Worcester Business Journal

F OC U S R E A L E S T A T E W orcester is a city on the cusp of reinven- tion, with new cul- tural, lodging and residential projects. But as much work as it's been to encourage downtown investment, rebuilding the city's industrial image may prove more challenging in an envi- ronment discouraging needed updates of the city's commercial real estate. Steven Rothschild is a city landlord who owns an old brick mill building the Main South neighborhood. Over the years, he's been able to cover the expens- es by leasing the former industrial space to office tenants, leaving little left over for the upgrades necessary to attract industrial users, which generally bring with them larger workforces and a great- er contribution to the local economy. "The challenge of keeping the build- ings occupied in an industrial capacity are basically insurmountable," Rothschild said. Upgrades & taxes The problem is the needed upgrades at the old industrial spaces and how that impacts their taxable value under Worcester's dual tax rate. Every year in December, the Worcester Regional Chamber of Commerce tells the Worcester City Council the city's 23-year-old dual tax rate is a major hindrance to business growth in Worcester. This past December, the City Council voted to increase the difference between what businesses and residents pay for the sec- ond year in a row, reversing progress that had been made to narrowing the gap over the previous four years. Rothschild said available industrial stock is too dated for modern commer- cial operations, such as manufacturing and distribution, which generally yield higher rents than office tenants. Upgrading the properties with features like loading docks, high bays, modern heating, cooling and power infrastruc- ture, and replacing beams and old wooden floors not suited to today's use, is costly and leads to higher tax bills. "Buildings can't sustain a rent that can pay the taxes," said Rothschild, who is now developing small-scale manufac- turing units with modern amenities in the Armory Business Center in the South Worcester Industrial Park, as an alternative to more antiquated spaces. Industrial vacancy at 40% The city's industrial vacancy rate hov- ers at 40 percent, according to data pro- vided by Sherri Pitcher, Worcester Regional Chamber of Commerce senior director of business development. Much of the vacancy is concentrated in three major buildings, but it's spread over 36 buildings throughout the city. Pitcher sits on the Worcester Economic Development Coordinating Council on behalf of the chamber, and manufacturing is one of the key sectors the council wants to grow, Pitcher said. She agreed the cost of investing in need- ed upgrades is a major hindrance to Industrial vacancies Worcester's industrial building are 40% empty, as landlords can't reconcile costly upgrades with the impact on their tax bill, especially for small manufacturers BY EMILY MICUCCI Worcester Business Journal Staff Writer Steven Rothschild had such a difficult time getting industrial tenants into the Ivy Corset Building that he opted to aim for small-scale manufacturing spaces for startups and new companies at his new Armory Business Center. Chris Duva, owner of Duva Distributors in Worcester, had to freeze his payroll after moving into his new Millbury Street facility because of the cost of all the necessary upgrades. P H O T O / B R A D K A N E P H O T O / E D D C O T E 12 Worcester Business Journal | January 23, 2017 | wbjournal.com

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