Success stories not limited to Providence, as Quonset Business Park and suburbs continue to see growth
October 30, 2015
As we head into the 4th quarter of 2015, it is becoming apparent that the 3rd quarter of 2015, may be remembered as the period of time in the most recent economic cycle where “things did get better” in Rhode Island. The signs include a continuing decline in the unemployment rate, three consecutive months where the State’s performance on Leonard Lardaro’s Current Conditions Index (CCI) “matched or exceeded year-earlier CCI values for two consecutive months” and shovels are finally going into the ground for the South Street Landing Project.
Governor Gina Raimando and the General Assembly passed a budget that included economic development programs that are focused on not only supporting and continuing the ongoing recovery but also specifically targeting real estate development both in the former I-195 District and across the state. According to governor’s The Ocean State Wave proposal, the strategy is to:
“Create real estate tools that encourage the construction of job-producing projects, and especially strengthen development in urban areas and in historic structures. We proposed a package of redeemable Rebuild Rhode Island tax credits, state-level tax increment financing, and assistance for local tax stabilization agreements that will make investing in construction and development in Rhode Island a compelling proposition.”
CommerceRI, the state’s economic development arm, is in the process of putting together the procedures that will needed to be implemented. CommerceRI expects to be online with them by the end of this quarter. What this action will do is offer both local, regional and national developers the tools they need to truly consider Rhode Island as a location for new development.
Recently, the developer of South Street Landing, has entered into negotiations for two nearby by parcels in the I-195 District. This development group is proposing a mixed use residential/hotel/life science development which they will add an additional catalyst for more national investment into the area. During their work on the South Street Landing, the group saw future opportunities and sees Providence as being at a unique period in history with the confluence of the available land and private/public/institutional cooperation lending to a once in a lifetime opportunity.
The success stories are not limited to Downtown, Quonset Business Park continues to see development with the addition of Edesia and Greencore. The park is reaching a point where it is has become more limited in its availability for larger use sites. Suburban office vacancies are lower than the previous years and there are a number of new buildings being constructed or proposed to meet what is hoped to be the upcoming demand.
What does this mean for the local real estate market going into the fall? There is clear evidence that activity is increasing with both the number of sale/lease transactions and with the number of listing increasing compared to same period last year. Owners that may have considered listing their properties in the past but held due to skepticism are now approaching the market with more confidence. Between the increase in available inventory and the banks loosening the reins on lending, the attitude on real estate is becoming more positive than it has been in years.
As it appears that we have gotten to a point where more product is coming to the market, the only issue being we still lack many of the types of product that is desired in the market. While cost of construction in Rhode Island is similar to cost in the Boston market, we have not achieved the rents that make any speculative development viable. This situation needs to be addressed before any larger scale development will occur.
The governor’s plan and its implementation would seem to address some of the needs in the market by making development more affordable so that the cost of construction can be supported. We continue to be in a Catch 22 with the need for development being supported by an increase in the number of jobs, but it is hard to create jobs when you don’t have the facilities to house them. The hope is that by the combination of the economic development packages and an improving economy will result in an increase jobs which will set the dominoes in motion to the overall benefit of the real estate market and the state in general.
Tom Sweeney, SIOR is president of Sweeney Real Estate & Appraisal, Providence, R.I.