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High, but stagnant, industrial occupancy rates still lead to increased rents

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A significant number of industrial transactions occurred throughout the state in the first quarter, but had little impact on the industrial occupancy rate, which remained stagnant at 95.0%. Despite that, rents continued to increase, by $0.34 PSF or a 5.2% increase year-over-year, ending the quarter at $6.67 NNN. 

The Nashua submarket’s occupancy rate rose 1.6% year-over-year, ending the quarter at 94.8%. Some tightening in the market is due to industrial buildings being purchased and converted to different uses. 110 E Hollis Street in Nashua sold for $1.81M ($24.32 PSF) in January to a developer. This 74,000 SF general industrial mill building was the longtime home of Henry Hanger Company. The new owner plans to convert the building to apartments. Another sale in Nashua was 90 Northwest Boulevard. This 57,000 SF general industrial building was purchased in March by the YMCA of Greater Nashua for almost $5M ($86.48 PSF). With this purchase the use changed and Colliers will no longer be tracking the building as industrial.  

A similar trend is seen in the Manchester submarket.  With an occupancy rate of 95.8%, investors focused in on the industrial market as exemplified by the following Q1 sales. A local investor purchased 80 Ross Avenue in Manchester for $4.1M ($53.25 PSF) in March. This 77,000 SF general industrial building is the longtime home of E&R Laundry & Dry Cleaners. Another local investor purchased a 20,500 SF warehouse/distribution building at 504 Silver Street for $1.0M ($48.78 PSF) in February. And the 48,780 SF multi-tenanted warehouse/distribution building at 101 E Industrial Park Drive, also acquired by a NH-based investor, sold for $2.2M ($45.10 PSF) in February.

We also saw a NH-investor purchase 38 Locke Road for $1.95M ($65.44 PSF) in the Concord submarket. At the time of the sale, the 29,800 SF general industrial building was 50% occupied, with the Overhead Door Company of Concord and PharMerica as tenants.

Although the Concord submarket occupancy rate dropped to 89.8%, we saw two new tenants enter the submarket. MetalMax, a Tennessee based metal fabricator, purchased the 20,970 SF general industrial building at 28 Locke Road for $1.6M ($76.30 PSF) marking the opening of its first NH location. A. Duie Pyle, a transportation and distribution company, also opened its first NH location in 25,000 SF at 40 Londonderry Turnpike in Hooksett. The company plans to hire about 30 new employees with its new location.

While the Nashua, Manchester, and Concord submarkets all saw significant investor sales since the beginning of the year, the Salem submarket has not. This could be due to Salem’s occupancy rate being one of the lowest in the submarkets we track, ending the first quarter at 92.9%. Further, current owners/investors could be waiting to see if the ongoing highway improvements and continued build out of Tuscan Village have a positive impact on the value of their holdings. We believe this market’s occupancy will continue to climb, given its prime location.

There was, however, significant leasing activity in the submarket during the first quarter. Nordson MEDICAL, a global medical devices and component technologies company, leased 25,000 SF at 21 Northwestern Drive in Salem. Nordson occupies the entire 60,000 SF building at 29 Northwestern Drive. It is moving some of its manufacturing, warehouse, and office space to the newly leased unit at 21 Northwestern to make room for more clean rooms at its current facility. 

We are continuing to see great signs for the industrial market: occupancy continuing to steadily increase, owner/occupiers building and expanding, and investor activity continuing to grow. We remain optimistic that the market will stay strong through the rest of 2019.

Industrial Market Report

High, but stagnant, industrial occupancy rates still lead to increased rents

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