Tenants in the many small business offices, local shops and eateries in Springfield’s South End were left with nowhere to operate after buildings were devastated by Wednesday’s tornadoes.
And soon after the dust settles, the game of musical chairs will begin for temporary and permanent relocations into the city’s ample vacant commercial real estate.
The affected office spaces are in Class B and C buildings. Depending on the degree of damage, some will be renovated or replaced, but many will be razed and the land left vacant for the near future, according to local brokers.
“It’s Class B that’s not worth $40-a-foot, and costs a couple hundred dollars [per square foot] to build,” said Robert Greeley, president of Springfield-based R.J. Greeley Co., a commercial real estate firm in Springfield.
Those decisions won’t be made until all the insurance issues are sorted out, like whether the landlord has an obligation to rebuild after such an event or provide temporary space for tenants, Greeley told Banker & Tradesman. In the short term, the relocations will be the focus for most companies.
While the tornado devastated homes and offices, its effects will offer much-needed business to landlords with vacancies. Prior to the storm, Class A and B space in the city was 13 percent to 20 percent vacant, while C space was 30 percent empty, according to Colebrook, a Springfield-based commercial real estate company that tracks local market trends. Rents in A space were fetching $15 to $20 per square foot; B space saw prices from $12 to $15 per foot; and C ranged from $6 to $10 per foot.
And although 2009 saw about 22,000 square feet of space absorbed, 2010 saw negative absorption of about 25,000 square feet, said Joe Dennis, a broker for Colebrook.
The company is trying to find some clients temporary offices right now, but with the Red Cross and other relief groups currently eating up much of the open space in the city, that is hard to accomplish, Dennis said.
Hopeful Future
But once the chaos has abated and the streets are completely cleared, there could be some positives for the city’s commercial spaces, said Kevin Sears, co-owner of Sears Real Estate in Springfield and last year’s president of the Massachusetts Association of Realtors.
“I could see there being a light at the end of the tunnel,” Sears said. “The commercial folks that are currently displaced are downtown for a reason, because they want to be there. There is high vacancy right now, so that will help because there’s plenty of room to rent. When the dust settles, you’ll have vacant space being occupied and damaged space being renovated, making it more attractive. Once the area is safe and open, I’m sure the community will come together and support those local businesses.”
And the storm did not affect a large chunk of the city’s rentable office space, Greeley added.
“While it’s terrible and it’s freaky, it’s not a substantial percentage of the office inventory that was affected, and none is Class A space,” Greeley said. “In terms of supply and demand, we have plenty of rentable space to absorb that. In the world of musical chairs, there will still be empty chairs. It’s not a big marketplace to begin with. A 20,000-square-foot tenant is a big tenant in our world. I think the biggest part is the incredulousness of the thing. We don’t think about tornadoes here."
