Springfield Positioned to Relieve
Stranglehold Presently Gripping the
February 10, 2020 | By Evan Plotkin, President/ CEO
Two great news articles recently published in by Inc. Magazine and the Boston Globe focus on the attributes of Western Mass and Springfield for starting a new business or relocating an existing one. Clearly, a great case can be made for small businesses to put their stake in the ground in Springfield. According to Inc. Magazine, “The City is continuing to develop as an urban business center, in particular for true small businesses.” National real estate consultant, Newmark Grubb Knight Frank, listed the 10 biggest selling points in Springfield, MA, are proximity to major population centers, transportation logistics, higher education, and low cost of living and housing.
Springfield made Inc. Magazine’s list for being one of the top 2 cities in the country to start a business. Those of us who have been working in Springfield for decades will no doubt be stunned by this recognition. The headline in the article by columnist Joan Vennochi accurately suggests that the solution to Boston’s housing and congestion crisis is in Western Mass. While the Globe article contrasts the huge disparity in housing prices, it neglects to make the case that the business property in downtown Springfield and elsewhere in Western Mass is only a fraction of what it costs in Boston. The article would suggest that the low cost of housing and little or no congestion in this part of the state could be the answer to the housing and congestion epidemic in Boston. I believe both articles are correct for similar reasons.
From the standpoint of pure economics, one of the attributes of Springfield that, while absent from the Boston Globe article, is Springfield’s significantly lower occupancy cost and availability of over 600,000 square feet of class A and B office space in the central business district.
Many site selectors and CEO’s dismiss Springfield, citing the unavailability of talent in our region vs. the abundance of human capital in Boston as their justification for leasing space for five times what comparable space would cost in Springfield. To underscore how outlandish this is, I submit the following:
By way of illustration, a typical 10,000 square foot Class A office leases for a minimum $65 per square foot in Boston's Metro center, or $650,000 annually. In Springfield, comparable space at the Mass Live Building, for example, costs approximately $18.00 per square foot, or $180,000 annually-- a savings of $470,000 a year (not including parking). Over a 5-year lease term, the savings would be a staggering sum of $2,350,000.
Boston parking, if you can find a spot, is around $45 per day, or double the most expensive garage in Springfield. Many Springfield businesses in the central business district enjoy free parking in the MGM garage. And buildings like 1350 Main Street offer valet parking at less than half of what it costs in the self-park garages in Boston’s Metro area.
It has been well reported, and the Globe article concurs, that the traffic and congestion in and around Boston, not to mention the lack of affordable housing, has reached epidemic proportions and will strangle the business community and new growth in the State’s capital. Companies that rely on commuting workers who are directly facing housing and transportation challenges are adversely affected. Ironically, the labor markets that they so heavily rely on can’t make it to the office on time or find affordable housing. Boston’s growth comes at a cost and new growth is not sustainable without major transportation infrastructure changes or a better idea.
As far as traffic and congestion is concerned, it doesn't exist in Springfield and the housing stock is less than half of what it is in the Boston suburban markets. Springfield is geographically well positioned for distribution due to its relatively proximity and access to New York, Boston, Providence, Albany and Hartford.
There is a better idea.
In 2009, Springfield was ranked 24th most important high-tech center in the U.S. with approximately 14,000 high tech jobs. Baystate Health’s Tech Spring Innovation Center located at the MassLive Building at 1350 Main Street was cited by Inc. as one example of how Springfield achieved this recognition. Tech Spring is a technology, innovation and healthcare think tank. Valley Venture Mentors, also in downtown Springfield and mentioned in the article, is a non-profit dedicated to providing expertise and funding through their mentorship programs. Both organizations are rooted in the downtown and recognize and support the entrepreneurial spirit and human capital we have in our city and region. In the case of 1350 Main Street, as managing agent, we have purposely repositioned this property such that it would attract a community and culture of innovation that would lure companies like Tech Spring in the first place.
Businesses in Springfield can tap into the deep reservoir of skilled and educated labor in our region. The good news is that Hartford, the capital of Connecticut, lies only 24 miles south of Springfield on the western bank of the Connecticut River. The Hartford Springfield region also known as the Knowledge Corridor is now connected by a commuter rail making 12 round trips a day. The corridor has over 160,000 university students in over 32 universities and liberal arts colleges; the second highest concentration of higher learning institutions in the U.S.
Springfield itself is home to eight colleges – Springfield College, Western New England University, American International College, Springfield Technical Community College, BayPath University, UMass, and Cambridge College. And Holyoke Community College enrollment includes a high percentage of Springfield residents. There are 25 universities and colleges within a 15-mile radius of Springfield including some of America’s most prestigious universities, as well as numerous highly regarded hospitals like Bay State Medical Center and Mercy Hospital. The opportunities that exist for Boston in Springfield not only include inexpensive, high quality residential and business property, but also the pool of talent that are graduating from these colleges and universities. The East/West rail would bring additional talent and businesses to Springfield to take advantage of the affordable cost of living and doing business here. The Hartford-Springfield commuter rail further enhances accessibility to Springfield from all points along the Knowledge Corridor.
Given the potential skilled work force represented by the 160,000 students in our region, big businesses should also be looking at Springfield to lower their occupancy costs to be more competitive. A compelling case can also be made for state agencies that are now concentrated in the high rent district of Boston to take advantage of the low cost of real estate in Springfield and Western Mass. An analysis should be done by the State Comptroller’s office to see what state agencies don’t need to be in Boston. Millions of tax dollars could be saved and at the same time making available new opportunities in Boston for businesses that need to be there, while the abundant office space in the western part of the State, especially Springfield, could be optimized, yielding higher paying job opportunities for the region.
Businesses, small and large, in both the private and public sector, need not look any further than downtown Springfield for their address. We are not just a top city to start a business, as the Inc. Magazine article suggests, but one that existing businesses could relocate to in order to take advantage of the human capital and inherent economic benefits that will not only fuel economic development in Western Mass, but also relieve the stranglehold presently gripping the state’s capital.
Self Manage or Hire a Property Manager?
February 20, 2019 | By Elizabeth Barnes, Chief Operating Officer
Let’s face it, there are a lot of things to consider before deciding whether to manage your property yourself or hire a property manager to manage it for you. While many owners have found success in self-managing to cut down on the cost to hire a manager, they are also surprised at the time and investment in takes to manage the properties themselves. Here are a few things that should be considered when weighing the benefits of hiring a property manager or self-managing:
One of the most basic, and time-consuming, functions of property management is handling building maintenance, including routine and emergency repairs, as well as preventative maintenance. It is important to take the time to create a detailed scope of work for your maintenance contracts to ensure that you are receiving and paying for only the services you need or desire. Determining the right size scope of work for each contract requires knowledge and experience - and vetting the marketplace through a competitive bid process for all contracted services can be a time-consuming process, but in the end, these steps will ensure that you are getting the best value for your money.
Establishing and implementing effective preventative maintenance programs can significantly increase the useful life of building components and reduce total life-cycle costs on your building equipment. Regular monitoring of the market for gas and utility rates will allow you to lock in the best per kWh for electricity and can significantly reduce the total electric expense for your property. These measures take time but are well worth the effort.
In any business, maintaining good relationships is extremely important. Establishing an ongoing rapport with tenants can often lead to better management of your property. Good communication can uncover issues before they escalate and help ensure things are working properly and the property is performing at its best.
Proactive management and setting reasonable service level expectations for response times go a long way toward keeping your tenants happy. But it takes more than a well-maintained building to create a positive tenant experience. Consider going the extra mile by investing in and hosting tenant appreciation events that will enhance the tenants overall experience.
Even properties with the best tenant retention program in place will experience vacancies. Because maintaining a high occupancy rate is critical to your investment, it is important to establish a solid leasing and marketing plan to attract and maintain a list of prospective new tenants. Today, a social media presence is expected, and while it requires a strategy and a little bit of effort to keep your posts fresh and interesting, you won’t regret it.
Of course, there are also the basic administrative tasks involved with filling a vacancy beyond just advertising the space and putting a sign up – be prepared to manage a high volume of phone calls, showings, screening of new tenants, and the associated administrative tasks including drafting leases and negotiating lease terms and rates.
Good tenant screening is paramount, and you may want an experienced leasing team that can assist with pulling credit reports, looking at a potential tenant’s history, and verifying income. Qualifying good tenants offers the best chance of having a long-term tenant that pays rent in a timely manner.
You’ll want to ensure that you have a good financial reporting system in place to stay on top of rent collections, timely payment of real estate taxes and mortgage payment, insurance, and payment of all other operating expenses such as water, electricity, etc. Factor in the time spent reconciling your bank statements, preparation of income statements and balance ledgers, and at the end of the year, tax return preparation. Other time-consuming financial tasks include rent collections and preparing accurate common area maintenance billings in accordance with lease terms to ensure that you are collecting all funds to which you are entitled.
Beyond the day to day accounting functions, you may want to take the time to benchmark how your property is performing against other commercial properties in your region on a price per square foot basis. Keep an eye on your real estate tax valuation and be sure to file for an abatement if you find it is out of line. Thousands of dollars can be spent unnecessarily if you are not paying attention.
Consider the volume of business you’ll be giving to your vendors and suppliers, and whether you have the purchasing power to leverage better pricing on goods and services vs. a property management companies with a large portfolio of properties under their management.
Self-Manage or hire a Property Manager?
So, what does it cost to hire a property manager? Typically, a management company would charge 5% of Gross Operating Income. When compared to the time investment of self-managing, it can be money well spent. In fact, you may find that the value proposition of outsourcing goes far beyond the direct expenses that can be eliminated such as salaries, benefits, payroll taxes, worker’s compensation premiums, tools, equipment, etc. Often times, the amount saved by a professional management company far exceeds the management contract amount.