Local Retail Market Feels The Pinch | For brokers ready to hustle smaller deals, opportunities exist
Photo/Matthew L. Brown
Jim Glickman, principal and founder of Glickman Kovago & Co. in Worcester
If on the streets of the region’s commercial corridors you see a harried-looking lady or gentleman, perhaps unshaven, perhaps with his or her clothes looking a little too big and with an anxious look in his or her eyes, that lady or gentleman could very well be one of Central Massachusetts’ commercial real estate brokers.
The last quarter of 2008 wasn’t kind to commercial real estate.
In Worcester County in Q4 of 2007, there were 75 commercial sales done with a total value of $126 million. In same quarter last year, there were 72 sales made with a total value of $44 million. The story is much the same in Middlesex County where in the last quarter of 2007, 114 commercial sales were closed at a total value of $396 million. In Middlesex County in Q4 2008, 101 sales were closed with a total value of $156 million, according to Boston-based real estate tracker The Warren Group.
Statewide in the fourth quarter of 2007, 654 commercial sales were closed at a value of $1.8 billion. For the same period last year the number of sales shrank to 546 and the total value of those deals sank to $668 million.
“We’ve been eating a lot of Saltines and peanut butter,” said Jim Glickman, principal at Worcester-based commercial firm Glickman Kovago & Co., jokingly.
Glickman said the Worcester commercial market, usually a bastion of stability, has become unpredictable. “There is a fair amount of small business activity all of a sudden. I don’t know where it’s coming from or exactly how long it’s going to last,” Glickman said.
Until recently, Glickman did a significant amount of business with Woonsocket, R.I.-based national pharmacy chain CVS. But recently, “they’ve become a lot more stringent. They’ve killed deals that were fully permitted,” Glickman said.
On the other hand, the Family Dollar chain of discount stores has hired Glickman to represent the company in its bid to open 15 to 20 stores throughout Central Massachusetts.
“Generally, everything’s changed,” Glickman said, “and it really depends on where you specialize. A lot of guys that do tenant representation for retail are getting creamed. Those companies are not looking for sites now.”
No Answers
Brokers who have specialized in certain areas find it difficult to adapt when their specialty no longer bears fruit. “It’s especially difficult if you’ve been at it awhile. You can’t really jump around, you’ve got to adjust and I don’t know what the answer is,” Glickman said.
Worcester commercial firm Kelleher & Sadowsky Associates hired an agent in 2008. John McKinley, the firm’s president, said brokers there don’t specialize, and that’s proving to be a smart strategy on the firm’s part.
“The retail market has been the hardest hit,” McKinley said.
Any broker that did “any significant amount of retail work is concentrating on other segments of the market now. There really isn’t any noticeable activity in the retail market.”
Brokers, McKinley said, have to put a little more effort into advising clients on pricing and time on the market. “It becomes more critical, and it’s going to separate the really good brokers, the men, from the boys.”
For the men, there may be real opportunity, even if it means harder times ahead for the region’s smaller, local landlords, said John Eysenbach, executive vice president with industrial real estate firm R.W. Holmes Realty Co. Inc. of Wayland.
Eysenbach noted that Holmes has seen the average size of its transactions shrink.
Deeper And Cheaper
“There clearly has been a shift to smaller sales transactions in the $1 million to $2 million range rather than the $3 million to $5 million range because they’re more readily financeable,” Eysenbach said.
Those properties “are the players of ’09 where they probably weren’t even on the radar screen” previously.
Specifically, Eysenbach said small spaces for military contractors, medical, biotech and health care companies are becoming the norm.
Brokers at Holmes “are going deeper into the market,” Eysenbach said, doing cheaper deals for small spaces, and “everybody’s business is evolving in that direction.”
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