Worcester Business Journal

8 Worcester Business Journal | April 1, 2024 | wbjournal.com Award Winning Office Furniture MADE IN MASSACHUSETTS www.ais-inc.com Multiple grocers are eyeing the area for potential locations, Jacobs said. Of course, a large supermarket or phar- macy usually comes along with a large parking lot, conflicting with the goal of creating a high-density neighborhood. "Part of the challenge we have down in the Canal District is space. If we were to convince [a small grocer] to open in the district, we actually have the necessary space and the parking ratios to provide them," Jacobs said. Despite the Canal District's reputation for small, owner-operator businesses, one corporate brand with a reputation for its ability to build supermarkets in areas with little parking keeps coming up among the neighborhood's players: Trader Joe's. "My perfect market would be about 5,000 square feet. A Trader Joe's is a full-service market within that range," said Dino Lorusso, the developer behind Crompton Place. "I don't think we want a 20,000- or 25,000-square-foot market." Famous for its small parking lots, Trader Joe's has opened stores with no dedicated parking at all, including one in Boston's Back Bay neighborhood and another one in its trendy Seaport District. A Trader Joe's spokesperson told WBJ said the company is always considering expansion but declined to offer any spe- cifics about potential Worcester or Canal District locations. Taxes and economics With commercial rental rates and tax assessment values climbing, businesses are dealing with climbing property tax payments, a potential threat to further growth, said said Jimmy Kalogeropoulos, owner of RE/MAX Partners Advance Group on Harding Street. "e commercial tax rate is going to end up crippling economic development in the city of Worcester," said Kalogero- poulos, who noted the yearly tax pay- ments on a 1,200-square-foot commercial building he bought are $8,000 per year. Taxes aren't the only economic factor potentially weighing down growth. Real estate prices in the area aren't always in tune with reality, said Ed Murphy, presi- dent development firm Baystate Invest- ment Fund, which is headquartered on the Canal District's Kelley Square. "e real estate values in the neighbor- hood have trickled back some in the last year or two. At the same time, the cost to own buildings has increased significantly. Property insurance is way up, taxes are up, and utilities are up," Murphy said in an email to WBJ. Despite the slight cooling, the real es- tate market in the Canal District remains hot. Perhaps too hot, as Murphy said some transactions he's seen in the area aren't based in reality. "What some buildings were being sold for simply did not make sense," Murphy said. "One deal in particular I passed on sold for double the price I passed on buying it for three months prior. Tenants are only able to pay so much in rent, and if the rent is too high, the tenants will fail." Certain property owners who didn't sell in the immediate wake of the 2018 Polar Park announcement in hopes values would continue to increase may now be regretting that decision. "When the WooSox announced they were coming, I would meet [property owners], and you could see all of the dollar signs in their eyes," said Jacobs. "People have definitely sold at a much more positive value than was previously, but some of the people have not gotten what they wanted. I'm not sure that's ever going to materialize because of the overall direction of the commercial market." Yet, higher real estate prices don't necessarily have to translate to higher costs for businesses if property owners are willing to take a more long-term and cooperative view. Chase, owner of Crompton Collective, said she's witnessed both developers who are solely focused on profit and those who want to help tenants succeed. "In any area, there will be developers who are fair and willing to collaborate with tenants to enhance the neighbor- hood, as well as developers solely focused on maximizing profits, leading to higher prices," she said. "is dynamic is some- thing I have observed in every location where I have stores. Fortunately, there are many landlords in this area who are committed to supporting and nurturing small businesses to thrive." Canal District property owners are valuing quality tenants over making a quick buck on a business destined for failure, Jacobs said. "Almost all of the landlords are looking for strong tenants," he said. "I don't think they are holding out for every last dollar." Neighborhood business closures As the Canal District has transformed since 2018, a number of high-profile businesses have closed, although they all cited multiple factors and weren't tied to one overarching reason specific to the neighborhood. e Dive Bar, Smokestack Urban BBQ, Worcester Ware's then-sec- ond location inside the Worcester Public Market, Maddi's Cookery and TapHouse, and e District Wood Fired Kitchen are just some of the smaller businesses closed in the neighborhood since 2018. Perhaps the most recent high-profile Canal District closure was the Maker to Main curated grocery store in January 2024. Despite the neighborhood's need for a grocer, Owner Lynn Cheney said Maker to Main was always facing an up- hill battle, aer buildout of the space took three times longer and was much more expensive than initially anticipated. Cheney said it's possible the city gov- ernment could do more to help business owners navigate the labyrinth of steps needed to open, but she didn't blame elected officials or the slower-than-an- ticipated progress of the more affluent Small retail businesses are the Canal District's main attraction The Canal District has gone through a number of transitions over the last few decades. The neighborhood once had one of the higher poverty rates in Worcester when businesses like the Dive Bar moved in, followed by a number of locally owned restaurants and bars. Just over 10 years ago, the retail shop Crompton Collective started attracting a different crowd of people looking for unique goods. This eclectic mix of small businesses and a walkable, urban vibe attracted the owners of Pawtucket Red Sox to move their baseball team in 2021 to the newly developed $160-million Polar Park, the most expensive minor league baseball stadium ever built. That development is being followed by a wave of market-rate multifamily housing projects, which are at varying degrees of development. When polled online, the plurality of WBJ readers said the small retail businesses are the main reason they visit the Canal District. Why do you primarily visit the Canal District neighborhood in Worcester? Small retail businesses 28% Restaurants 21% Polar Park and the Worcester Red Sox 20% I don't visit the Canal District regularly 17% Bars and nightlife 7% Other 4% 2% I live in the Canal District Continued from previous page

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