Worcester's Development Surge Tests City's Ability To Grow Sustainably

Amid Worcester's growth, local developers and city officials are concerned about how the city can continue to grow sustainably without deterring new development.

The city, located roughly 47 miles west of Boston, is the second largest in New England. Over the last decade, Worcester has seen tremendous growth, with its rise credited to the city's speedy permitting process and lower cost of living compared to Boston and Cambridge.

Developers and city officials who spoke at Bisnow's Worcester State of the Market event said further growth may require a delicate balancing act between encouraging new development and managing growth, affordability and sustainability.

Get the balance wrong and development could pay the price, Menkiti Group CEO Bo Menkiti said at the AC Hotel last month.

"It's like putting a wet log in a fire that's just starting," Menkiti said. "These are important things for a city to do, but the timing … is a really important thing."

Worcester's development boom was fueled by an influx of residents fleeing growing rents and housing costs in eastern Massachusetts.

Worcester became the fastest-growing New England city, with a 14% population increase between 2010 and 2020, the Worcester Business Journal reported. To address this influx of new residents, the city added roughly 10,000 housing units in the last decade, with more on the way, The Boston Globe reported.

"We like to think of ourselves as a fertile place for development," Worcester Business Development Corp. President Craig Blais said. "Our cost is a little less expensive out here, particularly compared to our friends in Boston."

The city sought to lean into long-range planning as it continued to grow, Worcester Chief Development Officer Peter Dunn said. To do this, city officials established Worcester’s first comprehensive plan since the 1980s.

The plan, adopted in March 2024, established the right to create accessory dwelling units on existing housing without the need for a special permitting process. The city is also taking a look at easing parking requirements for new housing to facilitate development.

"There's different levers that are affecting development feasibility, and we're trying to do what we can on a local level to put the levers in the right direction to make development as feasible as possible," Dunn said.

Menkiti said that the city has finally reached the tipping point at which bigger investors are entering the space and larger housing projects can begin to take shape.

"Worcester has been unattractive to institutional capital for a long time, and what you've seen recently is a couple of transactions that start to justify institutional capital coming into Worcester," Menkiti said.

Blais and the Worcester Business Development Corp. are working on GreenTech Park, a 51-acre, pad-ready site planned for advanced manufacturing development. As the site owner, the development corporation is working on site cleanup, demolition and infrastructure upgrades.

Last month, Morgan Stanley's real estate arm acquired the 370-unit Alta on the Row apartment complex at 22 Mount Carmel Way for $157M. In July, Jones Street Investment Partners acquired a 365-unit apartment building named 145 Front Street Square for $122.2M.

However, in response to the rapid growth, the city has also made moves to address concerns around affordability and sustainability. That has some developers rattled, V10 Development Managing Partner Ricky Beliveau said.

"It's already extremely difficult to build market-rate housing," Beliveau said. "You start hearing the words 'Passive House,' you start hearing 'all-electric,' you start hearing 'higher affordability.' When you start passing that along to a market-rate development project, you start seeing less units, right?"

One factor that may soon drive up costs is the need for energy upgrades for Worcester’s aging energy infrastructure. To do that while also asking developers to meet sustainability goals might be difficult to make pencil, some speakers at the event said.

Tremont Development Partners' Rich Mazzocchi said housing energy-efficiency standards and energy stretch codes have driven costs up dramatically.

"Projects are bearing the cost over seven figures, which obviously creates challenges, and we have to scramble to find resources to address that," Mazzocchi said.

Tremont Development Partners is working on the redevelopment of the former Table Talk Pies factory on Madison Street. The first phase of the project was completed in 2024 and delivered 83 affordable units.

Affordability has also become an ongoing issue throughout the city as more market-rate units have been developed and threaten to price out lower-income families.

In 2023, city council members voted to require new buildings to include an affordable component, the Globe reported. Forbes named Worcester's rental market the third most competitive in America in 2023. Worcester Housing Authority CEO Alex Corrales doesn’t want Worcester to lose its reputation for affordability as it grows. 

"How do we maintain affordability that rents are not through the roof, that families are forced to leave? There's excitement for the future, but there's certainly a crisis at hand right now," Corrales said.