🔒Money on the sidelines: Real estate is having a rough year, but premium properties are still catching the attention of investors

Uncertainty seems to be the overarching theme of business in 2025, and commercial real estate has been no exception. The federal interest rate cuts in September and in October have a cause for some optimism, but looking at the market as a whole, a lot of investors have been sitting on their wallets, waiting for more economic clarity. Deals across commercial real estate have been slower to progress as a result. Even with uncertainty, investment funds still need to be invested, meaning there has been an increase in large transactions involving key properties seen as stable and safe bets. Multi-family and certain industrial and retail properties generally see high demand and low vacancy, with high construction and financing costs making existing assets all the more valuable. “There's so much money on the sidelines looking to do something that makes sense. Those trophy assets are performing very well,” said Jim Bartholomew, vice president of Wayland-based commercial brokerage firm R.W. Holmes. Seven transactions worth $100 million or more have occurred in Central Massachusetts so far in 2025, more than any year in the last decade, according to real estate data firm CoStar. Multi-family properties top the charts as the most valuable assets in the region, but with the demand for housing in Central Massachusetts clear, all but one of these $100-million sales have been large multi-family sites with low vacancy rates.

The other was a newly-built logistics site in Douglas, showing the value of these types of locations in an age where online shopping has become ubiquitous. In terms of new construction, higher-than-recent interest rates and the cost of construction are still impacting new developments across sectors, but particularly in the multi-family space. “The biggest challenge over the last few years is getting these projects permitted,” said Jim Glickman, principal and founder of Worcester real estate firm NAI Glickman Kovago & Jacobs. “Financing has been tighter, and the cost of construction has been exorbitant. Building materials have gone up significantly in price. Some banks have pulled back from the multi-family space. Interest rates are not high historically, but are comparatively to the way they were in recent years. All of these are contributing factors.”

Big housing deals

Through August, 917 permits had been issued for single- and multi-family construction in the Worcester metropolitan area, including 20 structures with five housing units or more, according to U.S. Census Bureau data. This compares to 1,344 permits, featuring 16 structures five units or more, at that point in 2024. Demand for housing outpacing supply and new construction in Central Massachusetts has been bad news for renters and good news for investors looking to capitalize on the situation. “With limited new supply in the surrounding areas of each property, we will be well-positioned to leverage our local market knowledge to maintain stable occupancy levels,” Yisroel Berg, chief investment officer of multifamily at HGI, said in a Sep. 11 press release, after his firm purchased the Royal Crest Apartments in Marlborough and the Wexford Village Apartment Homes in Worcester for a combined $201.8 million.

This nine-figure transaction was hardly an outliner, as large, stable properties in the region have been sought after by large investment firms. Largely driven by these transaction types, the 12-month transaction volume for the multi-family Worcester metropolitan market sits at $590 million, more than double the 10-year average of $214 million, according to CoStar.

These sales fall into two buckets, Glickman said. While he wasn’t personally involved in the deal, he views the $157-million sale of Worcester’s 370-unit Alta on the Row as an example of one large firm, in this case Georgia-based Wood Partners, using its capital to build and stabilize a high-quality, valuable property, making it a prime target for institutional money sitting on the sidelines. The property was sold to an affiliate of Morgan Stanley. “They built Alta, they stabilized it, and they probably created a significant amount of value over and above what their cost was,” Glickman said. “Those properties become very attractive to institutional investors because they have very specific investment criteria. They have to be high-quality properties that are stabilized. They're willing to accept low returns, because they're getting high-quality property with a good, stabilized income stream.” Sales of large, older properties like Plumley Village, 430-unit affordable housing community in Worcester, as well as the Royal Crest Apartments and Wexford Village sales, can represent a chance to upgrade aging sites in a region where housing is in short supply, Glickman said. “For existing properties that have been around historically, a lot of times we're seeing that the rents being achieved in those buildings are undervalued or undermarket,” Glickman said. “Sometimes you see investors come in and say ‘These rents are 20% or so below market, so we'll buy this.’ Over time, they’ll do some renovations to the properties and increase rents.”

Limited construction of new housing

Even with headwinds, some Worcester-based multi-family projects are still moving forward. A project led by Texas-based Trammell Crow Residential to build a 220-unit complex on Oriol Drive is expected to be completed in January, while Watertown-based SMC Management is making progress on two projects off Madison Street, which will add a combined 287 units to the city.

Right next to one of SMC’s parcels adjacent to the Polar Park baseball stadium is District 120, an 83-unit affordable housing building. It joined The Cove, a nearby 173-unit luxury apartment building also opened in 2024, as residential projects which managed to fight construction and financing headwinds when it opened last year. District 120 was led by Andover-based Tremont Development Partners, a company led by President Rich Mazzocchi. About 750 people applied to live at District 120, he said at the building’s ribbon cutting in 2024.

“If that doesn’t demonstrate demand and the critical need for affordable housing, I don’t know what does,” Mazzocchi said of the number of applicants. For single-family homes, Central Massachusetts has seen an increase in available inventory in 2025, rising from 656 listed homes in Worcester County in January to 1,281 homes in September, according to data from Realtor.com. Listings are generally lower in the winter and reach their peak in the fall, but that’s the most homes ton the market at a single time since June 2020. Sales are up 4% in Worcester County and 2.7% in Middlesex County through September, compared to that point in 2024, according to data from The Warren Group, a Peabody-based real estate data firm. The increase in inventory and sales has yet to slow the seemingly endless climb of prices in the region. The year-to-date median sales price sits at $490,000 for Worcester County and $800,000 for Middlesex County, increases of 4.7% and 6.7% respectively, compared to 3% statewide.

Flex and logistics driving industrial

Overall, there’s been a slow down in the industrial space, according to the sector’s annual sales volume in the Worcester metropolitan area. The annual sleeves volume of $372 million sits below the five-year average of $534 million, according to Costar. “Some people have called it a cool down,” said Evan Koogler, a commercial real estate agent at Worcester-based Kelleher & Sadowsky Associates, said. “I don't know if I would quite put it in that category yet, but definitely a leveling off.” The time it takes to close an industrial transaction increased in 2025, with deals occasionally getting axed in the 11th hour, said Bartholomew.

“Deals that used to be pretty quick are now taking much, much longer to do if they're happening at all, and we're certainly seeing a lot more paper being pushed late in the game or the deal getting nixed by corporate or higher ups,” he said. “It's wait and see right now.” On a more positive note, Glickman said the industrial space has benefitted from investors looking to move away from office assets, and there’s still high demand for industrial sites forlogistics operations. “E-commerce has had a huge effect on demand for warehouse distribution space, and reshoring has had a similar effect,” he said. “So demand for large size spaces to accommodate these uses has been high, and therefore rental increases are happening as well.” Buildings with plenty of power to handle advanced manufacturing or data centers can be a valuable asset, and Koogler said spaces less than 10,000 square feet with garage bays and flexible space have been a hot commodity. “It’s like buying a starter home,” he said of these smaller flex spaces. “There's so many types of firms that could finish it. It could be a small company looking to get their first location, or even a larger company that needs overflow space.” Investors looking for safe deals with a stable tenant who is unlikely to pack up and move have found some refuge in the industrial sector. In September, an investment team including a firm founded by David Rubenstein, a private equity investor and principal owner of the Baltimore Orioles, bought the headquarters of Commonwealth Fusion Systems for $74 million from a Boston-based investment firm. Working on the cutting edge of fusion energy technology, CFS has a long-term lease at the site, which was built out for the company, making a major move away from it unlikely. Showing the importance of logistics space in modern times, a 607,000-square-foot site in Uxbridge sold for $120 million in February to Boston-based Rockpoint. The company cited a strong demand for preeminent space in the region.

Top office spaces shine, the rest suffer

This year has been more of the same for many office building owners, as sites without amenities or top-tier locations have had no means to adapt to the rise of hybrid or work-from-home firms, said Bartholomew. “It's kind of sad when you go into these lobbies,” he said. “They used to be full of life and busy, and there's just no life in the buildings. Office buildings are feeling a lot of pain, specifically the ones that are older, class B, class C, buildings just without amenities. They're done. There's only so low that landlords can go, because of the mortgages they have with banks.” The 12-month sales volume for office buildings in the Worcester metropolitan area sits at $69.2 million, compared to the 10-year average of $108 million. The state of the office space market has caused traditional investors to look elsewhere, particularly industrial properties, Glickman said.

“Investors were focusing on buying office towers, but with the office markets going south, there's still all that money that needs to be invested,” he said. “A lot of it went to industrial.” Office buildings with top-rate amenities and locations have fared stronger in Central Massachusetts, even as major cities like Boston and New York struggle with an abundance of this type of space. “It's the same old story: To hire in the best and brightest, you want them to work in the best and brightest of spaces,” Bartholomew said. The five-story office building at 111 Speen St. in Framingham built in 1985 has completed a $5-million renovation, according to the property’s website. The higher-end building serves as corporate headquarters for energy equipment and solutions firm Ameresco and has a 7% vacancy, about half the average vacancy rate in the Greater Boston real estate market.

The demand for top-tier office space in Worcester has reached the point where, if trends continue and market conditions, there could be appetite for the construction of new class A space in Worcester, Peter Dunn, chief development officer for the City, said in a September meeting of the Worcester Redevelopment Authority. Koogler agreed with this notion. “If you have a tenant who is looking for 5,000 to 10,000 square feet, in a city like Boston, you might have 25 or 30 buildings,” he said of class A space. “Here in Worcester, you might have two or three options. If rent continues to increase, and we hit a certain point where new construction pencils out for class A office space, it could definitely happen. It’s something to watch.” Eric Casey is the managing editor at Worcester Business Journal, who primarily covers the manufacturing and real estate industries.