THE COMMONWEALTH OF MASSACHUSETTS is one of the largest commercial office tenants in the state, leasing just under 5 million square feet of space for employees throughout its various agencies and departments. Nearly 1.7 million square feet, approximately 35 percent of the state’s rental space, is in Boston, the region’s most expensive office market. Worcester, the next largest location of state offices, hosts 350,000 square feet – approximately 7 percent.
What would happen if those percentages were closer together?
The Worcester Regional Research Bureau recently released Brokering a New Lease: Capturing the Value of State Offices for Massachusetts to examine that question. In Boston, high costs drive state office rents and payrolls, as the Commonwealth competes for both space and workers. In Worcester, a lower-priced office market and a more affordable cost of living offer the Commonwealth an opportunity to save on both space and personnel, while decreasing the demands on Boston’s overwhelmed transportation infrastructure. A redistribution of state offices could save millions of dollars annually – a win-win for taxpayers and the economies of Gateway Cities such as Worcester.
Relocating state office space to communities outside Greater Boston offers an opportunity to promote a statewide economic development agenda. Cities woo companies like Amazon because the influx of well-paid workers and corporate buying power will grow the regional economy and tax base. State facilities, with significant job numbers, local purchasing, and related spinoffs, can have similar economic impacts on modest marketplaces.
The Gateway Cities are an important target for state resources and economic development efforts. Yet most of these interventions focus on capital investments and tax incentives, not operational impacts. The Commonwealth currently pays a median rent of $38 per square foot in Boston, double the $19 per square foot paid in Worcester. A Research Bureau survey of Worcester brokers estimated a median rent of Class A office space in the city at $22 per square foot, in line with a similar survey by the Worcester Regional Chamber of Commerce in 2017. Industry experts estimate new Boston leases are close to $60 per square foot for Class A office space. The only other US markets in that price range are Manhattan, San Francisco, and Washington, D.C.
Worcester is in an excellent position to host large numbers of state employees without unduly disrupting Boston-focused government operations. Worcester is centrally located and easily accessible to the state’s 6 million residents who live outside Suffolk County, yet is within reach of the Boston area. Importantly, as a result of state investment, Worcester has expanded commuter rail connections to Boston, including a one-hour express train launched in 2016 to “bring the heart of Massachusetts and connect it to the hub of Massachusetts” as Lt. Gov. Karyn Polito, a Central Massachusetts local, remarked at the time.
Residents of Boston and Worcester share many of the same complaints – traffic, housing costs, public transportation – but on very different scales. Worcester’s rush hour is counted in minutes rather than hours, Worcester’s median housing cost is less than half that of Boston, and Worcester’s public transportation struggles with frequency rather than reliability. While Worcester is the second largest city in New England, few argue that it suffers from overcrowding. It is unlikely that sending a few state offices to Worcester would hurt the Hub more than it would help the Heart of the Commonwealth. Colliers International recently counted more than 225 tenants seeking around 5.5 million square feet of space in Boston – roughly double the demand from five years ago. In comparison, the Research Bureau’s study of Worcester’s downtown office space found more than 250,000 square feet available for new tenants in the city.
While only state leaders can determine which offices require proximity to Beacon Hill, a new way of thinking about the distribution of state office space is essential. The recent decisions of the Massachusetts State Lottery Commission, which moved from Braintree to higher-cost Boston, and the Massachusetts Cannabis Control Commission, which is opening in lower-cost Worcester, illustrate the seemingly haphazard approach. Departments currently paying high rents per square foot, that have all or most of their office space in Boston, and whose leases are expiring soon, are prime candidates to become the next building block in Worcester’s renaissance. An opportunity to spur economic development in Gateway Cities, lessen congestion in Boston, and strengthen the connection between the two largest cities in New England should be an intentional part of a statewide land use strategy.
Timothy J. McGourthy is executive director of the Worcester Regional Research Bureau.