🔒Running out of retail: Second-generation restaurant spaces are driving demand in Central Mass. retail real estate

Todd Alexander, an executive vice president at Worcester real estate brokerage Kelleher & Sadowsky Associates who focuses on the retail sector, has been busy in 2025 trying to find space for clients. Retail vacancies in Central Massachusetts real estate are sitting near all-time lows, he said.

Most Worcester area properties are reporting vacancy rates between 2% and 4%, with malls and neighborhood centers seeing vacancies closer to 9%, according to real estate data firm CoStar. Like a lot of real estate insiders, Alexander said deals are taking a bit longer to finalize, given uncertainty and market conditions. “Retail is still very active,” Alexander said. “Vacancy rates are at all-time lows, but it has been a little more challenging to get deals done, because of the uncertainty in the economy. There's not a sense of urgency with some of these retailers who are doing deals.”

The rise of restaurants

The Boroughs region in MetroWest is particularly hot at the moment, with existing restaurant spaces moving quickly, he said. Low vacancy and the cost of constructing new restaurants space or converting non-restaurant spaces is a major factor. “Second-generation restaurant space has been going like gangbusters,” Alexander said. “Everybody's looking for that. Obviously, it's a huge saving in infrastructure costs: things such as grease traps, venting hoods and things like that.” National fast food chain Checkers is opening its only New England location on Gold Star Ave. at a former Honey Dew Donuts site, while Marlborough restaurant Chill is opening a second location in the Westborough Shopping Center on Lyman Street, the former location of Mexicali Cantina Grill. Brio 33, a new bistro in Westborough, is replacing the former Tavolino Italian Gourmet restaurant. Gail Hanson, a Westborough resident and former Tavolino patron, is opening Brio 33 in an effort to allow the space to once again be a gathering space for locals after Tavolino closed suddenly earlier in 2025, she said. The restaurant had a soft opening in October and is planning a grand opening for November. About half of the 45 or so employees are former Tavolino workers, including Chef Kevin Sanders and General Manager Abigail Winant. While the existing restaurant space at 33 East Main St. made the project viable, unexpected costs and upgrades still added up, she said. “There were a few more things that changed that we weren’t aware of,” Hanson said of new rules and regulations that required upgrades. “Before we could get back to having an occupancy permit, satisfying the board of health and all that kind of stuff, the list became a little bit longer.”

Anchored plazas

In terms of retail real estate sales, the bigger transactions in the retail space recently tends to be focused on plazas anchored by large grocery chains, whose products have not been impacted as much by the rise of e-commerce, said Jim Glickman, principal and founder of Worcester real estate firm NAI Glickman Kovago & Jacobs. In February, Brasswater, a real estate development firm based in Quebec, entered the American retail real estate market with the purchase of the Stow Shopping Center for $16 million. The site is anchored by a Shaw’s location, with the company telling CoStar News it intended to keep targeting grocery-anchored plazas for purchases. In April, The Center at Hobbs Brook in Sturbridge, featuring Walmart and Stop & Shop, sold for $30.6 million to Argonne Capital Group, an Atlanta-based private equity firm, as part of a wider $1.1-billion deal. The firm said the deal represented a strong belief in this type of asset class. Smaller plazas with less desirable locations and no big anchor tenants find themselves in more difficult situations, with some being redeveloped into housing or other uses, Glickman said. Coming online in late 2024, the Amazon warehouse and distribution center built at the former site of the once-bustling Greendale Mall is perhaps the most compelling example of the transformation caused by e-commerce in the retail sector, Glickman said. “That's as poignant as it could be,” he said of that site’s transformation from a bustling mall, to a building in decline, to a brand new logistics site. “Nobody is going into indoor shopping plazas, and everybody's buying stuff online. So Amazon came in and built a warehouse where there used to be a very valuable interior mall.” Similarly, large indoor shopping centers, which have survived longer than Greendale, are still struggling to adapt to modern times. The Solomon Pond Mall in Marlborough has been operated by a receiver since 2021, after owner Simon Property Group could not reach an agreement with its lender to modify terms, according to ConnectCRE.com. The mall was appraised for $29.7 million in 2024, down significantly from its appraised value of $200 million in 2012, according to Boston Business Journal.

The Natick Mall is faring the best of the region’s shopping malls, attracting innovative, fun-focused tenants like the Level 99 interactive entertainment venue and Puttshack indoor mini-golf to fill vacant big box spaces. Still, the 1.6-million-square-foot site is struggling to find a path forward, with its owner needing to extend its $505-million loan in the spring after failing to find a path toward refinancing, according to BBJ. Attempts to pivot other mall spaces in Natick and beyond to life science space have been halted by the slowdown in that industry. Other malls are considering major modifications to their sites, with plans being considered at The Mall at Whitney Field in Leominster to demolish part of the mall to make way for a Costco Wholesale location, Leominster Mayor Dean Mazzarella told WBJ in June. Tariffs have had less of an impact on consumer spending than some anticipated, but mall and other retail property owners with tenants who are already treading water may be nervously watching this year’s holiday shopping season. Retailers are running low on products purchased in the pre-tariff marketplace, causing analysts to predict November and December retail sales to grow 1.2%, compared to a growth rate of 4.3% in 2024, according to Boston Consulting Group. Eric Casey is the managing editor at Worcester Business Journal, who primarily covers the manufacturing and real estate industries.