Rhode Island and the New Normal - by Thomas Sweeney and Christina Rouse

Rhode Island’s commercial real estate market is shifting in line with national trends, though local dynamics reveal both opportunity and constraint. Office tenants are more selective, experiential retail is expanding, capital remains tight but shows promise, and industrial continues to be the strongest sector – though costly to build.

Office has seen the most dramatic shift. Today’s tenants prioritize wellness features, customized layouts, advanced technology, and home-style comforts. For landlords, this means subdividing floorplates, upgrading common areas, and taking on higher tenant-improvement costs – often the deciding factor in whether space leases or lingers. 

Legacy buildings without significant upgrades are at a disadvantage. Many downtown office properties have already been converted to other uses, which skews absorption data. Even with these conversions, the current vacancy rate of 10.4%, compared to a five-year average of 9.4%, underscores the challenge. Before 2020, vacancies averaged closer to 8%. The repositioning of the Amica Building at 10 Weybosset St. will take a major block of office space off the market. Brown University Health consolidating into 15 LaSalle Sq., while relieving some future vacancy in downtown, results in an increase in vacancy in the Innovation at the Port campus in the southern part of the city. The reality is that the Class A buildings in downtown, such as 100 Westminster, are drawing more activity due to the amenities and quality of space, while also facing the reality of declining rents. The option for tenants seeking Class B quality space is lessening with many former office buildings being converted or in the process of conversion to residential space with the Lauderdale Building being the latest example.

Retail, meanwhile, is increasingly driven by experience. Coffee shops, boutique fitness studios, and service-oriented tenants are drawing foot traffic in both secondary markets and downtown Providence. For landlords, this shift requires repositioning space and carefully curating complementary tenant mixes. The biggest question weighing on the market is the future of the Providence Place Mall, which continues under a receivers control. The Receiver has increased security and brought in a new operator for the movie theater space, but the property still faces the challenges of malls across the country as customers purchasing habits continue to change and are less reliant on traditional brick and mortar retail. The disposition of the asset will reflect on the future potential of the mall.

On the investment side, activity has edged upward as borrowing costs are easing, but buyer and seller expectations remain out of sync. Buyers are pressing cap rates higher to achieve stronger yields, while sellers resist lowering prices, prolonging deal timelines. Industrial and well-located retail continue to attract capital, though tighter underwriting and financing hurdles limit how quickly deals get done.

Industrial remains Rhode Island’s most resilient sector, with vacancy rates often just 1 – 2%. Distribution, flex, and logistics properties are consistently leased, occupied, or sold, and rents have risen to $6 – 10 per s/f, with some flex space commanding more. Yet the very strength of the market constrains new supply. Rising land and construction costs, combined with cautious lending, make speculative projects difficult. Most new development is build-to-suit, keeping vacancies tight and reinforcing the scarcity premium for modern industrial space. There are a number of investors in this market, who are looking at current leases and weighing whether the tenants will renew and what the potential for release or resale of the property if the tenant chooses not to renew. In certain cases in the market, owner/occupants have decided to wait out the tenant and then occupy the space. Pricing for owner occupants for existing buildings is out pacing investment sales.

Overall, Rhode Island’s commercial real estate market is navigating a period of transition, shaped by selective tenants, evolving retail preferences, constrained capital, and strong but costly industrial demand. Office spaces must adapt to tenant expectations or risk obsolescence. Retail has shifted toward experience-driven uses, and investment activity shows cautious optimism amid misaligned buyer and seller expectations. Industrial remains in high demand but faces development constraints. Success in this market requires adaptability, strategic upgrades, and alignment with what are now long-term trends. These trends are not temporary – they represent the “new normal” to which the market must adjust.

Thomas Sweeney, SIOR, is principal and Christina Rouse is the director of marketing & operations, broker associate with Sweeney Real Estate & Appraisal, Providence, R.I.