Capstone: R.I. commercial real estate market improved in ’14

THE CAPSTONE REPORT, by Capstone Properties, analyzed the real estate market in Rhode Island in 2014 and said the state's commercial real estate market saw an improvement in the office and industrial sectors. / COURTESY CAPSTONE PROPERTIES
THE CAPSTONE REPORT, by Capstone Properties, analyzed the real estate market in Rhode Island in 2014 and said the state's commercial real estate market saw an improvement in the office and industrial sectors. / COURTESY CAPSTONE PROPERTIES

PROVIDENCE – The office and industrial sectors of the Rhode Island commercial real estate market strengthened in 2014, according to an analysis by Capstone Properties, with large properties showing the greatest sales gains.
Sales volume across all property types in 2014 showed a modest gain, of 4 percent, according to the report.
In all, 249 sales were recorded last year, with a combined value of $276 million. That represents a 4.2 percent increase in volume over the 239 properties sold in 2013.
The value of the sales, however, decreased from $479 million to $276 million, a 42 percent drop. The significant drop was attributed to a contraction in the apartment and retail building sales, according to the report, prepared by Capstone Properties Vice President Neil Amper.
Gains in commercial office sales were led by significant purchases by Paolino Properties, including 100 Westminster St. and 275 Westminster St. in downtown Providence and 200 Narragansett Park Drive in East Providence.
Five other office buildings sold in 2014 in downtown Providence, according to Amper’s report “indicating there is still some optimism in the potential of the Providence market.”
Nearly half of the sales across all property types in 2014 were recorded in Providence.
According to the report, among the changes that provide some optimism for future development: the city recently updated its zoning ordinance for the first time in 63 years, and specific areas of the city have been targeted for new economic and development opportunities, including the former Interstate 195 lands, downtown and the waterfront. “Increased density and less onerous parking requirements are two major aspects of the new zoning ordinance expected to drive further development,” Amper wrote.
Although the number of transactions for the retail market dropped in 2014, several new tenants have entered the state marketplace. They include:

  • O’Reilly Auto Parks, a national after-market auto parts company, which bought a building at 355 Atwood Ave. in Cranston, and is seeking more stores.
  • CarMax, a national used car retailer, which purchased a retail plaza in Cranston and razed it to build a used car lot.

Several significant investment sales were recorded in the suburban market, according to the report. They included:

  • The 320,000-square-foot Pontiac Mills, on Knight Street in Warwick, which was sold for $1 million to a Newport-based developer who plans to redevelop the site as a mixed-use project.
  • The 208-room Hotel Viking in Newport was sold to Lone Star Global, a private equity firm from Dallas, for $77 million.

The East Side of Providence market continues to outperform other locations, and two sales were described in the report as having “super-heated” values. They were:

  • A 4,675-square-foot mixed use building was sold at 184 Angell St. for $1.9 million, or $406 per square-foot.
  • A 3,762 square-foot mixed use building at 108 Waterman St. was sold for $2 million, or $531 per square-foot.

“The Boston market has been overheated for the past two years and investors have begun to look at secondary markets, such as Rhode Island, for investment opportunities, which could further drive market appreciation,” the report stated.

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