cooking in Holyoke?”

That’s a Wrap

As he was wrapping up his walk through the city with CBS, Morse told the reporter that it would be a good problem to have if the cannabis industry so embraced Holyoke that it found itself running out of commercial space for additional ventures.

That’s not likely to happen anytime soon (1.5 million square feet is a considerable amount of inventory), but a cannabis cluster appears to be no longer a goal but a reality. How quickly and profoundly it develops remains to be seen, but Holyoke appears to be well on its way to having history repeat itself on a certain scale.

A name change probably isn’t in the cards — ‘Paper City’ will stick — but a new era in the city’s history is certainly underway.

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

Commercial Real Estate

Warming Trend

A confluence of factors — from the opening of MGM Springfield to the dawn of the cannabis era in Massachusetts — have fueled heightened interest in real estate in downtown Springfield. Brokers report that the level of activity — inquiries, showings, leases, and sales — is the highest they’ve seen in recent memory.

Freddy Lopez Jr. says there’s a rather complex algorithm, as he called it, when it comes to locating a cannabis dispensary in Springfield.

Such a facility can’t be within 500 feet of a school, he noted. Or within 300 of another dispensary. Or within 50 feet of a Class A residence. And there are many other restrictions, as well as a host of hurdles to clear locally and with the state, just to get the doors open.

But this rather high degree of difficulty doesn’t seem to be stopping many people from trying to get in the game in downtown Springfield — and at other locations within the city, said Lopez, a broker with Springfield-based NAI Plotkin.

He said he’s lost count when it comes to how many properties he’s shown to various parties, and noted that the interest is constant and only increasing, as desire to be part of the cannabis wave, if you will, intensifies.

“There’s a lot of interest across the area, but the hot spots are downtown, and especially locations near the casino,” said Lopez, who recently brokered the sale of 1665 Main St., once the headquarters of Hampden Bank, to a party (RLTY Development Springfield LLC) interested in converting it into a dispensary. “There’s a lot of competition for good sites.”

1665 Main St., recently sold to a party interested in converting it into a cannabis dispensary. Evan Plotkin, left, and Freddy Lopez Jr. of NAI Plotkin, which brokered the sale.

The Main Street property, located across from the Hippodrome and a block from Union Station, was most recently assessed at $127,600, but sold for $285,000, a clear sign of the times and an indicator of how hot the race to secure locations for cannabis facilities can, and probably will, become.

“People are jockeying for position right now,” said Lopez, adding that some parties are securing options, some are leasing, and others, like RLTY, are going ahead and buying properties in anticipation of winning a coveted license.

But the cannabis industry is only part of the story when it comes to growing interest in Springfield and especially its downtown, said Mitch Bolotin, a principal with Colebook Realty, based in the heart of downtown.

MGM Springfield has certainly had an impact as well, spurring interest in various forms of development, from retail to housing. But there have been many other positive developments as well, from the relocation of the Community Foundation of Western Mass. to a location on Bridge Street, to the renovation of Stearns Square, to an improved outlook on the part of many when it comes to public safety.

“There are a number of factors driving this,” said Bolotin late on a Friday afternoon after a day of showing various properties, referring to a surge in interest and activity in Springfield and its downtown. “I’ve been doing this for more than 30 years now, and this is the strongest I’ve ever seen it.”

Mitch Bolotin says MGM Springfield is just one of many factors stimulating the most activity seen in the downtown Springfield market in recent memory.

Mitch Bolotin says MGM Springfield is just one of many factors stimulating the most activity seen in the downtown Springfield market in recent memory.

Demetrius Panteleakis expressed similar sentiments. The president of Macmillan Group LLC, now based in Tower Square, said the last quarter of this year has been extremely busy, and he expects that pattern to continue.

“I haven’t seen an October-November-December period as busy as this one — this is usually a slower time,” he noted. “There is a lot of movement; things are very robust right now.”

For this issue and its focus on commercial real estate, BusinessWest looks at why things are heating up in the downtown market and what this warming trend means for 2019 and beyond.

Where There’s Smoke…

Lopez said he has a number of anecdotes that capture the soaring level of interest in Springfield and its impact on the real-estate market.

One of his favorites concerns a party calling to inquire about securing a luxury apartment in downtown Springfield. Lopez explained that the city doesn’t really have any of those, much to the disappointment of the caller.

“This person was looking to do some investing in Springfield, and I think he wanted to use this apartment as a base — he could meet people there,” Lopez explained, adding that this phone call, all by itself, speaks volumes about how the commercial real-estate market is heating up in the city, and also how widespread the interest is.

Indeed, while there are many local parties interested in investment and/or development opportunities, the callers and visitors are also coming from well outside the 413.

“We’re getting calls from developers and investors in Boston, Rhode Island, New York City, and beyond,” he said, noting that many of these calls involve potential housing developments. “People who have never set foot in Springfield now have an interest in the city, and that’s very encouraging.”

That interest comes in many flavors, said those we spoke with, adding that the cannabis industry, and a strong desire to join it, are sparking many of the inquiries.

But these robust times are manifesting themselves in many ways.

Bolotin noted that he recently secured a lease for a new food-service business on Bridge Street. He couldn’t give specifics, but said the deal involved one of the vacant storefronts on that street, damaged first by the natural-gas blast and later by explosions triggered by a water-main break.

It’s an example of the strong interest in the market that he noted earlier, arguably the most activity he’s seen in recent memory.

“We’re seeing a lot of positive signs in the marketplace in terms of activity and interest, leases, and sales,” he said, adding that this vibrancy is reflected in everything from higher occupancy rates in the buildings managed by Colebrook — and there are many in the downtown, including the TD Bank Center and the Fuller Block — to how many showings of properties he’s conducted in recent months.

Overall, Bolotin, like others we spoke with about this, said there is considerably more positive energy concerning the downtown than there has been in some time. MGM deserves some credit for this, he noted, but there are many other factors as well, from the developments on and around Bridge Street to the renovation of the Fuller Block, to less apprehension about public safety. “The attitude is much more positive than it’s ever been.”

He noted that Patricia Canavan, president of United Personnel, who moved her business onto Bridge Street, Katie Alan Zobel, who relocated the Community Foundation to that same area, Tom Dennis, owner of the Dennis Group, who purchased and renovated the Fuller Block, among other buildings downtown, and Martin Miller, general manager of WFCR, who moved his operation from Amherst into the Fuller Block, are all examples of people investing in the downtown, and through, their actions, inspiring others to do so.

Panteleakis has also seen considerable optimism and less apprehension about public safety. “You don’t hear as many concerns about safety,” he said. “Before, safety was a real issue — it kept some people from coming downtown. But you don’t hear that much anymore.”

Meanwhile, housing has become a huge area of interest, in part because of MGM and the needs of its huge workforce, but also because of rising activity levels in general and growing anticipation that the city will soon become, if it isn’t already, a landing spot for younger people and empty-nesters alike.

Evan Plotkin, a principal with NAI Plotkin and long-time champion of downtown Springfield, noted the purchase of the former Willys-Overland building in the so-called ‘blast zone’ by Boston-based Davenport Advisors LLC, and that company’s acquisition of the old Registry of Motor Vehicles site, possibly for the same use, as harbingers of things to come.

“I’m seeing a lot of developers coming in looking to develop residential,” he said. “I see tremendous potential for new developments in parts of our city that have been stagnant for a long time, including areas on the fringes of downtown and in the downtown itself.”

Joint Ventures

While interest in potential housing development grows, the cannabis industry is the source of much of the activity downtown.

The brokers we spoke with said they’ve been showing multiple sites to groups interested in all facets of this business, from cultivation to retail. And while sites across the city are being explored — as many as 15 sites might become licensed in Springfield — the downtown is becoming the focal point.

“Things have been crazy for the past two years when it comes to this business,” he said, adding that he’s brokered the sale of sites for marijuana-related businesses in Holyoke and Easthampton. “Now, the focus is shifting to Springfield and the downtown area; people are trying to line up sites.”

Lopez concurred, noting that there is a broad mix of local, national, and even international companies looking to start a cannabis dispensary or cultivation site in this region, with many focused on Springfield and an initiative known as the Opportunity Zone Program.

Created as part of the U.S. Tax Cut and Jobs Act of 2017, the program provides incentives for investment in low-income communities, like Springfield. Individuals and groups looking to develop in these designated geographic areas can gain favorable tax treatment on their capital gains, said Lopez, adding that he has worked with several owners and investors in the city’s Opportunity Zone.

The purchase of 1665 Main St. falls into this category, he said, noting that the acquisition is a good example of investors jockeying for position through options, leases, or outright purchases.

And the race for cannabis locations should provide a substantial boost for owners of properties downtown, said Plotkin, noting that prices are moving higher as interest grows, in a movement that echoes what happened when MGM Springfield and other casino-industry players jockeyed to enter this market.

“When you were dealing with a casino developer, like MGM or the other parties interested in Springfield, there was what we all referred to as the ‘casino rate,’” he explained. “They’ll pay more for real estate than the average buyer will.

“In the case of a marijuana dispensary, because the business is so lucrative, they will pay a lot more rent per square foot,” he went on, noting that a ‘marijuana rate’ is taking shape. “Rents that may have been $15 a square foot a year ago … for a marijuana shop, we’re taking about $20 to $25 per square foot, and in some cases more, depending on where it is.”

As for what the cannabis industry might mean for Springfield, Plotkin, who has traveled extensively, expressed some hope that the city might someday become somewhat like Amsterdam, a city famous for its culture, nightlife, and countless shops selling marijuana, other drugs, and related paraphernalia.

“I think Amsterdam is a great example of just how the very liberal nature of that city has led to incredible street life in that town that’s very safe,” he said. “Amsterdam is a great city, one of the most vibrant cities in the world, and maybe we can learn from its example.”

Bottom Line

Whether Springfield can become anything approaching Amsterdam — as a tourist destination or cannabis hotspot — remains to be seen.

For the time being, it is a hotspot when it comes to its commercial real-estate market.

There is interest and activity unlike anything that’s been seen in decades, and the consensus is that this pattern will likely continue and perhaps even intensify.

Springfield and its downtown have become the right place at the right time.

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