Worcester Business Journal

14 Worcester Business Journal | December 23, 2024 | wbjournal.com ECONOMIC FORECAST 2023 Real Estate Report: Office BY ERIC CASEY WBJ Managing Editor U rban cores across the country have been hollowed out in the last five years, as the rise of remote work in the wake of COVID added to problems caused by offshoring and automation. is has brought about the rise of so-called zombie buildings: underutilized offices with high turnover and a narrow- ing path to financial viability. is outbreak hasn't seriously infected Worcester's urban core, where office vacancy rates aren't nearly as troubling as Boston and other large cities like St. Louis or New York City. e vacancy rate in Worcester sits at 5.4%, according to CoStar, significantly less than the rate of 17.7% in Boston's Financial District or the 10.4% in Providence. Instead, the region's office vacancy problems lie in more suburban areas, where rates sit around or above the national average of 13.9%. Northborough, South- borough, and Westborough have been particularly hit hard, with a total vacancy rate of 22.6%. Vacant office space in Central Mass. Framingham/ Outlying Worcester Worcester metro Natick The Boroughs Marlborough County Total inventory (sq. ft) 14.2 million 10.6 million 8.3 million 7.2 million 6.1 million Available sq. ft. 1.1 million 1.3 million 2.1 million 1.1 million 692,000 Vacancy rate 5.4% 11.6% 22.6% 12.4% 5.9% Market asking rent per sq. ft. $22.88 $28.56 $25.00 $25.91 $20.73 12-month net absorption (sq. ft) -201,000 -464,000 25,200 -21,000 -1,700 Source: CoStar Suburban zombies Overall, the amount of available space in prominent suburban Central Massachusetts office markets is 5.19 million square feet, more than 90 football fields. Long gone are days where properties lacking high- way access and amenities could coast on the strength of the overall suburban office market, with some build- ings sitting underutilized, or even empty, for years. Shrinking demand for and value in office space has property owners and their financial backers trying to find a path forward, hoping their buildings can find new use and municipalities are willing to accept the changing tides. "When that ratio of supply and demand gets out of sync and there becomes way too much product on the market with, then what happens is pricing just starts to go through the floor," Jim Umphrey, principal owner of Worcester real estate firm Kelleher & Sadowsky, said of suburban space. "One thing is true is that a lot of these buildings will never be used as office space again." Urban core e Worcester office market's relative strength has been a bright spot in the Central Massachusetts office market, said Umphrey. "I would say downtown Worcester is faring much, much better than the suburban areas," he said. "A lot of these suburban buildings, these big, sprawling build- ings that had tech companies or other uses in there, are going to get repurposed as something else." Worcester has about 1 million square feet of Class A office space, said Umphrey, which comprises buildings with high-quality finishes, the latest technology and amenities like on-site concierge services. Downtown space offers lunch and aerwork entertainment within walking distance, which the younger generations of workers see as a plus. "If you're in 100 Front St., you've got 10 restaurants that are within walking distance." Umphrey said, "One thing is true is that a lot of these buildings will never be used as office space again." U-Haul was able to think outside the box by renovating this former MetroWest office building into a new storage facility. More offices in Central Massachusetts are likely to be converted into other uses as vacancy rates soar. PHOTOS | ERIC CASEY

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