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Will investors continue to be attracted to New Hampshire properties as interest rates climb?

The New Hampshire industrial market remains an attractive market for investors, with vacancy rates stabilizing and rental rates climbing over the last couple of years. Moving forward, will investors continue to be attracted to NH properties as interest rates climb? Over the last quarter, the trend continued as the industrial sector’s vacancy rate remained low and the high demand for space has led to many investor sales this quarter. While there is not the same amount of interest in the office market, with the vacancy rate leveling out, investment activity picked up slightly during the third quarter.

Industrial space continues to be hard to find with the overall vacancy rate hovering around 3% over the last four quarters. Demand for the limited inventory has caused the average rental rate to soar over the past two years.  Rents have increased by 26.4% ($2.18 PSF) year-over-year, ending the quarter at $10.45 NNN.

As the trend continues, it is no surprise that this sector is attracting investors. One of the most active investment groups is RJ Kelly Company, which acquired 18 properties over the last quarter. In August, RJ Kelly purchased 14 properties in separate transactions totaling 745,500 SF for $90.0 million, with an average sale price of $118 PSF. The properties are in Amherst, Hudson, Londonderry, Manchester, Nashua, and Salem. Then in September, it purchased 112,360 SF in three flex buildings on 13.05 acres for $13.375 million ($119 PSF) at 15, 18, 20, and 22 Continental Boulevard in Nashua.

Lincoln Property Company, an investment group based out of Texas, purchased four fully leased flex buildings during the quarter from Albany Road Real Estate Partners. The sale included 5 Wentworth Drive in Hudson, 22 Cotton Road in Nashua, and two Manchester properties – 645 Harvey Road and 1050 Perimeter Road, and sold for a total of $69.0 million, an average price of $127 PSF.

After that portfolio sale, Albany Road Real Estate Partners, a Boston-based investment group, purchased the 177,170 SF warehouse/distribution building at 144-146 Main Street in Plaistow and the two abutting lots for $21.138 million ($119 PSF). The building then reached full occupancy with Didax, an education supply distributor, leasing the remaining 52,750 SF.

In the office sector, the vacancy rate was relatively flat with a 0.5% decrease since last year, ending the quarter at 11.2%. Although a nominal change, this was the first time since the beginning of 2020 that the vacancy did not rise. Rental rates on the other hand have continued to increase over the last three years, climbing by 5.2% ($1.01 PSF) year-over-year and ending the quarter at $20.52 modified gross.

With the vacancy rate seeming to have leveled out over the last six quarters, investors became more active during the third quarter. Torrington Properties, the Boston-based investor group, expanded its NH portfolio by purchasing the 236,000 SF Class A property at 100 Domain Drive in Exeter. The asset sold for $46.9 million ($178 PSF) and was about 71% occupied at the time of the sale by a variety of tenants - including Bauer Hockey, FH Cann & Associates, Digital Prospectors, Garnet Hill, and Vapotherm.

Two other sales that closed over the quarter were to two separate NH-based investors. In Nashua, a local investor bought the 119,500 SF Class A office building at 30 Temple Street for $10.7 million ($90 PSF). The building was about 80% occupied at the time of the sale. In Concord, Sarnia Properties purchased the fully leased, 65,520 SF Class B office building at 6 Loudon Road for $10.5 million ($160 PSF).

With the number of investment sales and the variety of investors purchasing properties, the question is whether it will continue. One of the biggest conversations that could impact investors is the direction of interest rates. However, the degree of the impact depends on the company and the property – for larger firms, someone working on a 1031 exchange, or someone who does not need financing, an increase in interest rates may not affect them right now. However, for owner-users or investors that need financing options, an increase in the rate could influence their actions. It may delay some in buying property, or it may lead others to move quickly and lock in the rate before they rise. It may also lead to lower valuations.

The good news for investors is that both the office and industrial sectors are currently in stable positions, with vacancy rates leveling in both sectors and rental rates higher than recent averages.  As we go into what is usually a historically busy quarter, we will have to wait and see how the economy and interest rates impact the New Hampshire commercial real estate market.

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Kristie Russell

Research Manager | New Hampshire & Maine

Manchester, NH

As the Research Manager, I serve as the point person for gathering and reporting on market knowledge for the New Hampshire and Maine offices. 

I collaborate with our brokers to deliver in-depth analyses of current market conditions and trends for their clients. Using various in-house and online resources, I maintain our proprietary database, which includes detailed property statistics, sale and lease comparables, market contacts, and tenant activity within New Hampshire and Maine. 

With this data, I develop best-in-class research reports, market analyses, and market insight to ensure our clients capitalize on this research as they contemplate business decisions that significantly affect their bottom line.

Prior to becoming the Research Manager, I was a Marketing Specialist at Colliers for five years. In this position I used Adobe software, including InDesign and Photoshop, to implement marketing strategies in support of our brokers. 

My responsibilities included creating property marketing collateral - such as flyers, brochures, ads, and proposals - as well as maintaining listing databases and our exclusive listing inventory. In addition to the property marketing, I assisted in coordinating special events, handling public relations and advertising, creating brand awareness, and developing our SEO and social media campaigns. 

Additionally, I am a licensed real estate salesperson in New Hampshire.

Prior to beginning my career in commercial real estate, I worked for Gallery Marketing Communications, LLC as a graphic design artist. During my time there, I used Adobe software to design brochures, flyers, business cards, and postcards, among other marketing materials. I also worked for Gatehouse Media, Inc as a freelance sports journalist, covering high school games in Massachusetts.

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