News & Transactions

ECONOMY:

As we reach the mid-point of 2025 we continue to be in the “higher for longer” category as it relates to interest rates. Future rate cuts are going to be dependent on tariff impact but are expected to occur in the back half of 2025 with one or two rate cuts forecasted. Sales volume continues to be weak with the best performing sectors being Multifamily, Industrial, and Medical Office as they continue to be the dominant sectors in the investment market due to underlying economic and demographic fundamentals favoring these asset classes.

SUPPLY AND DEMAND:

The Rhode Island (RI) office market supply remains static with no new speculative traditional office development on the horizon. We don’t expect any new meaningful inventory for the foreseeable future. The lack of new inventory and continued trend of adaptive re-use among the older historic office buildings along with user acquisition mainly from the healthcare and academic institutions have provided for structural market stability. The Central Business District (CBD) continues to regain daytime population as employers try to bring their workforce back to the office three or four days a week with varying degrees of success.

We are now seeing significant sized tenants make long term decisions around their footprint needs and expect several record setting lease deals to be executed in Q3. These transactions will result in a mixed bag of absorption as some new leases are coming out of “owner/user” real estate that will be repositioned while others are simply shedding footprint. Companies are focusing on higher-quality buildings with amenities that will help them attract workers back to the office.

PRICING:

Rates have continued to hold up reasonably well, especially for top-quality assets. Concessions are on the rise due to the higher cost of construction impacting build-out expense. Overall RI market rents decreased by about $.02 per square foot (psf) from $21.94 psf at the end of Q1 2025 to $21.92 psf currently. Construction costs continue to increase which has provided stability for rental rates on 2nd generation spaces and make relocations more challenging.

Rhode Island is increasingly focused, at the state economic development level, on attracting life science companies to the market. Recently, Organogenesis made a commitment to lease a more than 100,000 square foot (sf) drug production facility in Northern RI. Also, the RI Department of Health has awarded an 80K sf state lab facility to be built in the Innovation District. The developer is building additional lab space for the market to absorb which will be completed in Q1 2026. This will be a significant achievement for Providence and one that could be catalytic for growth given the proximity to Boston and the strong talent pool surrounding Brown University’s Medical School and the other local healthcare institutions. Brown is also now under construction on a new 350,000 sf life science research facility adjacent its Medical School in the Jewelry District.

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