After Initial Wins, CitySquare Shuffles Into Next Phase
PHOTO/COURTESY
The Unum Group building was the first of two anchor structures that ushered in the CitySquare development this year in downtown Worcester.
This year has brought the first tenants to the site of the former Galleria Mall, but a weak finance market, low rental rates and a lack of nighttime foot traffic stand in the way of developing the rest of the 22-acre CitySquare site.
Earlier this year, Worcester welcomed the moves of Unum Group and Saint Vincent Hospital's cancer and wellness center in the first half of 2013 into nearly 280,000 square feet of space along Front Street, which now connects Union Station to City Hall for the first time in decades.
Most of the remnants of the former shopping mall have been knocked down, said Donald Birch of Leggat McCall Properties, which is developing the 13.6-acre portion of CitySquare owned by the investment arm of The Hanover Insurance Group.
Some $200 million of public and private money has been poured into CitySquare since the project began in 2010, said Tim McGourthy, the city's economic development director.
“We're surprised by the success of CitySquare given that it's being developed in the middle of a recession,” said Ben Forman, executive director of the Gateway Cities Innovation Institute, a think tank within the research group MassINC that studies growth and renewal opportunities in 24 mid-size urban centers in Massachusetts. “It's persevered against some adverse currents.”
Come spring, another 100,000-square-foot portion of the mall that Leggat McCall purchased this year should be demolished, said Birch, the company's chief operating officer. McGourthy also hopes to see new private development in CitySquare by early next year.
And, summer 2014 is expected to bring the start of work on a 500-space, two-deck underground parking garage behind the Unum and Saint Vincent buildings, Birch said.
Then things will get tougher, as Leggat McCall seeks tenants to fill its remaining 8.5 acres of vacant land. That'll require up to $200 million in private investment, Birch said, with the potential for another 300,000 square feet of mixed-use development, said William D. Kelleher IV, vice president of Kelleher & Sadowsky, a commercial brokerage firm in Worcester.
Officials associated with CitySquare have long talked about bringing in housing and a full-service hotel into the development. Birch wants to have urban-scale, market-rate housing and the hotel — with meeting rooms — in place by 2016.
An additional hotel would make it easier to market the city as a host for larger conventions and events, said Bob Murdock, sales director for Destination Worcester, which seeks to bring such events to the city. Worcester currently has just 739 hotel rooms and could use more than 1,000, said Connie Pion, Destination Worcester's director.
“It's hard to find hotel rooms in the city,” Murdock said.
However, construction costs are currently higher than what can be supported through rents collected from apartment dwellers and fees from hotel guests, McGourthy said. And there are few tax incentives for market-rate housing, Forman said, which he believes are needed to create a 24/7 market for goods and services in Worcester's core.
“CitySquare is the ideal project, but it's being done without the right toolset,” he said.
McGourthy hopes to address the affordability of residential development and the lack of private equity for new projects by making programming and financing changes to the city's tax incentive financing (TIF) program.
And Forman is pushing for a revolving loan fund that would make money available for developers to rehabilitate project sites, as well as state legislation that would allow for larger and easier-to-access tax credits for market-rate housing.
If They Build It, Will Stores Come?
Non-office development downtown faces an additional obstacle: many retailers don't want to locate in a site with little regular evening foot traffic, but many prospective tenants don't want to live in a place where most businesses close at 5 p.m.
“It's a very delicate web you have to put together,” McGourthy admitted.
Most experts agreed that a residential base is needed downtown to attract restaurants, bars and stores to the area.
“With people comes retail,” McGourthy said. “Developers aren't going to come into an empty marketplace.”
But the present lack of nightlife shouldn't be an insurmountable deterrent to housing development Downtown, McGourthy said, adding that residents could find activity nearby in the Canal District or along Shrewsbury Street.
Birch thinks the residential component of CitySquare should be large enough to create the critical mass needed for restaurants or retail outlets to thrive. “We are our own destination,” he said.
CitySquare's rise will be complemented by a nearly decade-long effort by the Worcester Business Development Corporation (WBDC) to revitalize the area near The Hanover Theatre into a theater district.
A $34 million renovation of the 135,000-square-foot former Telegram & Gazette building should be done by May, with Quinsigamond Community College slated to move into 80,000 square feet of the structure in the fall, said Craig Blais, WBDC president. The remaining space will be used for a 350-seat low-cost experimental “black box” theater and a business incubator with available space for startups, he said.
CitySquare will remain an area of emphasis for the next three to five years, McGourthy said. By then, he expects the foundation for development — including active retail areas — to be there, meaning the market should be able to move the project forward on its own without the city's assistance.
Further office space will be the last thing developed under the current CitySquare timeline, Birch said, since it would be built atop the underground parking garage.
McGourthy said it will require a couple of hot real estate cycles for CitySquare to become fully developed.
“We are committed to sticking with it until it is complete,” Birch said.
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