By, Cyrus Moulton – Worcester Telegram and Gazette, August 2nd, 2020
WORCESTER — The economy is in tatters.
Working from home has become the norm rather than the exception.
And Unum, a major employer and pioneer in the downtown resurgence pre-COVID-19, has recently decided to vacate its signature building.
But for the firm embarking on a $10 million to $15 million renovation of perhaps the city’s most iconic building — the 24-story glass tower at 446 Main St. — the fundamentals of Worcester remain strong.
“We love the fundamentals of Worcester,” said Ryan Chamberlain, vice president at Boston commercial real estate firm Synergy Investments, which bought 446 Main for $16.5 million in October.
Chamberlain cited the city’s economic base in the medical technology fields, the roughly 35,000 students in the city, the growth of UMass Memorial Medical Center, the Worcester biomanufacturing park The Reactory, public transportation directly to Boston, and the landing of the Worcester Red Sox.
“It reminds us quite a bit of the success of Boston,” Chamberlain continued. “We want to be a part of Worcester’s resurgence and plan to invest a good amount of capital within the next few years.”
And while Chamberlain acknowledged that coronavirus has “slowed things down a little bit,” he remained optimistic on Worcester … seeing signs that the commercial real estate market is starting to return.
“Certainly in terms of tenants looking — especially early on in the April-to-June timeframe — and potential tenants moving, it took a bit of a back seat and they said, ‘let’s focus on operating a business under the new life we were given,’” Chamberlain said. “But I think we’re seeing that start to break a little bit … as we’re re-emerging a bit, we’re seeing folks getting back out and asking about space we have available.”
The downtown commercial real estate market was going strong pre-coronavirus, with occupancy rates rising and several buildings — including 100 and 120 Front St. or Mercantile Center, The Printers Building at 44 Portland St., and 10 Chestnut St. — reporting occupancy rates at or above 90 percent, according to a Feb. 27 report by the Worcester Regional Research Bureau. The report also showed 446 Main St. and the Unum Building with an occupancy rate of 86 percent.
Moreover, property owners were investing in renovations; perhaps most notably the $70 million redevelopment of Mercantile Center.
But 446 Main had begun to show its age, and several major tenants were moving out.
The Worcester Regional Chamber of Commerce moved out in October 2018. Knight-Dik Insurance Agency Inc. announced it was relocating from 446 Main to Mercantile Center in January 2019. Engineering and environmental consulting firm Tighe & Bond moved from two floors at 446 Main St. to 120 Front St. in June 2019.
Santander Bank, which had most of the ground-level space in the building, moved out of 446 Main on Friday and plans to open Monday at 507 Main St., an 11-story building just down the street.
Today, the glass tower is about half full, according to Chamberlain.
But the building was purchased — at $9 million less than its assessed value — with a major renovation in mind.
“They know that there needs to be a refresh of mechanicals, office space, common areas; it’s a 50-year-old building,” said Timothy P. Murray, president and CEO of the Worcester Regional Chamber of Commerce.
Moreover, the building is in an Opportunity Zone: designated low-income census tracts where companies can defer taxes from previous investments for seven years by putting the capital gains into funds that finance projects in those zones. Investors who remain in the funds for 10 years can avoid taxes on gains in the new investment.
“This is absolutely a long-term investment for us,” Chamberlain said, estimating the project’s total cost (purchase plus renovation) as between $25 million and $30 million. “We want to restore it to its previous grandeur and make it again the crown jewel of the Worcester office market.”
To do that, Chamberlain said that an update of the building’s lighting has been completed, and the renovation will add a new HVAC system in addition to freshening up the lobby and elevators with “modern amenities.”
He also envisioned some sort of a space for a food-service option and better use of the plaza to allow outdoor lunch breaks and encourage pedestrians to linger. The work will primarily occur over the next several years, Chamberlain said.
“It’s a lot about putting in the work and investing in modern amenities and services that attract companies that want to be there,” Chamberlain said. “The most expensive thing for companies is attracting and retaining employees. Having a desirable place to work is a huge part of that. We feel we can provide that in this building, in terms of location, having a member gym, food service, etc.”
But will people want to be there? After all, COVID has sent most of downtown’s desk jockeys home to work and prompted companies to rethink their office needs.
Dunn also predicted a change to what office space would look like, with the end of the open office floor plan and the practice of communal work spaces.
“It’s not just about the size of the office and how many employees are coming to work, you also have to think about now how to configure the space,” Dunn said.
But on the other hand, perhaps that means it’s a good time for 446 Main to be renovating.
“Now that some of the layouts and designs of office space is changing and evolving, they can be adapting it differently, so it’s a good time,” Dunn said.
And he added that Unum has been successful in subleasing its space. Moreover, recent success of Class A conversions in the city — from big projects at Mercantile Center to small projects in the offices above Dunkin Donuts — bode well for the building.
“We’re excited to have a new ownership,” Dunn said. “They’re going to bring it back into Class A as Class A can be.”
“COVID has slowed everything down, but I think as hard as it is, there will be a day when COVID is behind us, and the fundamentals that have created the momentum in Worcester and the region is still there,” Murray said. “But that is what brought (Synergy) here to begin with — a surging economy, revitalized neighborhoods, the downtown has gotten a facelift — some of the amenities they can bring into the building that they’ve already talked about make me think it could be a real exciting place, you just need an owner committed to that with the know-how and the expertise to do it. And we’ve got one.”
Indeed, both Dunn and Murray said that Synergy was well known throughout the Metro Boston area and beyond in converting underused assets into first-class commercial space.
“It’s nice to see their interest in our city,” Dunn said. “It’s a good signal to the market that their firm is interested in our city.”
Murray agreed.
“If a company like Synergy and (CEO) Dave Greaney have made the decision to invest in Worcester, that has already turned some heads and caused some other people to inquire about Worcester and what other opportunities there might be,” Murray said. “I don’t want to say who, but both real estate brokers and Boston-based development companies have inquired because of Synergy’s investment.”
In fact, there might be more investment to come.
“We really like Worcester,” Chamberlain said. “We’ve looked at several other potential projects in the city and have interest in other projects — be on the lookout.”