Town grappling with record high office vacancy; EEA grant to help address one Rte 9 issue

by beth on December 21, 2021

Recently, I posted about the closing of Wendy’s on Route 9. That is just a drop in the bucket for the commercial vacancy issue in Southborough.

This month, the Town reported that office vacancies are at a record high, with only 1/3 occupied. At a recent meeting of the Economic Development Committee, it was referred to as the highest rate in Greater Boston.

Worth pointing out, one large vacant building at 250 Turnpike Road (formerly the site of Kaz), is a factor in those figures which are based on square footage.

Earlier this year, critics of the Town’s efforts to revitalize downtown through zoning changes said that the focus should be on the Route 9 corridor. The issues there weren’t an unknown to the Economic Development Committee. In addition to efforts to improve downtown, they have been pursuing funding to make Route 9 more attractive to businesses.

EDC’s Coordinator Marijke Munsiff-Vegting shared:

Over the Summer of 2021, the committee submitted grant applications for 3 different projects that all focus on solving issues that were identified as negatively impacting Business Development along Route 9:

  • One-Stop for Community Growth: to conduct a review of the current zoning code of Southborough’s Business Highway and Industrial zoned areas along Route 9, Provide recommendations for a zoning update for these areas, provide recommendations for implementing specific Economic Development tools, provide recommendations to improve traffic patterns that will facilitate access to businesses along Route 9.
  • Executive Office of Energy Affairs: Review and Update “Wastewater Disposal Alternatives” for Route 9 sites.
  • MassDevelopment Real Estate Technical Assistance: Recommend Economic Development tools and/or District Improvement Financing options for Southborough’s Route 9 Business Corridor including concrete steps for implementation.

The EDC didn’t receive the One-Stop grant for zoning, but will continue pursuing the opportunity in future rounds.

Zoning was among the issues covered in a discussion the EDC had with a guest speaker on December 6th. Commercial realtor Gary Holmes discussed the likelihood that the pandemic had forever changed the number of parking spaces that will be needed per desk in office buildings. Another issue he referred to was the need to increase the vibrancy of downtown to make it more attractive for workers of potential tenants. Upon questioning, he also confirmed that mixed-use on Route 9 could be attractive to employers.

But the main issue he highlighted was the need for sewer infrastructure. He referred to it as a long known factor that restricts commercial development in Southborough.

That ties into the grant that the EDC did receive – $45,000 from EEA for Wastewater. Last week, selectmen discussed how to handle/budget for the $12,500 match the Town has to invest to take advantage of the opportunity. An announcement from the EDC explains the Town’s intent for the grant’s use:

The grant funding, along with a local match, will allow the town to proceed with an analysis of wastewater options along Route 9. Specifically, this grant will fund a comprehensive compilation of existing septic and wastewater systems and update a study that was done in 1981 (SEA Consultants, Inc. – Evaluation of Wastewater Disposal Alternatives for Selected Sites in Southborough, MA).

The lack of wastewater infrastructure has been identified as one of the hurdles for revitalization of Southborough’s Route 9 business corridor. The intended project aims to identify viable wastewater solutions for sustainable economic development as well as diversity in residential options along the primary commercial artery of the Town.

I was going to recap more highlights from Holme’s presentation, but Munsiff-Vegting did a better job. Scroll down for that.

But first some additional notes and highlights worth sharing on the topic:

  • This morning, commenters on the blog were lamenting the condition of the old Andrea’s Restaurant (241 Turnpike Road). In Holmes’ presentation, he indicated that a colleague was in the process of selling that and the adjacent property at 245 Turnpike, with another vacant building. (The properties have been owned for years by the old Volvo dealership and just used for storing cars in the lots. Rad Enterprises purchased the dealership property, but apparently not the extra lots.) Holmes wasn’t sure the latest status of the sale, but if it goes through, he believed the intent is to knock down the buildings and build a warehouse.
  • Earlier in the presentation, Holmes noted that warehouse properties, which Southborough doesn’t have much of, have gone up in value at the same time that office space value (especially “Class B”) has declined. He encouraged that if Southborough had land that could be earmarked for warehouses, it would be a good move.
  • Last year, Trivedi Advanced Technologies made news by buying 200 Turnpike Road for $1.4M to expand its headquarters in Southborough. They are in the news again. This time for relocating to Northborough to expand even more. In July, they sold the building to JC Grounds Management. It is currently going through a permitting process with the Planning Board to renovate and use the site for their commercial snowplowing business.
  • For those of you who aren’t sure why to be concerned about vacancy rates, remember that they impact the tax burden for residents. A decline in commercial properties’ assessed values due to vacancy rates is a big factor as to why residents’ tax bills will significantly increase this coming year.

Now here’s Munsiff-Vegting’s message to the Board of Selectmen, Planning Board, and Advisory Committee about the presentation. In addition to a recap of Holmes’ points, it includes her thoughts to them on other context and necessary actions:

Most of you were unable to attend the EDC meeting [on December 6th] where Mr. Holmes was invited to speak on commercial real estate challenges and opportunities for Southborough. Mr. Holmes (a former but long-time Southborough resident) is president of R.W. Holmes Realty. His 35 years of professional experience in the Greater Boston area and more specifically Southborough, makes him a valuable resource on the current trends of commercial real estate market developments. [In the meeting] he gave a very insightful evaluation of Southborough’s Route 9, from his commercial realtor’s perspective.
I have taken the liberty to send this summary to all of you (and not just the EDC) because I believe this information and insight is important for all that work for the Town.
A summary of Mr. Holmes comments:

  • Southborough’s office vacancy rate is at an all-time high: Southborough has 900,000 sq ft of vacant office space. At a current 35.6% vacancy rate it is the highest it has ever been and the highest office vacancy rate in the area. This high vacancy rate, translates to one in three buildings being empty.
  • Office space has to be repurposed: Southborough has an abundance of Class B offices for which there is a low demand. In order for companies (clients) to get people back into the buildings, offices need to be upgraded with improved ventilation, outdoor spaces, and amenities.
  • The Life Sciences sector is the biggest growth market in the region: The Life Sciences industry is well funded and will continue to grow. Neighboring communities are converting office space to lab space (Natick, Framingham, Marlborough, Westborough). As laboratories increase in size and their operations mature, office space will be required. (Note, companies want their office space to be contiguous with their existing laboratory location.)
  • Southborough is missing out on the Life Sciences boom: Lab space needs wastewater infrastructure. Southborough does not have sewer along Route 9.The Town will subsequently miss out on any office space demand by laboratory firms. Southborough will not be considered due to proximity and desire for campus style locations.
  • Mixed use housing is a must: Companies need to have viable housing options to attract employees. Corporate housing (more high-end apartments) should be looked at as well.

Other discussion:
Communities are reconsidering their parking requirements for several reasons:

  1. Employers want people back in the office – but hybrid work is going to continue.
  2. “hoteling” – While workers are showing a preference for working from home, when they do go to their office, they want their own space and not a cubicle reservation system. This will increase the number of cubicles needed but should not drive up the number of parking spaces = more space for less employees.
  3. Green space has become a requirement, not just an amenity.

3 PRIORITIES TO ATTRACT BUSINESS TO ROUTE 9:

  • Sewer on Rt 9 – there are no viable solutions to tie into surrounding communities. Sam Stivers (MWRA advisory member) confirmed this at the meeting.
  • A vibrant Downtown is important! Southborough has great schools and a great location but potential home buyers go to Sudbury because they want walkability and vibrant places to visit, eat and shop.
  • The right zoning has to be in place. Developers are averse to go through a lengthy rezoning process with municipalities. They will find an alternative location in a community where the zoning is in place.

This fact was also highlighted during a discussion I attended on the e-commerce boom in the region: Warehousing space is becoming more and more valuable (and worth more than the office building space). The boom in e-commerce has fueled the demand in various types and scale of warehousing. Southborough has the ideal location but zoning needs to be in place for any developer to come in.

This is a brief summary of the discussion that is worth watching. You can find the EDC meeting recording here. Please fast forward to 30 minutes into the meeting.

For Southborough to be effective in keeping and attracting businesses along Route 9, and seeing some significant growth in commercial/industrial tax revenues, strategic decisions and investments are needed.

Any potential Route 9 revenue will not be realized within the next year. It will only be realized when a well thought-out, project plan is developed and supported by all of the Town’s elected boards.

{ 13 comments… read them below or add one }

1 empty buildings December 21, 2021 at 5:21 PM

Over the last fifteen years I have observed increasing FOR LEASE signs being put up in front of Southborough office buildings and/or the corresponding removal of company names from signs in front of those buildings.

It is a mystery why and how the EDC has seemingly not mitigated this ongoing, and possibly accelerating loss of businesses in Southborough.

The EDC’s focus seems to have been on that single parcel on Main St. and changing Southborough’s zoning law

How is that going to bring significant tax revenue to this spendthrift town?

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2 Southville December 22, 2021 at 12:07 PM

I’m not sure how Southborough is supposed to magically avoid the effects of this pandemic compared to every single place with office space that is struggling right now. There’s still too many questions and too much working from home for companies to think about expanding their office footprints. Either they want to shrink them for more work from home folks, or like many companies have had to close or lower employment to survive the pandemic.

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3 LD December 21, 2021 at 6:10 PM

A warehouse, really?!

We have a relatively dense residential area with little to no restaurants (and high incomes), and that’s the best we can come up with for that prime location?
A warehouse on Rt. 9 doesn’t scream a ‘move here’ vibe…A vibrant restaurant/arts/open space scene might.

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4 Enriching the Rich, Hang Onto Your Wallet December 22, 2021 at 8:10 AM

What is not explained here is your taxpayer dollars will subsidize already wealthy owners. That’s the reality behind this EDC persistent push to stick its hand in your wallet, while the owners cry all the way to the bank. If you simply Google which private companies and owners have already obtained taxpayer grants, money funded by you, this will be worthwhile.
There’s a pandemic that has impacted office use from Boston to the suburbs and beyond. Not just Southborough. The misleading propaganda above doesn’t state that Southborough’s vacancy rate historically for DECADES has always been high and in the double digits primarily due to its less desirable suburban location as compared to AVAILABLE, higher quality space everywhere else. That’s not a reason to open your wallet and hand over money. These commercial properties are empty and aging, as properties do everywhere, from Boston, Cambridge, and throughout the state. As buildings age and demand changes, new uses eventually surface. No one should feel compelled to assist wealthy owners.

Also, there are some very misleading bits in the EDC statements above. Community’s don’t convert space, owners do. Based on demand. The tenants pay for their own fit up. Typically it’s built into their rental rate. Other locations are simply more desirable locations. No lab user will ever want Southborough over closer suburban locations to core Cambridge and Boston, or better substitutes. So putting in sewer on Route 9 might backfire. NOT having sewer has been one good BENEFIT to our town. It has been a natural cap on ruining and overrunning the town with development beyond the capacity of the size of this small town. Route 9 remains traffic clogged and often has pre-pandemic levels of traffic halting routes and overflowing huge trucks and traffic through small back roads.
For all of the above reasons, this EDC developer voice should be defunded and disbanded. At a minimum, it should be moved immediately OUT of town hall, as a de facto leasing office and taxpayer funded grant source for wealthy owners. It was ludicrous to move it in town hall in the first place by moving the ZBA out of town hall, away from the Planning Board, and other vital town government functions to begin with. Crazy.
Don’t fall for the misleading propaganda. As for Sam Stivers push for sewer on Route 9, this push is looking to “unlock” parcels at 495 and 9, and making a bad situation worse with traffic, trucks, standing emissions and clog. Sometimes saying NO or STOP is the best way to preserve a town center and the town itself, I.e. overdevelopment to the hilt beyond the capacity of water and roadways versus recycling, reusing, and preserving.

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5 Randy March 30, 2022 at 10:12 AM

“Route 9 remains traffic clogged and often has pre-pandemic levels”. Traffic clogged is an understatement. One very big reason for this is the traffic light near Ted’s Towing and Ken’s Salad Dressing. This light needs to be reset to allow more time for heavily congested Rt. 9 during commuter hours. The off timing of the red light literally creates a traffic jam in that area every morning and evening. Please reset the light to allow for better traffic flow on Rt. 9.

Thank you!

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6 Carl Guyer December 22, 2021 at 8:52 AM

Has Mr. Holmes and our EDC decided to team up as a comedy act.

Our commercial investors are now trying to convert a tax break they get when they lose tenets into a reason for future benefits from the residents of Southborough. Who came up with this policy that if a commercial investor fails retain a tenet the residents of a community take a hit with higher tax bills. I know of no similar provision for residential tax payers. You think our commercial property owners would be grateful for this subsidy and not try to turn in to a list of grievances of why residents don’t make their property more valuable. We are in a pandemic and the economic pain is everywhere.

The EDC seems oblivious to the fact our commercial property owners year after year pay a tax rate lower than the rate paid on 75% of the commercial property in the state while the residential property owners are paying a tax rate higher than the rate paid on 80% of the resident property in the state. That is not equity, that is the scam of a single tax rate. Equity would have each classification, as they are called, paying a tax rate of the same relative burden for their classification. An equitable set of tax rates would reduce the tax burden on residents to the tune of 5 to 10 million dollars a year.

So please lets have less of this poor mouthing by our commercial property owners and a little more humble appreciation for the benefits they recieve year after year.

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7 Al Hamilton December 22, 2021 at 11:39 AM

Carl

The tax dollars that flow from commercial properties comes in 2 parts. The value the property and buildings and the value of the plant and equipment that his housed in the building.

If a property is rented, the tenant will have taxable assets in the facility that yield property tax. If the property is empty then there is no property tax from the tenants property.

Beyond that, a good case can be made that a full building has a greater value than an empty one. I am sure that the owners of said buildings are taking advantage of every legal avenue to minimize their taxes just as you or I would.

I disagree with you on the desirability of a split rate. By far the greatest local expense in our town is schools, taking roughly 2 out of every 3 tax dollars raised. Commercial properties do not send children to school. They are already cash cows.

To reduce our tax burden, we need more fully occupied commercial and industrial properties not less. We should be striving to make Southborough a desirable destination for commercial and industrial firms to locate not scaring them off with split rates.

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8 Carl Guyer December 22, 2021 at 5:27 PM

Hello Al

Thank you for responding to my comment, it is good to see an individual willing to be identified with any comments made here, I wish others did the same.

I just wanted to note that you may be in the wrong pew in terms of tax classification.

The contents of a building are usually classified as Personal, a truly poor name.

Here is the definition of Personal.

“Personal property generally includes tangible items that are not firmly attached to land or buildings and are not specially designed for or of such a size and bulk to be considered part of the real estate. This includes, for example, merchandise, furniture, machinery, tools, animals and equipment. Personal property is taxable unless a specific exemption provision applies. G.L. c. 59, § 2.”

Also, your reference to who benefits from schools is an old dodge.

Schools were established long ago not to benefit individuals, but to enhance the commercial viability of the community. The most direct consumers of an educated public is the commercial enterprises in a community. Or more directly, try to get a job in well a established business without a high school diploma.

Aside from all this, the basic argument is that the commercial property owners are getting a great deal as a result compared to their counter parts while residents in Southborough are financing it through high tax rates.

Thanks again for your interest, hope all is well with you family.

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9 Al Hamilton December 29, 2021 at 9:32 AM

I may have the nomenclature wrong but businesses do pay property tax on their plant and equipment. Here is the form that is to be filled out each year by businesses located in Mass

https://www.mass.gov/doc/state-tax-form-2-form-of-list/download

It specifically sites the following as taxable personal property for a business: Poles & underground conduits, Machinery, Business Furniture and Fixtures, Merchandise, Unregistered Vehicles, Forest Products, Animals, and Other.

If a business leaves Southborough it will take most of this stuff with it and hence no taxes for us.

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10 Enriching the Rich, Hang Onto Your Wallet December 23, 2021 at 7:45 AM

Thank you Carl for your good comments on a split tax rate. It is a basic fact that owners of commercial properties have been enjoying a longtime subsidy by the rest of the tax base, namely residents, in the form of a single tax rate. This should have ended long ago.

Since the pandemic has resulted in less office space demand, many office properties especially aging ones, are simply not desirable by tenants who will opt for more desirable locations. The aging of a property is a completely different factor. Asking to residents to help a commercial owner with his property in any way is like asking a commercial owner to put a new roof on a resident’s house.

Must strongly disagree with Al. He fails to recognize that for market based reasons and locational realities as compared to Boston, Cambridge, and closer in suburban locations, other areas have always been and will remain a tenants first choice. Traffic clog is always a tenant’s top consideration as well.

More importantly, it’s not the residential taxpayers job to prop up any commercial owners in any way, including costs or expenses of any type or pay for infrastructure costs. Al, has any commercial owner sold any one of his second or third out of state vacation homes or Lamborghini yet? Everyone can stick to their own knitting. The market will always be changing. The market takes care of change. Owners do their own leasing and property management just fine. When they do, they buy luxury cars and more vacation homes. Al, your analysis is off. The single tax rate has helped prop up this tax inequity. Also other owners in nearby locations with split rates manage to attract tenants. The only scary thing about a split tax rate is the crybaby antics one can expect from wealthy commercial owners and their p.a. system, the EDC. The EDC should be moved immediately out of town hall and defunded. This de facto leasing office for wealthy owners, subsidized by resident taxpayers, needs to be defunded and disbanded.

Al, you do bring up a great point about the ludicrous school spending and disproportionate burden on taxpayers. That should undergo a careful hard look and longer term planning analysis with the intention of downsizing and trimming costs to a less disproportionate level. One has to ask why it ever got this bad?

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11 Carl Guyer December 24, 2021 at 9:04 AM

Hi Al

I realized I missed responding to your assumption that split tax rates “scare” off commercial and industrial investment. This is a common misconception.

I am sure you have heard the EDC’s mantra that since only 30% of the communities in Massachusetts have split rates and 70 % have single rates, those with single rates know what is the best strategy for attracting commercial and industrial investment.

Well you better sit down for this….

The 30% of the communities with split rates in Massachusetts have 78 % of all the commercial and industrial assets in Massachusetts while the 70% of the communities thinking single rates are a great policy have 22%.

Obviously the EDC is unaware of this basic bit of economics. It could be easily said their advocacy of a single tax rate to attract commercial and industrial investment is off by an order of magnitude.

I appreciate your expressing some the standard cliques whenever the subject of split tax rates surfaces. Gives me a chance to respond.

Thanks

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12 John B December 22, 2021 at 2:26 PM

1. Disband the EDC. Your “efforts” to help developers at all cost are not needed. Pack up your toys and go home.
2. Split tax rate is needed to relieve burden from residents.
3. BOS, please stop endorsing committees who seek advice from developers on how to spend tax payer money. Please, please stop this insanity!

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13 Joe January 12, 2022 at 7:35 PM

This stinks of Capital Group and their control over the edc and our government. We as taxpayers are not responsible for improving, leasing or marketing for any commercial owners. We don’t want warehouses and trucks keeping us up at all hours. Just ask the people that live behind Ken’s. Let them lay in the bed they made. It’s not our problem or fiscal responsibility. A comment on others in here is keep the money in the schools. It’s the only positive thing keeping our real estate values up. That along with what was a quiet New England town amongst over developed towns at least for now until edc and our crazy government ruins that with high density housing.

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