New Hampshire’s office market remains unsettled as the State moves farther away from the initial pandemic related shut down. Many companies are waiting to make a decision regarding their future office plans and needs. Given the situation, it is not surprising that occupancy rates dipped year-over-year, ending the year at 90.5%.
Although the occupancy rate fell by 0.68%, rents rose by $0.28 PSF (a 1.5% jump), ending the year at $19.01 MG. The increase is not necessarily surprising considering the new space hitting the market is higher end space. The bump in rent will likely reverse and steadily decline if the market sees little or no absorption over the next year.
Even with the daily media reminder that companies are readily adopting the “work from home” (WFH) business model, it remains to be seen what direction occupiers will truly take. While some people think the office market is retreating, particularly in cities, we believe the best way to describe it is – evolving. The pandemic pushed a lot of companies to a WFH platform. Some announced plans to potentially downsize their offices and stick with a WFH platform due to the investment in the technology and the ability to pull from wider employee pool. Others have announced a hybrid model, splitting time in the office and home, allowing office space to stay as is – at least for now. We have also heard about companies pulling out of a big city and into several spread out suburban locations to follow employee’s migration. These trends will have different impacts on the market, but we believe that the WFH approach will start to affect occupancy rates in 2021.
While NH is in a wait-and-see phase, an immediate impact was seen with the occupancy rate slightly dropping as some companies vacated space. However, the impact was not as significant in 2020 as we believed it would be. In 2021, some companies will undoubtedly downsize or close NH locations, while others may expand to follow social distancing guidelines. As more companies make office decisions, we believe this will lead to lower occupancy rates in the market.
At Colliers International in New Hampshire & Maine, we internally track over 23.07 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.
