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The vacancy rate in New Hampshire’s industrial category has continued to fall for more than two years

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New Hampshire’s industrial market continued to tighten year-over-year making it more difficult to find space for companies that need to expand or relocate in the market. The good news for the state is that the low supply  has sparked industrial construction for owner-occupiers, as well as spec buildings by investors. 

Areas like the Manchester and Portsmouth submarkets continued to have vacancy rates below 1% over the last three quarters, which is great news for building owners and investors. Since demand has outgrown the supply, rents have increased by $1.61 PSF in the Manchester submarket and $2.99 PSF in the Portsmouth submarket compared to the first quarter of 2021. On the other hand, tenants and/or owners that need to expand could face the possibility of being priced out or not finding space to grow in the market. Both submarkets have seen companies leave because there are no buildings that fit their needs or land sites available to build.
 
The Nashua, Salem, Concord, and Dover submarkets are each slated to have more than 100,000 SF of industrial construction this year. The majority of construction in the Nashua, Salem, and Dover submarkets is in the warehouse/distribution category - both owner/user and spec construction. However, the Concord submarket has 350,000 SF proposed or under construction in the manufacturing category, which is also a mix of owner-occupier and spec.
 
There is something to be said that these submarkets are the ones seeing the most amount of proposed or new construction, since all four submarket have above a 4% vacancy rate, especially the Salem submarket that has a 6.1% rate. Even with high overall vacancy rates, there are other factors that have led to the construction. For example, the 350,000 SF manufacturing building that broke ground in Concord is for an owner-user, Pitco Frialator Inc. After not finding an existing building to fit its needs, the company decided to build to consolidate its three locations - Bow, Concord, and Pembroke. Down in Salem, the 155,000 SF spec warehouse building broke ground at 6 Industrial Way at the beginning of the quarter. Although the submarket has 12% vacancy rate in the warehouse category, the town of Salem itself has 0% vacancy, making it a prime location just over the state border. The building is also unique in its submarket with 40’ clear heights, a feature that is missing in that area. 

Will the industrial market continue to see vacancy fall or will the market shift in a new direction? The easiest answer is  that the vacancy rate cannot get much lower, falling 1.5% year-over-year and ending the first quarter of 2022 at 2.9, and in some submarkets there is not a lot of room for the rate to get any lower. 

However, with new inventory hitting the market, we could potentially see anomalies of increased vacancy. Yet if the new construction completed last year sets the tone for this year, almost of all of those building were fully leased by the end of 2021. 

What could cause a change in this trend in the industrial market? Many companies in New Hampshire are facing new business challenges, not only low inventory to lease or own, but a smaller amount of available land, rising material costs, interest rate hikes, supply-chain constraints, and labor shortage. 
The demand on companies right now is too strong to see the immediate impact on the industrial market. However over time, these factors may cause businesses to have to reduce footprints if they are short on employees. The supply-chain constraints could lead companies to rethink processes or cause them to make more materials in-house. There are so many ways the market could move based on different factors. However, one of the biggest strengths of the New Hampshire market has continued to be the adaptability of the local businesses. 

 

 At Colliers , we internally track over 71.1 million SF of industrial space across 6 submarkets in New Hampshire. Our inventory includes buildings and condominiums 10,000+ SF and are classified as manufacturing (Mfg), flex/R&D, or warehouse/distribution (W/D).

 

Q1 Industrial

The vacancy rate in New Hampshire’s industrial category has continued to fall for more than two years

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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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