The story of the industrial market has been similar all year, vacancy rates fall and rents climb. The only difference this quarter is the vacancy rate is starting to level out. Some factors affecting the rate include the limited availabilities due to a low vacancy rate, construction being completed bringing out new available space, and tenants consolidating locations.
Last quarter we reported on some construction projects in the pipeline. This quarter there was over 286,000 SF completed. The 54,000 SF of new inventory in the Dover submarket was from two owner-occupiers and the 232,000 SF spec facility in the Nashua submarket added 160,000 SF of available space in the warehouse/distribution category.
In addition to newly constructed availabilities, the large vacancy at 9 Northeastern Boulevard shifted the vacancy rate in the submarket. Extreme Networks has most of its employees at this location working from home, so it vacated 190,000 SF. This flex vacancy led to the submarket’s increase of 2%, the only submarket to see a positive change in its vacancy rate all year.
Even with the new availabilities, the low vacancy rate in the industrial market has led to not only higher rents, but also higher sale prices. Before COVID, during Q3 2019, the average sale price was around $74 PSF. Two years later, with a spike in demand, the average sale price has increased to about $86 PSF. This shift is mostly due to investor sales, although some owner-occupier sale prices are rising as they are having to outbid investors for available buildings.
This increase in sale prices has led many companies to weigh whether to build a new facility or purchase an existing building. The results have varied based on the submarket. In the Manchester submarket, Baron’s Major Brands had approvals for a new facility to consolidate its multiple warehouses, but decided to purchase a building in Bedford. Wire Belt of America had also been working on plans for a new building, but instead decided to lease the former Walmart building in Bedford.
However, in the Dover submarket, more companies are turning to construction rather than existing buildings. Although there is less inventory and available space in this submarket, over the last quarter LDI and Intec Automation completed construction on their new buildings in Rochester. Also, Pella Windows’ new home in Rochester will soon be completed.
