DOWNTOWN LOWELL MARKET STUDY.Draft Report
The city of Lowell conducted a “Best Use” study of the current Lowell High School. Many people (or at least a few current downtown business owners and political players) have had fantasies of a Faneuil Hall type business combined with a hotel in that location and are in shock and disbelief over these findings.
The report was compiled by RP Realty Advisors who have been in business since 1992 and are highly respected and regarded. They also did the Hamilton Canal best use study among others.
Hamilton Canal Urban Renewal Area, Lowell, MA – Provided the City of Lowell a series of market valuation reports for an assemblage of 20 separate properties located at the confluence of four canals. The parcels included historic mill buildings, commercial property and vacant land. The City of Lowell envisions redeveloping the Hamilton Canal District into a transit-oriented, mixed-use neighborhood with 1,000 market-rate residential units and attendant retail and commercial space.
I’ve attached the entire report which is 50 pages but have shared the highlights that help them explain their findings.
Downtown Lowell Supply: There are currently 13 development‐ready sites available in Downtown Lowell. All have been actively marketed in recent years with limited interest from private developers.
Four sites are adjacent to Lowell High School and would afford over 1.2 million square feet of development potential.
Nine sites are in the Hamilton Canal District and offer over 1.6 million square feet of potential development area.
In total, development on the almost 18 acres of pad‐ready land would increase the supply of the Downtown market by more than 2.8 million square feet.
Institutional Use: The University of Massachusetts Lowell and Middlesex Community College are among the top five employers in the City of Lowell and major users of Downtown office space. UML expects to add 3,000 more students in the next five years, although most of the growth will occur on the existing campus footprint.
UML joined NCAA Division I Athletics in 2013 and this move will require the University to add basketball capability to the Tsongas Center, make improvements to the North campus Costello facility, and add new playing fields with artificial turf. The University would also like to add another ice rink for practice, although there are no concrete plans at the moment.
The University of Massachusetts Lowell (UML) recently announced the purchase of the 4.85‐acre parcel of land located at 225 Aiken Street and identified as the “Notini site.” UML’s initial plans are to use the site as recreation fields for the East Campus.
While UML does not currently have funding for the needed athletic facilities, it could build them on the Notini site or on the 122,743 square foot site at 152 River Place that it owns if public funding becomes available.
Office Use: The vacancy rate in the subject’s Route 495 North submarket is the highest among all 20 submarkets in the Greater Boston office market, at 23.5%. Year to date absorption was reported as negative (313,361) square feet at the end of the second quarter of 2015.
My same‐building Downtown Lowell rental rate analysis between 2007 and 2015 found that rates are essentially the same and below the level needed to support new construction. There is very little demand for new office space in Lowell or the surrounding market. Thus, office use, while legally allowed, would not be financially feasible.
Retail Use: Commercial and retail uses are also allowed “as of right.” Lowell’s Downtown core has numerous vacant retail spaces. While the many new residential developments in Lowell have brought a changing demographic and the addition of several upscale shops and restaurants, the supply of Downtown retail space currently exceeds the demand created by new residents.
As new market‐rate housing is introduced Downtown and resident’s disposable income increases, the demand for new retail space should grow. At this time Downtown Lowell has not achieved the critical mass of residential housing required to support new retail development.
Residential Use: Lowell’s housing prices have not recovered from the peak in 2005. Median single family home prices are currently 13% below the 2005 price of $274,900. Median condo prices are 15% below the $194,200 median 2005 price.
In spite of the downturn in the sales oriented market, I did not find a corresponding decline in the rental market. My same‐building rental survey of three converted apartment buildings found that rental rates have increased 2% to 5% on average between 2007 and 2015
Maximally Productive – Simply stated, highest and best use is that use which fully develops the land’s potential. Institutional demand appears speculative at this time. There is only lackluster demand demonstrated for office use in Downtown Lowell. Demand for support retail, restaurant and commercial uses will follow once residential buyers and tenants move to Downtown Lowell.
There is positive demand for residential rental properties but 953 units are under construction or planned in Downtown Lowell, which indicates ample supply.
Conclusion – At this time, there is a surplus of development‐ready sites in Downtown and no market support for redevelopment of the subject site in the near future. Highest and best use is continued use of the site.