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The vacancy rate in New Hampshire's office market remains unchanged for the last two quarters

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The New Hampshire office market is still relatively flat, but  this was the first quarter in the last two years that saw a drop in the vacancy rate, falling by 0.5% year-over-year.

The most significant drops in the rate occurred in the Class B and C sectors, decreasing by 0.9% and 1.4% respectively. A minimal part of the drop was from removing a total of 50,460 SF (roughly 0.3%)  from both sectors due to conversion to other uses. This does not include the proposed conversion at 1000 Elm Street and 1230 Elm Street, two downtown Class B buildings, to multifamily. If those buildings are converted it would remove over 95,000 SF of vacancy and add roughly 200 new apartments. 

Over the past year, we have commented on how asking rents have climbed alongside vacancy. In a typical market, the rule of supply and demand would mean as vacancy rose, the rent would soon begin to fall. This has not been the case in any of the sectors. Compared to last year, rents in the Class A sector climbed by 5.5% ($1.28 PSF) and 5.6% ($2.22 PSF) in the Class B sector. The elevated rents were partially due to some new construction, but mostly from high quality space hitting the market at higher than average asking rents - especially in the Manchester and Portsmouth submarkets. 

Looking at the last four years, rents have not dropped and from the look of things that may not be coming. That does not mean there are not other concessions for the tenants like free rent, an increase in TI allowance, renegotiating terms in renewals, or allowing tenants to vacate part of their space as long as they stay in the building. So far these terms seem to be working and the market is seeing many renewals and new companies relocate in the state. 

This is good news for investors. Not only has the vacancy rate begun to level out, but rental rates are at least 5% higher than last year. This has led to a slight uptick in investment sales this quarter. 

The question now is whether investment sales 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 it rises. It may also lead to lower valuations.

At Colliers, we internally track over 23.8 million SF of office space across 6 submarkets. Our inventory includes buildings and condominiums 10,000+ SF and are classified as Class A, B, or C.   

Q3 Office

The vacancy rate in New Hampshire's office market remains unchanged for the last two quarters

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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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