The 2015 Downtown Vacancy Report

By Friday of each week, the City of Lowell uploads the agenda and packet of information for the following Tuesday’s City Council meeting. The packets make interesting reading—they include reports that the city council requests, petitions for permits only the council can grant, and the minutes of the previous meeting. They can be found going here: http://agenda-suite.com:8080/agenda/cityoflowell/Meeting.html and clicking on the book icon to the right of the appropriate meeting.

Why do I mention this? The public has an opportunity before the meeting to request to speak in favor or against any motion a City Councilor makes, and City Councilors welcome emails about upcoming agenda items. I thought I might make a semi-regular post about items I find interesting in each week’s packet, partly to encourage me to keep up with city politics and send a message to the Council when I feel so moved.

This week’s votes seem fairly routine: A vote to accept a donation to the library, a vote to approve a sign for a new restaurant, and a vote to instruct the City Manager to “inquire as to whether LTC can broadcast Lowell Historic Board meetings.” However, there are two interesting reports about downtown in the packet: a report about concerns the Lowell Commission on Disability brought up in a November meeting, and a report about downtown vacancies. I hope to write about the Disability Commission in a future post, but would like to focus on the downtown vacancies today.

Downtown Vacancies: Is it Getting Better or Worse?

A little more than a year ago, the former City Manager presented a report about downtown retail vacancies. We discussed that report, the high school location, and what an ideal downtown use mix might look like in “Downtown Lowell, Downtown High School.”

A month ago, Councilors Kennedy and Leahy made a motion for a new report, which is in this week’s packet. Here’s a quick table of the two years, side-by-side:

Commercial Space in Downtown District
	Dec 2013		Jan 2015*
Total Square Feet, Ground Floor	828,726		805,699
Total Square Feet, Upper-Story	1,876,762		1,070,984
Vacancy, Ground Floor	8.6%	70,831	10.3%	82,987
Vacancy, Upper-Story	Unknown	Unknown	19.6%	209,913

*Total values derived from vacancy percent for 2015

The first thing I noticed is the drop in total commercial space. I’m not sure if this represents a smaller study area or a shrinking amount of commercial space (due to conversion to residential or demolition). Even with that shrinking of space, the amount of ground-floor vacancy has increased. I urge readers not to make too much of this: these are two snapshots in time, and a change of 20,000 square feet could represent only two or three storefronts. If a 10,000 square foot business closes or opens, it affects the vacancy rate by more than a percent.

A quarterly series of these reports to spot trends over time may be more valuable. In fact, the councilors suggested periodic reports. However, as I mentioned in last year’s post, while ground-floor vacancies can often be spotted with a simple drive-by survey, keeping track of upper-story vacancies is often a more laborious process involving keeping in touch with downtown landlords.

Downtown Lowell Ground-Floor Occupancy, Jan 2015, City of Lowell DPD, from City Council Packet

Are these good or bad numbers?

Downtown retail vacancy rates below 20% are considered appropriate and the national average (including both downtowns and shopping centers) is 10%. A stretch goal might be reducing vacancies to 6.5%: This is considered a “tight” market and is close to rates in Burlington, VT or Cambridge. This would mean filling 30,000 square feet. Another goal, having restaurants, shops, or other businesses and organizations that bring “eyes to the street,” creating a healthier downtown, could make up a post of its own.

A healthy upper-story vacancy rate is also difficult to define. The 19.6% downtown upper-story vacancy rate is worse than Greater Lowell’s office vacancy rate as a whole, which was 13.8% in early 2014. However, the numbers aren’t comparable. Historic building office spaces being more difficult to fill because of small floorplates, lack of dedicated parking, and old infrastructure. In addition, many spaces in downtown require significant renovation. With that in mind, for comparison, Reis reports that the national US office vacancy rate was 16.7% in the last quarter of 2014. Both Worcester’s and Springfield’s vacancy rates were lower, at 18% and 13% respectively, but this was for their whole metro area, suburbs included.

What about individual properties?

The most interesting piece of both the 2013 and the current reports is the map and table of prominent vacant properties. I’ve made a table with an edited version of what each report mentioned about vacant properties.

Name	2013	2015
151 Merrimack Street – UML Bookstore	A group of private and institutional partners is… exploring the possibility of retail incubator…	Future home of Lowell’s School Department Family Resource Center.
107 Merrimack Street – Chantilly Place	The property owner has had many inquiries but several have been for service-oriented businesses, which may not be the highest and best use of this prime retail location.	The property owner has had many inquiries but several have been for service-oriented businesses, which may not be the highest and best use of this prime retail location.
61 Merrimack Street – Union National Bank	The building was condemned by the Fire Department and Development Services due to work being done without permits.	Space currently being rehabilitated for restaurant use.
2 Merrimack Street – Sun Tower Building	Currently occupied by the contractors undertaking work on the building.	Not listed in 2015, but was only recently vacated by contractors.
104 Merrimack Street – Mill City Tobacco	The property owner is in discussion with a potential tenant.	Not listed in 2015, as the tenant – Mill City Tobacco – moved in.
110 Merrimack Street – Ask Clothing	A sporting apparel/upscale sneaker shop in considering going into this place.	Not listed in 2015, as the tenant – AWOL – moved in.
201 Market Street – King Star Café	The property owner is addressing residual issues with the previous tenant…	DPD has been working with the property owner and has sent this listing to several inquiries…
43 Market Street – Moe’s Trading Post	General feedback is that “the sale price is too high and not realistic considering the building’s poor condition.”	The new owner is currently cleaning the building and doing interior renovation. The owner plans on operating a restaurant on the ground floor…
30 Central Street – Sal’s Pizza	DPD has communicated with the property owner to identify resuse options and offered assistance.	This space is available for lease.
166-174 Central Street – Bank Building	The building was recently purchased and is being rehabbed by the new owner. He is considering a mix of uses…	The building is currently being rehabilitated as an adult daycare facility.
295 Central Street – United Restaurant Equipment	The owner of the building… has received several inquiries but he’s been very selective since the building will need substantial rehab.	Currently available for lease/sale.
313 Central Street	This building is for sale…	Not listed in 2015, but I see it listed for sale for $120,000.
125 Church Street – Battambang Market	The property owner and their broker are working aggressively to identify suitable tenants, with a particular preference for a grocery user.	Not listed in 2015, as the V Mart International Market moved in.

Comparing 2013 with 2015 shows a lot of progress, so where are the new vacancies coming from? The newly vacated properties are 40 Church Street, Delicias Bakery/La Pastiche, La Boniche, Mambo Grill, Welles Emporium, Giovanni’s Trends, Babylon Restaurant, TableTop Arena, Pure Fro Yo, Ray Robinson’s, Downtown Dancewear, RiHa Computer, and Cravings.

Some of these were real losses to Aurora and I. One of our favorite downtown restaurants was Babylon, we loved La Pastiche, and we sadly never had a chance to visit Ray Robinson’s. Each of these new vacancies has a story: some closed due to death or retirement, others due to low sales, others due to staff problems. A survey of the reason for each would be an interesting study.

Of these, La Boniche, Mambo Grill, Giovanni’s Trends, and TableTop Arena have prospective Tenants. Notably, Bishop’s Legacy Restaurant is confirmed to move into the La Boniche building. Also of note is that the owner of the former Lowell Sun Press Room – the large building on Prescott Street – is working with a prospective micro-brewery tenant, which could be an interesting use for a very large space. The upstairs floors would potentially become market-rate residences.

Former Lowell Sun printing building, future microbrewery and apartments?

What about the upper stories?

The 2015 report has a property-by-property summary of upper stories as well. There are many interesting developments listed: United Teen Equality Center (UTEC) is looking to renovate 27 Prescott Street, which it recently purchased. The owner of 100 Merrimack Street renovated their property to include shared-amenity small office suites to attract entrepreneurs. As mentioned before, the owner of the Sun Printing building on Prescott is working with DPD to convert its upper stories to market-rate apartments.

Conversion to apartments is often more profitable than office buildings. Because of a trend of businesses using less space while people live in larger spaces, the demand for apartments in central business districts is usually high. However, a healthy downtown needs both offices and apartments: too many apartments, and there is no lunch crowd and few people walking on the streets during the day. This may be compounded by long commutes professionals may take to other cities, meaning they aren’t home until well into the evening. On the flip side, a non-vacant apartment is almost always better than a vacant office.

What does the Department of Planning and Development do?

Inherent in asking for a report is the question of how the city can improve its vacancy rates. The 2013 report included a good list of activities the City’s Department of Planning and Development (DPD) undertakes. This includes (paraphrased):

• Maintaining an inventory of vacancies to market to prospective tenants
• Communicate with property owners and brokers and offer to help outreach to prospective tenants, including visiting other city centers and cold-calling desired businesses such as an independent bookstore
• Work with people interested in starting a business to help them develop their business idea, including working with the Merrimack Valley Small Business Center
• Work with several organizations to offer financing and microloans
• Offer ways to improve vacant storefronts, from window displays to pop-up stores

The DPD also offer a Best Retail Practices program to offer businesses with techniques and grant assistance, a Community Marketing Grant program for collaborative marketing, and does additional marketing for the downtown and its businesses through social media and other methods. City staff also attend neighborhood meetings and supports privately led initiatives. The report concluded with future activities, following up on council recommendations. These included a best retail practices type program for web presence, conducting a survey of Lowell businesses in early 2014, and providing “Welcome to Lowell” packets to parties registering with the City Clerk’s Office.

I hope to reach out to the City to find out which of these programs it continued and what other activities the DPD is considering, and I encourage anyone to comment if they have ideas of their own! The 2015 report states that the DPD will conduct a survey of businesses to evaluate the impact of the two-way traffic change, which will certainly have interesting results and may make a great topic for a future post.

In addition to following up with the City on how they completed their study, what types of programs they’re planning for 2015, and how they feel about downtown Lowell, I hope to learn about a critical question not addressed in the reports: the asking rent in downtown properties and how it compares to other cities. This could add a layer to understanding the dynamics of Lowell’s downtown and why some prominent storefronts seem stubbornly empty. Please let us know in the comments if you think we should research anything else!

Update: I had a great conversation with a staffperson at the City of Lowell about the above questions.