The North Shenandoah Valley industrial market continued to have positive demand in the second quarter, with 269,822 square feet of positive absorption. This is the eleventh consecutive quarter of positive demand in the market.
Construction activity remained robust, with 5.9 million square feet underway at the end of the quarter, and numerous other projects are in the pipeline. The delivery of two buildings resulted in an increase in vacancy on the northern end of the market
Demand for industrial space in the Northern Shenandoah Valley remained strong during the second quarter of 2022, marking the eleventh straight quarter of positive absorption. Although lower than previous quarters, the nearly 250,000 sf of warehouse absorption may be a reflection of lack of available space in West Virginia and Virginia. In Front Royal, VA a single undisclosed tenant signed a lease for the entire 340,000 square feet at the Virginia Inland Port Logistics Center which will be reflected in statistics when they take occupancy in the fall.
Further north in Washington County, MD the story was different as two buildings delivered without tenant commitments in the second quarter, breaking a long string of pre-leases. Specifically, Creekside Logistics Park and Hagerstown Crossroads accounted for slightly over 1.5 million square feet which pushed the vacancy rate in Washington County to nearly 13 percent.
This bump in vacancy resulted in the overall vacancy rate of warehouse space in the North Shenandoah Valley market rising to six percent. However, asking rents rose by $0.26 this quarter to $5.66 per square foot for all warehouse and Class A product is asking in the $6.25-$6.50 range.
With low vacancies locally and in surrounding markets, existing vacant product is attractive for tenants who are looking to enter the market or expand within the North Shenandoah Valley region. As existing options become scarcer, the new developments will likely benefit. West Virginia and Virginia remain strong and have fewer future deliveries on the horizon. Demand there should continue to drive rents up and vacancy down, especially in new buildings.
Demand for industrial space in the North Shenandoah Valley totaled 269,822 square feet during the second quarter. During the quarter, demand for warehouse/manufacturing product was 248,168 square feet, while absorption for flex product was 21,654 square feet.
Just under 6 million square feet of product is under construction in the market, with numerous other projects in the pipeline. Berkeley County, WV and Washington County, MD account for the majority of this development, making up 88 percent of construction underway in the market at the end of the quarter.
VacancyThe overall vacancy increased from 3.7 percent to 5.8 percent during the quarter largely in part to the delivery of the two vacant warehouse in Hagerstown. The warehouse product vacancy increased from 3.8 percent to 6.0 percent while flex vacancy ended the quarter at 2.3 percent. Warehouse product vacancy stood at 4.8 percent a year ago while flex vacancy was 6.5 percent at that same time.
Overall asking triple net rates increased during the quarter. The current overall asking rate ended the quarter at $5.69
per square foot. Asking rental rates for warehouse product increased $0.26 to end at $5.66 per square foot, up from $5.35 per square foot a year ago. The overall flex asking rate remained level at $7.50 per square foot.