Industrial and E-Commerce Product Avoid Havoc Wreaked by Covid-19
Covid-19 wreaked havoc with most commercial real estate property types in the second quarter of 2020 but not so with industrial and e-commerce product which continued to show strong signs of a healthy market despite harrowing times for the economy. The I-81 Corridor was no exception to this trend, holding its own with over 1.5M square feet of absorption in the second quarter with continued constraint on supply in the face of steady demand.
DemandDemand for industrial space in the Shenandoah Valley market increased during the second quarter of 2020, with 1.5 million square feet of absorption. During the quarter, demand for warehouse product was 1.5 million square feet, while demand for flex product was flat, giving back 5,113 square feet to the market. Washington County, MD accounted for the majority of absorption due to Amazon moving into 1.2 million square feet.
SupplyDuring the quarter, 1.85 million square feet of new space delivered in the market. This dropped the under construction total to 1.57 million square feet of space. Trammell Crow’s 1.2 million square foot warehouse was completed and is fully leased to Amazon. 5694 Winchester Ave, which was built on a speculative basis delivered vacant, adding 404,040 square feet to the market. This space was taken by Home Depot. Northpoint broke ground on Building 3 at Hagerstown Logistics Center. The 177,673 square foot building will be the developers first on the site.
VacancyThe market’s overall vacancy increased during the second quarter from 4.9 percent to 5.1 percent. This is in part due to 5694 Winchester Ave delivering vacant. The warehouse product vacancy ended the first half of 2020 at 5.2 percent. Vacancy for flex product ended at 4.5 percent.
Overall asking triple net rates in the Shenandoah Valley market decreased $0.10 to end the quarter at $4.27 per square foot. This compares to a year ago when the rental rate stood at $4.29 per square foot. Overall average rental rates for warehouse product decreased $0.11 to end the quarter at $4.25 per square foot while rental rates for Flex ended the quarter at $8.13 per square foot. Class A warehouse product is still seeing rates closer to $4.75-$5.00 per square foot in the market.