The Gem of the Berkshires: North Adams
Findings from six weeks (and counting) of market immersion in the Berkshires
Surprises happen when you relocate to a new real estate market. That was certainly true when I swapped Nantucket for the Berkshires six weeks ago. To get to the heart of the market I met with everyone: local contractors, realtors, town officials, renters, police, housing non profits, insurers, bankers, investors, and lawyers. None were safe from my outreach. Research targeted the main towns: Williamstown, North Adams, Adams, Pittsfield, and Great Barrington. I crunched the numbers on dozens of properties. Findings emerged. The big one is that North Adams is going places.
Most will split the Berkshires real estate market into the south, central, and north county. You can more usefully think of the region as having affluent, rural drive through, and working class towns. Each geographic segment of the Berkshires has a collection of these towns. North Adams is priced at a working class level, which is its history, but the fundamentals point to an affluent future. Think $150,000 homes turning into $450,000 homes and an empty main street filling with high-spending urban transplants.
To understand where the town is going, let’s start with its past. Manufacturing put North Adams on the map. At its peak, housing and mills were built for 24,000 residents in the early 1900s. The original industrial revolution production turned into electronics by the 1930s. Sprague Electric, which made the detonator in the “Fat Man” atomic bomb, among other things, became the town’s primary employer. The final breath of manufacturing left when Sprague ended local operations in 1985. Thousands of residents left and incomes plummeted. It felt like a mortal blow… what is North Adams without manufacturing? That narrative began to change in 1999. MassMoca, a now world-renowned performing and contemporary arts institution, was born. Today it pulls 160,000 visitors a year. Two weeks ago it announced a $14.5 million public-private renovation of an abandoned school campus. The town has a destiny beyond its present reality. The feeling is obvious standing here on the street. North Adams has been down for so long that few locals share this optimism, despite a $1 million condo hitting the market. This creates buying opportunities.
Investor are buying stabilized apartment buildings in North Adams that cash flow 9-12% of the purchase price (cap rate). This compares well to the 5-6% cap rate in Boston. When I first saw these deals I thought “there’s no way” but it gets better. With direct outreach to homeowners and a partnership with a savvy local general contractor, I’m finding 3x higher returns. Appreciation markets typically do not have large immediate cash flows, which makes North Adams doubly attractive. Prices will rise to balance cap rates with the broader region.
The local view is that the pandemic killed the downtown’s vibrancy and there’s no reason to expect change. There are fentanyl antidote vending machines and empty storefronts, after all. The movie theater shut down. But the hospital re-opened. The local narrative is priced-in, the future is not.
The Berkshires have superior and more accessible real estate deals than Eastern Massachusetts. The market is receptive to an outsider with a pocket full of cash. Investors on Nantucket need $500,000 in hand to get a conversation. A fifth of that will do in North Adams. Today, I looked at a $85,000 single family home that needs a new septic system, a $225,000 four-family with a tenant mid-eviction, and the $199,000 building pictured above. The opportunities abound.
I should be under contract on a project soon, and you will be the first to know about it.
Great article. Boots on the ground effort was well worth it. Keep it up