CBRE: Commercial real estate marching back from recession

SLOWLY BUT SURELY, Rhode Island's commercial real estate market is recovering from the Great Recession, according to CB Richard Ellis-New England data. / COURTESY CB RICHARD ELLIS-NEW ENGLAND
SLOWLY BUT SURELY, Rhode Island's commercial real estate market is recovering from the Great Recession, according to CB Richard Ellis-New England data. / COURTESY CB RICHARD ELLIS-NEW ENGLAND

PROVIDENCE – The commercial real estate landscape continues to strengthen in Rhode Island, characterized by decreasing vacancy rates and increasing rents across several markets, according to CB Richard Ellis-New England executives, who presented its 2016 Outlook for New England Tuesday.

The Providence office market is undergoing increased conversion of obsolete office space to residential apartments, and increased rents across all asset classes, Vice President Andrew Galvin said in a presentation at the Omni Providence Hotel.
“The residential conversion trend is exciting,” he said. “As an aged and in some cases antiquated pool of office buildings provide the framework for housing the workers of tomorrow.”
In the last three years, 10 buildings totaling 525,000 square feet have been, or are in the process, of conversion to residential units in Providence, he said. Three had been deemed obsolete, and were not carried as office inventory by CBRE.
The properties under conversion include 95 Chestnut St. and 170 Westminster St.
Major projects on the horizon include the development of Parcel 8, one of the parcels available through the development of the Interstate 195 redevelopment district, into a mixed-use facility featuring retail, office space and 50 apartments.
In addition, the $220 million development of South Street Landing, including a 174-unit apartment building, is expected to be completed at the end of the first quarter in 2017, he said.
The suburban Rhode Island office market is continuing to improve, Galvin said, with an overall vacancy rate of 16.4 percent at year’s end in 2015, down from 18.4 percent the prior year.
At its peak, the office vacancy rate was 25.5 percent in 2009, Galvin noted, making for a “steady march” back from the recession.
In describing Rhode Island industrial real estate, Vice President Thomas Barry said 2015 was a vibrant market, with a 4.3 percent vacancy rate, down from 7.8 percent the previous year. It was the lowest vacancy rate in 15 years, driven, in part, by a lack of supply.
Rhode Island had 1.9 million square feet of industrial space absorbed in the past year.
Overall, prices are increasing for both sale and leasing of industrial property, as a result of limited inventory, he said.

In opening statements of the session, R.I. Commerce Secretary Stefan Pryor encouraged the audience of developers, architects and real estate financiers to seek out state incentives now available for development. His staff passed out brochures to attendees, describing each incentive program and basic qualifications for projects.

“If you’re making decisions about whether to move forward … put us to the test,” he said.

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The theme of the outlook program – innovation – drew on the focus for future economic development in Rhode Island. Speakers included Samantha Joseph, global expansion lead for the Cambridge Innovation Center, who reported that Providence has all of the ingredients needed to form a dynamic ecosystem for startup and innovative companies.

“Young companies will drive job growth,” she said, and encouraged Rhode Island to invest in innovation infrastructure, including shared office space desired by young entrepreneurs.

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