105-Unit Worcester Development Delayed By Commercial Real Estate Trouble

WORCESTER, MA — Another high-profile downtown Worcester development is being held back by tumult in the commercial real estate sector, according to documents filed with the city.

AKROS Development is asking the Zoning Board of Appeals to extend zoning approvals for a 105-unit mixed-use building planned for the former Fairway Beef site along Grafton Street.

The reason: economic factors like inflation and financing difficulties.

"[AKROS] has been forced to delay commencement of work associated with the Project due to challenges with respect to labor and supply chain issues and access to financing and capital related to the rise of inflation and interest rates, instability of the banking system and an overall slowdown in the commercial real estate market," a letter sent to the ZBA said.

The developers behind a 375-unit residential building on the site of the former Kelley Square Table Talk Pies factory gave that exact reason when in late February they asked for an extension of zoning approvals, as first reported by Worcester Patch.

Commercial real estate has been hit hard by interest rate increases put in place by the Federal Reserve, a measure meant to slow inflation. U.S. commercial properties, mainly office buildings, lost over $500 billion in value in 2023 alone, according to the research firm Capital Economics. The volatility has caused banks to rethink financing for commercial projects, according to reports.

"For example, about two-thirds of US banks recently reported a tightening in lending standards for commercial construction and land development loans, up from less than 5 percent early last year," the International Monetary Fund reported in January.

In its letter, AKROS Development said it is hopeful work will begin on the Fairway Beef tower in 2024. The developer is asking the ZBA to extend special permits until September ahead of a March 12 expiration. The developer first received zoning approvals for the project in September 2022. The nine-story building would include 1,000 square feet of commercial space, plus a "semi-automated puzzle stacker" parking garage with room for 72 vehicles.