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The NH industrial market continued to tighten, while the vacancy rate in the office market is leveling out

The New Hampshire market finished the year with a strong quarter, seeing multiple transactions in the industrial and office sectors.  That said, the two categories are moving in different directions. The industrial market continued to tighten as its vacancy rate fell by 1.6% year-over-year (YOY), ending the quarter at 2.9%. With this tight vacancy rate, rents increased by $1.97 PSF YOY.  Conversely, the office market finished the year with an 11.2% vacancy rate, rising by 1.6% YOY. Over the past year, rents oddly climbed with the vacancy rate. It was not until Q4 that the overall vacancy rate and rents started to level out, with rents unchanged YOY.

Focusing on the industrial market, the sector with the biggest change was warehouse/distribution (W/D). The vacancy rate fell by 2.8% YOY, ending Q4 at 1.6%. This change was not only due to tenant expansion in the submarket this year - like Alene Candles in Amherst, Baron’s Major Brands in Bedford, and XPO Logistics in Manchester - but also due to new tenants entering the market, like Novo Building Products and Masy BioServices in Amherst.

With less than 500,000 SF of vacant W/D space in the market, it is not surprising that rents climbed by $2.07 PSF, ending Q4 at $9.27 NNN. With the limited availabilities in the Salem submarket, and close to no available space in the town of Salem, some owners in the surrounding areas have increased their rents year-over-year. Similarly in the Manchester submarket, the demand for space has not slowed down, with a near 0% vacancy rate in the W/D category. This market position will likely drive up lease rates and sale prices even higher as space becomes available in the Manchester submarket.

2021 was also busy on the W/D sales front and at higher than average sale prices. The fourth quarter had the highest sale price PSF of any quarter in 2021, with a weighted average sale price of $104 PSF. This included investor sales, like 11 Ricker Avenue in Londonderry that sold to a CA-based investment group for $159 PSF, and an owner-occupier sale to Brueckner Group USA that purchased 50 Education Way in Dover for $153 PSF, to name a couple. 

As the industrial market as a whole continues to tighten, rents are expected to climb in 2022 if inventory shortfalls persist. One outcome from such tight vacancy rates is the potential of increased construction.

Moving to the office market, it comes as no surprise the sector suffered a bit in 2021 - some large national tenants left the market, while other tenants reduced their footprints. However, the market looks to be leveling out with Q4 having less than 10,000 SF of negative absorption, the first time since Q3 2019. This is due to some tenants expanding and new tenants entering the market.

Focusing on the specific sectors, the Class A category ended up seeing little to no change in its YOY vacancy rate. This was slightly unexpected after large vacancies hit the market in two newly constructed Class A buildings in the Portsmouth submarket this year. But, one of these buildings is already fully leased and the other is about 60% occupied at the end of Q4. The Portsmouth submarket’s Class A category had the most transactions this year, with tenants like Waste Management expanding its office operations in Portsmouth, Jordan Park expanding and relocating from Hampton to Portsmouth, Sentient Decision Science expanding its footprint in Portsmouth, and many more.

On the other hand, the vacancy rate in the Class B category was the only sector to weaken. With every submarket seeing a rise in Class B vacancy rates, the market-wide vacancy rate climbed by 3.4%. The two submarkets with the biggest vacancy rate increases were the Dover and Nashua submarkets. Interestingly, the high vacancy can be attributed to a single vacant building in both submarkets.

Talk of construction does not usually go hand-in-hand with climbing vacancy rates, but the impact of adaptive reuse could affect the office market. In the Manchester submarket, a few companies are seeking approvals for converting office space to residential. Off Elm Street, a local developer proposed to convert a 10,520 SF office building into 12 apartments. Another owner proposed to convert a large portion of a downtown office high rise into residential use. If approved and the trend starts to spread, the office market may see a decrease in the vacancy rate and overall inventory.

 More time is needed to determine where the office market is headed.  The impact of converting office space to residential and the work from home/hybrid models need further sorting out before there is clarity in the direction of the NH office 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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