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The vacancy rate in the New Hampshire office market is leveling out, while rents were unchanged this year

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It comes as no surprise the New Hampshire office market suffered a bit in 2021 - some large national tenants left the market, while other tenants reduced their footprints. However, the market looks to be leveling out with Q4 having less than 10,000 SF of negative absorption, the first time since Q3 2019. This is due to some tenants expanding and new tenants entering the market. 

Focusing on the specific sectors, the Class A category ended up seeing little to no change in its YOY vacancy rate. This was slightly unexpected after large vacancies hit the market in two newly constructed Class A buildings in the Portsmouth submarket this year. But, one of these buildings is already fully leased and the other is about 60% occupied at the end of Q4. The Portsmouth submarket’s Class A category had the most transactions this year, with tenants like Waste Management expanding its office operations in Portsmouth, Jordan Park expanding and relocating from Hampton to Portsmouth, Sentient Decision Science expanding its footprint in Portsmouth, and many more. 

On the other hand, the vacancy rate in the Class B category was the only sector to weaken. With every submarket seeing a rise in Class B vacancy rates, the market-wide vacancy rate climbed by 3.4%. The two submarkets with the biggest vacancy rate increases were the Dover and Nashua submarkets. Interestingly, the high vacancy can be attributed to a single vacant building in both submarkets. The Nashua submarket lost Dell Technologies on Innovative Way in Nashua, which brought a 198,000 SF vacancy to the market and attributed to the 7.6% increase year-over-year in the vacancy rate. In Dover, Measured Progress shut down its operation in 99,675 SF, leading to a 12.7% increase in its vacancy rate this year. This building was recently purchased by a local investor, so hopefully a new tenant will be attracted soon. 

Talk of construction does not usually go hand-in-hand with climbing vacancy rates, but the impact of adaptive reuse could affect the office market. Adaptive reuse is the process of repurposing buildings for new uses or modern functions. With some owners sitting on large vacancies and the NH market having a high demand for housing, there may be a solution for both problems. 
In the Manchester submarket, a few companies are seeking approvals to convert office space to residential. Off Elm Street, a local developer is proposing to convert a 10,520 SF office building into 12 apartments. This is the developers third project - already having approvals to convert two of the abutting building into a total of 21 apartments. 

Another local developer has proposed converting several floors of a downtown high rise to residential. The 20-story tower has substantial vacancies and the developer plans on converting eight floors. This is after the company converted part of a mill building on N Commercial Street into 61 apartments. 
If developers are granted approval and the trend starts to spread, the office market may see a decrease in the vacancy rate and overall inventory. 
It would be hard to talk about office construction without mentioning one of the only strictly office projects announced this quarter. Novcocure purchased a 26,000 SF commercial building in downtown Portsmouth for $9.5 million ($345 PSF). The company plans to convert the site into an office building that will house a world-class training and development center. The seacoast is the only submarket to see new construction this year. 

At Colliers, we internally track over 23.7 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.   

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The vacancy rate in the New Hampshire office market is leveling out, while rents were unchanged this year

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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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