Indigo Block is the only project in the All About the Jobs report that will blend housing with light industrial to rely on a cross subsidization model.
Construction started on the building in November 2019. Leah Whiteside, associate director of real estate at the Dorchester Bay Economic Development Corporation (DBEDC), said the goal is to create employment and housing opportunities right next door, rendering the daily work commute into a mere street-crossing.
“This project is not just providing places to live—we’re helping residents create self-sufficiency,” said Whiteside.
To build out the Indigo Block concept, DBEDC relied on its decades of experience building affordable housing and commercial space. The Newmarket Business Association has been its partner on the commercial building as the association has deep-seated connections with industrial businesses along the Newmarket corridor.
Sue Sullivan, executive director of the Newmarket Business Association, “has run a light industrial facility herself and she hears from business owners and residents about what works and doesn’t work in terms of loading docks,” said Whiteside.
That knowledge helped greatly as they worked with local contractors and architects to design the commercial building concept.
Whiteside’s organization has already had some success with industrial projects aimed at small-scale producers. The Bornstein and Pearl Food Production Center in the Dorchester neighborhood was a $13-million redevelopment project that transformed a 36,000-square foot meat factory into a modern space for budding food entrepreneurs.
A major tenant in that project is Commonwealth Kitchen, a nationally-recognized food entrepreneur incubator space that is currently home to over 50 wholesalers, food trucks, and caterers. Nearly three-fourths of those businesses are women, and they’ve created about 150 jobs while growing. Whiteside said their hope is to attract some food entrepreneurs to the industrial spaces at Indigo Block. They estimate accommodating up to eight tenants at 2,500 square feet a piece, creating a total of 35 jobs. The affordable housing development attached to the project will provide 80 affordable and workforce homes.
Industrial spots will remain at a mid-market rate, however, which is around $25 per square foot. “We’re not trying to maximize rents to make a profit but we are trying to maximize rents to get our debt service out to get the project built,” said Whiteside.
Q&A
Why does manufacturing matter to DBEDC?
Their strategic plan is on holistic neighborhood development, according to Whiteside. Being able to pair light industrial job-creating projects with affordable housing is important because it allows them to provide economic opportunities alongside places to live.
Does DBEDC have a history of manufacturing development?
Yes. DBEDC has historically focused on affordable housing developments, but Indigo Block will mark their third project that provides space to manufacturers. The other two spaces are the Bornstein and Pearl Food Production Center, located in the Dorchester neighborhood of Boston, and 65 Bay Street, an 80,000-square-foot manufacturing facility built for Spire, Inc., a printing company.
How did DBEDC develop capacity for a manufacturing real estate project?
DBEDC has a history of developing manufacturing real estate projects, but the Bornstein and Pearl Food Production Center was Whiteside’s first introduction to industrial development projects. “We’ve learned it’s important to pay the short money to hire consultants you need to build a specific space, than to have your architects not know enough about wiring for kitchens,” said Whiteside.
“We could have saved $100,000 to $200,000 in construction costs if we would have paid $20,000” for an early consultant trained in professional kitchen design to address that project, she added.
Does the neighborhood around Indigo Block have a history of manufacturing?
Yes. It is located in an industrial area near Newmarket, which is home to a rich community of food and other manufacturers.
How is a manufacturing/fabrication focused development different from other types of developments in DBEDC’s portfolio?
Whiteside said some key differences are that manufacturing projects require a different pro forma, and that the developer has to analyze business needs and material needs that are different from a housing project. She said there are different risks in construction because light industrial projects require different materials, input from different consultants in areas like industrial HVAC, and assets like loading docks that have to serve the average truck size of the target tenant.
What role did the board play in developing the Indigo Block project?
Whiteside said the board set parameters on the project early on, though primarily on the housing side. She said the board is risk tolerant and appreciates DBEDC’s history with light industrial projects, which was necessary support that encouraged them to take on another light industrial project.
Who were key mentors or advisors on this project?
Newmarket Business Association is the key mentor and partner. Boston Capital was another key partner as they provide low-income tax credits and have a “big stake” in the housing part of the deal, according to Whiteside. Architects and other consultants were also vital for blueprinting the project.
Will there be any focus on inclusion and equity when selecting tenants?
The residential project is required to provide housing to low-income communities.
Does DBEDC believe the project will break even or be profitable?
The project is required by funders to be financially sustainable on its own.
What are partners doing to ensure manufacturers will afford to remain in Indigo Block even if market dynamics change in the surrounding neighborhood?
Affordable rates aren’t their primary mission. Because it is difficult for light industrial tenants to find long term leases in Boston today, the project will consider offering long-term leases to provide stability for local businesses.
What type of entity is DBEDC?
Non-profit.
Did DBEDC receive assistance from local government?
Yes. The property was purchased from local government in a tax foreclosure sale and awarded to the development team at a subsidized price.
What is the zoning designation of the parcel in which the building is located?
Light industrial.
Were any zoning variances needed?
Indigo Block received multiple variances because the plot contains light industrial.
Was there protective industrial zoning?
No, but the property abuts Boston’s light industrial zone.
Were there any permitting issues?
No. Local government and community were on board with the plan. Variances and permits were not difficult to obtain.
How many commercial tenants will be in the space?
Can accommodate up to eight.
What types of tenants will be present?
There will be primarily light industrial and office tenants. Light industrial may include food-related businesses.
How many tenants will be businesses?
Eight.
How many will be production businesses?
To be determined.
How many jobs will be supported by this project?
An estimated 35 jobs.
How many jobs will be supported by manufacturing?
An estimated 26 jobs
How will tenants be selected?
They will prioritize small, growing, and local businesses from diverse backgrounds.
What is Indigo Block’s capital stack?
$6 million in private debt, $11 million in New Markets Tax Credits, and a $1 million soft loan from the state of Massachusetts.
What are Indigo Block’s sources of financing?
The Life Initiative, Northern Trust, LISC, and the Massachusetts Housing Investment Corporation (MHIC).
What is the size of the real estate deal?
$8.6 million in construction costs.
What is the total cost of bringing the project online?
Total cost to bring space online will be $12.7 million. What square footage options will tenants have? Spaces are flexible but will be a minimum of 2,500 sq. ft. and a maximum of 10,000 sq. ft.
What will the rent per square foot be?
$25 per sq. ft.
How long will the lease terms be?
A minimum of two years, though this will be negotiable.
Will there be an opportunity for tenants to take an ownership stake?
No.
Who were key stakeholders that helped with community outreach?
Newmarket Business Association, and the DBEDC itself, which has deep community ties because of past development projects.
Total square feet of the project?
20,000 sq. ft.
This case study was originally published by Urban Manufacturing Alliance in 2019 as part of “All About the Jobs: Eight Mission-driven Industrial Developers on How Their Spaces Anchor Manufacturers and Support Local Economies,” a project developed in partnership with Local Initiatives Support Corporation (LISC) and students at the Albany Law School Community Development Clinic.