New Hampshire’s industrial market has less available inventory each quarter, with the fourth quarter seeing the second largest quarterly drop in the vacancy rate this year. The rate dropped by 1.6% year-over-year and ended the quarter at 2.9%.
The largest change was in the warehouse/distribution (W/D) category, seeing a 2.8% reduction year-over-year and closing the quarter at 1.6%. This was due to large W/D deals like:
- 1 Bon Terrain Drive in Amherst reached full occupancy at the end of second quarter with leases by Novo Building Products and Alene Candles for the entire 395,920 SF building
- XPO Logistics leased 182,000 SF at 333 Harvey Road in Manchester during second quarter, which brought the building to full occupancy
- 2 Howe Drive in Amherst finished construction in the third quarter and quickly reached full occupancy after Ashley Furniture leased 70,000 SF and Masy BioServices leased 160,000 SF during the second half of the year
While these are some of the larger deals, there were many other that affected the vacancy rate and even more renewals.
With less than 500,000 SF of vacant W/D space in the market, it is not surprising that rents in the category climbed by over $2.07 PSF (29%) and ended the quarter at $9.27 NNN. This was mostly attributed to the increase in rents in the Salem and Manchester submarkets.
In the Salem submarket, there is limited availability and no space in the town of Salem itself. Some owners in the surrounding towns have increased rents year-over-year knowing there is still a demand for space.
Similarly in the Manchester submarket, the demand for space has not slowed down. Having a 0% vacancy in the W/D category has driven the prices up for the remaining occupied available space, even though it is not available until the second half of 2022.
With rents climbing and the abundance of new W/D leases, it came as no surprise that the majority of sales this year were also in the W/D category. The fourth quarter saw the highest sale price PSF throughout the year, with a weighted average of $104 PSF. Interestingly, 64% of these sales were to owner-users.
The flex/R&D category has the highest vacancy rate at 6.7%. With the most available space out of all the industrial sectors, this category had the second highest shift in vacancy falling 1.0% year-over-year. With roughly 1.2 million SF available in the flex category, submarkets like Dover and Salem have some of the largest blocks available.
We will be watching to see if a shift may occur over the next couple of years in the Dover submarket after the 495,700 SF vacant flex building in Durham was purchased by local investor RJ Kelly Company. The company recently repurposed a former Walmart facility in Bedford to a manufacturing building. A similar plan may be used on the newly purchased Durham building to attract tenants to the market. This could be a trend to keep an eye on, seeing flex space being absorbed as it finds new use as manufacturing or warehouse space.
At Colliers , we internally track over 70.3 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).
