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Business Talk Podcast Special Coverage

We are excited to announce that BusinessWest has launched a new podcast series, BusinessTalk. Each episode will feature in-depth interviews and discussions with local industry leaders, providing thoughtful perspectives on the Western Massachuetts economy and the many business ventures that keep it running during these challenging times.

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Episode 154: March 20, 2023

George Interviews Evan Plotkin, president of NAI Plotkin

Three years after the start of the pandemic, the world looks considerably different, with some of the most profound change coming in the commercial real estate realm. Remote work and hybrid schedules are here to stay. What does that mean for Springfield’s office towers and other places where people work? Evan Plotkin, president of NAI Plotkin, discusses all this and much more with BusinessWest editor George O’Brien on the next installment of BusinessTalk. It’s must listening, so tune in to BusinessTalk, a podcast presented by BusinessWest and sponsored by PeoplesBank.

 

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Commercial Real Estate

This Is Not a Fire Drill

By Brion J. Kirsch and James F. Martin

 

Remember in elementary school when they would have a planned fire drill? The alarm would go off, and students lined up in an orderly fashion and walked single file to the nearest exit and out into the schoolyard. Inside, the school was completely empty.

Brion J. Kirsch

Brion J. Kirsch

James F. Martin

James F. Martin

Obviously, the circumstances are light years apart, but that’s essentially what occurred in office buildings in March 2020. One minute, every room is filled with people working at their desks; next thing you know, the entire place is vacant.

What would always happen after the fire drill — everyone was back at their desks in about 10 minutes — didn’t happen in office buildings. It’s been almost three years. Some are never coming back.

Remote or hybrid work is here to stay, and people’s habits and expectations have changed. As a result, the commercial real-estate market is facing challenging times. In Western Mass., for example, the vacancy rate for office space is of concern to landlords along with the reality of expiring leases for downtown office space. However, the more attractive rental price per square foot of class-A office space in Western Mass. serves as a significant advantage to retaining and attracting tenants when coupled with the lower cost of living in contrast to Eastern and Central Mass.

Thus, there are some reasons for optimism, and potential options for landlords and tenants alike.

The continuing development of multi-family apartment complexes in both the cities and the suburbs is a promising sign. And with the proliferation of shopping from home and consumer subscription services, industrial properties like warehouses and fulfillment centers are in high demand.

 

Options for Tenants

For employers who now have more workspace than on-site workers, subleasing is an interesting option that can both reduce expenses and boost revenue. This requires a conversation with the landlord, but if conducted in good faith, it can be a win-win situation.

With a landlord’s consent, a majority of commercial office leases allow subleasing and partial assignments. But finding an occupant to sublease part of your space is far from the final step; legalities and practicalities abound. The documentation must be specific and thorough as there’s an extra added layer of complexity in these situations.

Taking a contractual agreement between two parties and adding a third opens up room for all sorts of unexpected conflict and misunderstandings. The language in the agreement must be crystal clear.

“With a landlord’s consent, a majority of commercial office leases allow subleasing and partial assignments. But finding an occupant to sublease part of your space is far from the final step; legalities and practicalities abound.”

The biggest concern is historic and/or prospective liability. One party’s transgression may have a direct impact on the other party, even if there is fault on only one side. Something else to consider is the construction of a demising wall for the new tenant’s subleased space. To be up to code, this new area will also need proper access, exits, and restrooms, in addition to other possible requirements, such as a kitchen or metered utilities.

Depending on the terms of the lease, there may even be an express option that simply allows for the reduction in the total area being occupied and would prevent the need to sublease.

 

Options for Landlords

There’s an opportunity now for landlords to make a long-term play by allowing tenants to make modifications to their original lease. The value in this circumstance arrives in the form of an early renewal or extension of the current lease, in exchange for allowing the tenant to sublease a portion of their space or shrink their footprint.

As many business owners have discovered in other industries, incentives are becoming a more crucial part of attracting customers or, in this case, tenants. And just because a space was previously used for one purpose, that doesn’t have to remain the case. Repurposing is an exciting and risky but sometimes necessary option.

Taking an empty office building and converting it to multi-family apartments or mixed-use commercial space is a large undertaking. But the strong demand for housing seems likely to continue, while office space continues on a more uncertain path.

While interest rates and the cost of construction materials both remain high, supply-chain issues are easing, and real-estate profits from the past decade have some property owners’ war chests well-stocked. It’s also likely that property values will begin to fall in the coming months and years.

It’s anyone’s guess how the current confusing climate of high inflation, low unemployment, rising interest rates, and massive tech layoffs will shake out in the coming years. Some say a recession is inevitable; others are optimistic one will be avoided. One thing we do know for sure is that we’re not in elementary school anymore. And this is not a drill.

 

Brion Kirsch and Jim Martin are attorneys at the law firm Pullman & Comley, which has offices in Connecticut, New York, and Rhode Island, as well as Springfield. Kirsch co-chairs the firm’s real estate, energy, environmental, and land use practice and practices in both Massachusetts and Connecticut; Jim Martin is located in the firm’s Springfield office and is a recognized practitioner in the areas of commercial real estate and real-estate planning.

Commercial Real Estate

Building Momentum

Michael Martin, left, and Nick LaPier

Michael Martin, left, and Nick LaPier have acquired 333 Elm St. in West Springfield and made it home to their businesses.

In many respects, Nick LaPier is back where he started. Or at least back to where he started his own accounting firm in 2003.

That would be the office building at 333 Elm St. in West Springfield.

Back then, he took a tiny office (600 square feet) on the first floor. There, with his mother, Elaine, serving as an office manager, he quickly grew his firm and eventually moved out and up.

Today, he is co-owner of the property where he first put his name on the door, along with Michael Martin, managing partner of Paladin Wealth Partners, which will soon be expanding with a second office at 333 Elm, sharing the property with LaPier Dillon & Associates (LaPier partnered with Brian Dillon several years ago); New Valley Bank, which moved in last August; and tenants that will occupy roughly 1,500 square feet of space currently being built out.

Together, they’re filling the parking lot and bringing new vibrancy to the property known to many in the community as the ‘Checkwriters Building’ (the payroll company occupied most of the property before outgrowing the space and moving to Northampton in 2021) and, before that, as the home to a dental practice — Dr. James Sady built the property in 1975 — and other tenants.

It was also home years ago to Multi Bank, where LaPier and his wife, Kathy, secured their first car loan.

So LaPier has a long history with the property, and he and Martin intend to write more chapters, starting with the relocation of their businesses to that site, thus becoming part of the revitalization of West Springfield’s downtown, a work in progress that includes the redevelopment of the former United Bank property, 95 Elm St., just a few blocks to the south; some new restaurants; and planned traffic improvements, including a rotary at the intersection of Elm Street and Route 20 (more on that later).

“The hope with this move is that, as we continue to grow, we will have the space available to accommodate that growth.”

LaPier, Dillon, and the accounting firm’s other employees finished moving in just after the new year. Meanwhile, Martin and others from Paladin Wealth Partners are set to move in later this month. While the property was acquired last summer, the two partners have invested heavily in renovating its spaces.

“We essentially gutted it and designed it from the ground to function as a full-service CPA firm,” LaPier said of his firm’s 6,500 square feet, adding that the company now has 16 employees. “We designed it to be the most efficient operation format for a CPA firm, but, at the same time, designed for 2023.”

With both LaPier, Dillon & Associates and Paladin Wealth Partners, the acquisition of 333 Elm started with the realization that they had outgrown their existing homes. For the accounting firm, that meant space roughly a mile away at 71 Park Ave., and for Paladin, space in Tower Square.

“The hope with this move is that, as we continue to grow, we will have the space available to accommodate that growth,” LaPier said.

Martin said his firm, which he launched with partner Pat Donnelly in 2018, has seen steady growth over the past several years. Having outgrown the space in Tower Square, the logical decision was made to expand with a second office.

“We have 2,500 square feet in Tower Square, and we were full,” he told BusinessWest, adding that, at the advice of his son, Ryan, who once worked in sales at Checkwriters (and now works at Paladin Wealth Partners), he took a close look at the 333 Elm St. property. Later, he would partner with LaPier, his long-time accountant, to acquire it for $1.9 million.

But there were other considerations for this acquisition beyond the need for more space.

Both LaPier and Martin were looking for real-estate investment opportunities, and when the property came on the market in 2021, they gave it a close look and decided that, in addition to a storied past, it had a solid future, given its location, parking, and other amenities.

Nick LaPier, left, and Brian Dillon

Nick LaPier, left, and Brian Dillon in their renovated space at 333 Elm St. in West Springfield.

Soon after taking ownership, they signed New Valley Bank, an emerging player in the region’s financial-services sector, to a long-term lease for what is now its third location. A solid tenant, the bank also brings potential new customers to both LaPier, Dillon & Associates and Paladin Wealth Partners, he said, as well as needed foot traffic in the city’s emerging downtown — a story both partners wanted to be part of.

“Elm Street’s a growing area; that’s another reason to invest here,” LaPier said. “There’s been positive growth on the street for the past 10 years, and it appears that the city wants to continue developing it as a business corridor; we want to be part of that story.”

West Springfield Mayor William Reichelt confirmed those aspirations. He said there has been significant progress made in making Elm Street more of a destination in recent years, especially through the redevelopment of the former United Bank Building, which is now home to several tenants, including Tandem Bagel Company, Future Health, Kindred at Home, and several others.

Having 333 Elm vibrant again, especially with service businesses that will have employees but also bring people to that location, will certainly bring more momentum to that central business district.

“Just to have more bodies in the downtown is good overall,” Reichelt said, referring to employees working at that location. “There are now more people who are going to go eat at Tandem, the Celery Stalk, or the other restaurants in the area. They’re going to bring customers and more foot traffic down here, and that’s what our downtown is going to thrive on.

“That building being vacant really hurt us — all those employees who weren’t there anymore,” he went on, adding that the property had been largely vacant for roughly two years.

The parking lot is filling back up again, a positive sign for the city and the start of another intriguing chapter in the story of a property with an already-rich business history.

Commercial Real Estate Special Coverage

Building the Portfolio

 

Vid Mitta acknowledged that the emergence of remote work and its impact — still to be determined in many respects — on the region’s inventory of office space was certainly a consideration when he and business partner Dinesh Patel were deciding whether to submit a proposal for the purchase of the 1550 Main building in downtown Springfield.

But ultimately, this was just one of many considerations, he told BusinessWest, adding that the others — as well as his firm belief that business owners and managers will always see value in having people working together in one place — convinced the two serial entrepreneurs to move forward and answer the request for proposals sent by the property’s now-former owner, MassDevelopment, early last year.

Mitta and Patel eventually prevailed in the bidding to acquire the property — formerly occupied by the U.S. Federal Court and currently home to tenants ranging from Baystate Health to the Springfield School Department — for $6 million.

As he talked about its prospects for the future, Mitta focused on those other considerations that played into this decision, especially that age-old axiom when it comes to commercial real estate — location, location, location. Beyond that, though, the current tenant mix, the timeline on current leases, and the good overall condition of the building also played a factor in generating a green light.

“These properties are connected, and they are the two best buildings in Springfield’s downtown for class-A space.”

“Remote work is the main thing that comes to anyone’s mind when we talk about office spaces today,” he acknowledged. “But look at the location — this is what we were looking at, as well as the maintenance and good condition of the property. These factors led us to see this as a good investment. When vacancies arise, people have choices, and they’re going to move into the best building possible.”

Thus, another chapter has begun in what would have to be called a developing story, in every sense of that phrase. That would be the expanding portfolio of properties now owned by Mitta and Patel, either individually or collectively.

That list includes Tower Square and its recently renovated hotel, which has re-earned the Marriot flag, as well as several other hotels, 99 Restaurant & Pub locations, a Walgreens, three McDonald’s franchises, adult day-care facilities, early-education facilities, and more. These collective investments and entrepreneurial gambits earned Patel and Mitta BusinessWest’s Top Entrepreneur award just a year ago.

Mitta told BusinessWest that 1550 Main St. was a common-sense addition to the portfolio, one that gives the partners a property that is essentially full (97% occupancy), with a stable tenant base that also includes the Internal Revenue Service, U.S. Immigration and Customs Enforcement, regional offices for U.S. Sens. Elizabeth Warren and Ed Markey, the law firm Alekman DiTusa, and an attractive, well-maintained property in the heart of the central business district.

“These properties are connected, and they are the two best buildings in Springfield’s downtown for class-A space,” he said of 1550 Main and Tower Square. “With these properties, we’ll be well-positioned to attract new tenants looking for quality space.”

The property that has come to be known as 1550 Main was acquired by MassDevelopment from the federal government in 2009. At that time, it was roughly 70% occupied, said a spokesperson for MassDevelopment, adding that, after achieving all its stated goals for the property, the agency decided to put the property up for sale through a disposition process to allow it to refocus its efforts on other projects.

Dinesh Patel, left, and Vid Mitta

Dinesh Patel, left, and Vid Mitta, who together orchestrated a stunning turnaround at Tower Square, believe 1550 Main St. is a logical addition to their growing portfolio of commercial real-estate properties.

That includes an initiative in Greenfield, where MassDevelopment is partnering with the city and the Community Builders in the acquisition and redevelopment of the former Wilson’s Department Store property in the heart of the community’s downtown. The redevelopment will create roughly 65 mixed-income rental units and reactivate prominent first-floor and basement retail spaces through the relocation and expansion of Franklin Community Co-ops’s Greenfield store, Green Fields Market.

Referencing 1550 Main, MassDevelopment President and CEO Dan Rivera said, “working with tenants, partners, and the city of Springfield over the years allowed us to cultivate this property to its best and highest use. This type of focused teamwork is how long-lasting redevelopment takes root. It is what makes converting an old federal courthouse into a stunning multi-tenant office building possible.”

The property went on the market in the spring of 2022, and the request for proposals issued by MassDevelopment attracted a number of bids.

Moving forward, Mitta said several of the leases of current tenants will be expiring over the next several years. He expressed optimism for renewals, but also for new tenants looking to take advantage of the property’s location and other amenities.

“Tenancy is not a permanent thing — tenants come and go; we know that,” he said. “Some leases are going to expire over the next few years, but we know how to market, and we have a very strong team here.”

“Even those working at home still go to the office — businesses prefer the hybrid model. They need a place where people can collaborate, meet, greet, that kind of thing. That need is still there, and I don’t know if it will ever go.”

Elaborating, he said this team is hoping to attract some current occupants of class-B space to properties that are not much more expensive but bring a number of amenities that class-B properties do not, including parking garages, lighting safety, and that aforementioned location in the heart of downtown.

The property at 1550 Main differs from its neighbor, Tower Square, to which it is connected by a skybridge, in many respects, said Mitta. He noted that Tower Square required significant investment and “re-imagining,” a word he and Patel use often, such as with new tenants that include the YMCA of Greater Springfield. The newer 1550 Main will not require much of either, he said, which is another of those considerations that prompted interest in the building.

As for the trend toward remote work and hybrid work schedules, Mitta acknowledged that there is likely permanence attached to these trends, but, ultimately, he anticipates that there will still be strong demand for office space, especially in the class-A category.

“Even those working at home still go to the office — businesses prefer the hybrid model,” he explained. “They need a place where people can collaborate, meet, greet, that kind of thing. That need is still there, and I don’t know if it will ever go.”

For evidence of this, Mitta points to Tower Square, where he acknowledged that the number of people in the office tower on any given day may be lower than it was prior to the pandemic. But overall, space needs have not changed to a great degree, and new leases continue to be signed.

“Overall, rent is a comparatively small item on the P&L statement,” he said, adding that, for this reason, he has seen few if any tenants at Tower Square downsizing.

Franklin County

Come as You Are

Jeremy Goldsher

Jeremy Goldsher says Greenspace CoWork melds modern amenities with a distinctly Greenfield vibe.

Co-working spaces — hives of business where members share office space — have taken root in many Western Mass. communities over the past several years, for a number of reasons, from the efficiency of sharing resources to opportunities to network and be inspired by other professionals. In the past year and a half, two have cropped up a block apart in downtown Greenfield, with different types of clientele but the same goal: to help enterprises develop and grow, and have fun doing it.

The way people work has changed dramatically since the last century, Jeremy Goldsher says — and so has where people work.

“There are so many intelligent people doing incredible things here, and they don’t feel like they have to go to Boston or New York or Hartford or wherever to flourish,” said Goldsher, who launched Greenspace CoWork about 18 months ago with business partner Jeff Sauser. “No, you don’t have to do that anymore. You can do it from locations all over the place.”

But why not just work from home, as so many companies encourage their employees to do? To Goldsher — and others who believe in the value of co-working spaces — it’s about culture, energy, and especially connection.

“In the great rush to connect people with technology, we’ve forgotten one of the most important things that connects people, and that’s human interaction,” he told BusinessWest. “I think we get a lot of really brilliant people who move out here to get away from the cities and raise families, but there’s not a lot of opportunities to interact, congregate, and meet their neighbors.”

That’s why more people are taking advantage of the co-work model. In some cases, he said, they’ve moved to Greenfield specifically because co-working was an option.

“In the great rush to connect people with technology, we’ve forgotten one of the most important things that connects people, and that’s human interaction.”

“We offer the same amenities you’d get in New York or Boston. But you can do it in a rural setting where you can leave work, go down to the river, swim, come back, jump back on your computer, and Skype with someone in Dubai. We have people here whose companies are spread out all over the country or all over the world, yet they can congregate in the kitchenette, talk over coffee, talk about each other’s kids, and maybe grab a beer after work. It’s just wonderful to see these people enrich their own lives.”

A block away in downtown Greenfield, Pat King, executive director of Another Castle, told BusinessWest that he and Paul Hake, CEO of HitPoint Studios, opened their co-working space, which caters to video-game developers and designers, a little over a year ago after the pair recognized its potential.

Pat King says Another Castle

Pat King says Another Castle helps bring together the region’s large and far-flung game-design community through a number of programs.

King worked with Hake for many years, both with HitPoint and its precedessor, Paul Hake Productions, before striking out on his own about four years ago. During that time, he started a group called Pioneer Valley Game Developers, a networking community that now boasts about 300 members, many of whom gather for monthly meetups and events.

King started talking with Hake about the potential of a co-working space specifically geared for this crowd, especially considering that many are small and solo outfits that could benefit from the networking and shared resources Another Castle offers.

“About two years ago, I realized we have such a vibrant community, and a close community that’s really active and wants to get to know each other, so it made sense to look for a space,” King explained. “We’d looked at other models in other cities that have done similar co-working spaces for video-game developers. We had enough people that expressed interest, and thankfully Paul was also interested in moving to a new location and wanted to go in with me on a co-working space for game developers.”

Michael Crigler found, in Greenspace CoWork, an ideal spot for his digital marketing agency, Bueno Social.

Michael Crigler found, in Greenspace CoWork, an ideal spot for his digital marketing agency, Bueno Social.

With just four members now — HitPoint is the anchor tenant, with about 12 employees — Another Castle has plenty of room to grow, despite the specific challenges of this niche-specific model (more on that later). But King, like Goldsher, is excited about the way the co-working environment encourages professionals to come together in the heart of Greenfield, rather than working alone.

Back to Life

Four years ago, Goldsher’s family bought the four-story building on the corner of Main Street and Court Square out of bankruptcy and rebranded it the Hawks & Reed building, after a former clothing store on Main Street. They have since brought new life — and many more events — to the arts and music space on the first floor, while Goldsher and Sauser worked to develop Greenspace CoWork on the upper floors.

The two met at a Franklin County Community Development Corp. event and were soon talking about the co-work concept, which Goldsher had seen flourishing while living in New York City.

“I was seeing co-working really starting to take off there, and it was something I wanted to see here. This is the wave of the future in workspaces for my generation, to address the modern needs of workers wherever they are,” said Goldsher, noting that the space has been designed with a Franklin County aesthetic in mind, with original wood floors, reclaimed materials, and greenery. “We didn’t want to throw a bunch of stuff into a space and say ‘done.’ It’s not overproduced, and it reflects Greenfield.”

His biggest challenge right now is building out more space in a building that could eventually house about 150 workers — although, like all co-work spaces, they’re typically not there all at once. About 30 individuals and companies call Greenspace home right now. Open 24/7, the facility has two secured entrances, and one of its conference rooms has access directly from the street without having to walk through the rest of the co-working space, which appeals to lawyers who meet with clients there.

Michael Crigler, who heads up digital marketing agency Bueno Social, is one of the original Greenspace clients, and is currently working with Goldsher to create a new logo and branding and redo its website.

“We had our own office down the street,” Crigler said. “It was nice, but my business partner and I were on the road a lot, meeting new clients, and we have a pretty big remote workforce; employees can work from anywhere. When just one or two people were in that big office, it felt empty, and didn’t feel like there was a lot going on, and we wanted to be more part of a community, where we can collaborate with people.”

When he heard about Greenspace, he was immediately intrigued.

“That week, I was like, ‘we’re going to get rid of our office and move in here.’ So far, our employees love it,” he noted. “I’ve never felt a sense of ease like I feel working here. Jeremy’s vision, and the way he’s built out the space, are warm and inviting, and the people it attracts are very cool. I’m really excited about the next few years in Greenfield.”

“About two years ago, I realized we have such a vibrant community, and a close community that’s really active and wants to get to know each other, so it made sense to look for a space.”

Members are attracted to co-working for a number of reasons, Goldsher said, among them lower prices than traditional office rent, flexible leases, and shared resources ranging from a printer, projector, conference rooms, and wi-fi to a kitchen with free tea and coffee.

Members range from stay-at-home fathers who show up in the wee hours to get some work done in a professional setting to Australis Aquaculture, an international fish-farming operation headquartered in Vietnam. When its fish farm in Turners Falls was shuttered and the farming operations consolidated overseas, the company needed a place to house eight employees who focus on sales and distribution to large food retailers in the U.S.

“I think it’s a great concept,” said Jackie Galvis, an administrative, financial, and human-resources assistant with Australis. “And it’s cool because this is a historic building.”

Goldsher said it was beyond his expectations to have a company of that size as a member, but at the same time, it makes sense.

“They were downsizing their space but wanted to upgrade in the amenities and the culture,” he noted. “We’re just lucky to have people from the community believe in what we’re building here and invest in our dream. You hear these stories about the synergy that happens in a co-working space, but it’s actually happening.”

Game On

It’s happening at Another Castle as well, though perhaps at a different pace. Besides the 10 HitPoint staffers who work there, Vermont Digital Arts utilizes the space, while the rest of the current members include a 3D artist, a software engineer, and an electrical engineer.

Greenspace CoWork’s private, soundproof phone booths

Greenspace CoWork’s private, soundproof phone booths were designed and built in house.

“It’s a slightly different beast than a general co-working space,” King said, noting that only about half the game developers and designers in the region are making money in this field, making it difficult to afford even the reasonable rates co-work spaces charge.

“I’ve seen numerous success stories of people who have been able to get work through the community, either from HitPoint or word of mouth,” he noted. “So people are definitely interested, but it can be a challenge making pricing work because it’s a hobbyist community. People want to support the space but can’t necessarily join.”

That’s why he and Hake are exploring the possibility of adding incubator space at even lower cost, to attract more startups who might benefit from the synergies, guidance, and networking opportunities available, as well as the 24/7 access and shared resources — not just the wi-fi, conference rooms, and flexible membership plans common to most co-working spaces, but a wide array of cutting-edge computer hardware to be used for testing, playing, or just for being productive.

And the events, too. Another Castle often serves as a community space for events like last month’s Global Game Jam, which drew about 50 participants who designed games for a frenzied 48 hours, producing 15 games by the end of the weekend.

“That was amazing to see a packed space, all people working on different projects,” King said. “We also host monthly educational events and a few workshops here, and we’ve led a couple at GCC and other institutions.”

Greenspace CoWork hosts community meetings as well, Goldsher said, just another way he hopes the venture connects professionals to the city and region around them.

“We want our members to be able to accomplish what they would in a corporate setting, but we also want them to go out into the community and enjoy all the resources and the natural beauty here,” he told BusinessWest, noting that he dreamed of something resembling a co-working environment when he was a kid, even though he had no idea they actually existed, or what they were called.

“This is just a child bringing his dream to life,” he said. “I’ve created a comfortable space that’s open 24/7, and anyone is welcome to join.”

Joseph Bednar can be reached at [email protected]