Editorial: Even in a slowdown, Central Mass. real estate remains strong
Back in 2018, a Worcester Business Journal special report looked at the hard economic data behind what has been widely deemed the Worcester Renaissance. The article revealed the national trend of people moving back into cities, coupled with the decade-plus of economic growth that followed The Great Recession, had finally arrived in Worcester, albeit years later than most U.S. peer cities.
In the subsequent five years, more population and economic growth have followed, particularly in the housing market. But, as the experts in that 2018 article cautioned: With Worcester late to the game in the economic growth of the 2010s, would it be hit harder once an inevitable slowdown arrived?
Central Massachusetts and the nation aren’t in a recession, at least not yet, but the economy isn’t nearly as rosy as it was during those growth years of the past decade. The red hot real estate market, which has been the hallmark of Worcester’s growth, is now facing a slow down.
For much of the past two years, it seems almost every week there was a new proposal for a multi-family development or mixed-use project on the table. That frequency has clearly dropped off, and as Staff Writer Timothy Doyle found in his “After the party” story, as fewer of those proposed projects are making it from the drawing board to the construction phase. Of 23 major projects proposed in Worcester in the past five years that we’ve looked at, three have been delayed, one has been downsized, and six remain in the proposal stage. Only six are under construction or nearing completion. And just one has been finished.
The slowdown in local commercial real estate projects mirrors the challenges facing real estate development nationwide: construction costs are rising, interest rates and borrowing costs spiked and remain high, all while many businesses are rethinking their space needs. The Wall Street Journal reported on Oct. 31 commercial real estate lending is nearing historically low levels, as banks and other lenders have been cutting back their exposure. Central Massachusetts is unlikely to be spared from this pain, and the region’s economic development will have to ride this roller coaster, just like everyone else.
After this period of market adjustment, the region still offers an affordable urban alternative where the cultural tide has shifted and greater Worcester is a place where more and more people want to call home. In the meantime, the current headwinds will likely mean that some additional commercial and residential real estate projects will fall by the wayside, but once those market conditions become more favorable again, the long term prognosis here remains strong.
In the past, when conditions softened and projects got pulled, it often felt like a defeat. Maintaining any real development momentum was illusory. Today, the momentum in Worcester and the region has real legs, and any slowdown feels more like a rough patch that we’re sure to recover from.
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