Net absorption and new construction both remained steady during the third quarter of 2020, largely driven by groundbreakings and strong leasing activity in the northern end of the Shenandoah Valley.

Most notably on the construction front, Northpoint Development broke ground on both 1 million and 175,000 square foot spec buildings off Wesel Blvd in Hagerstown, Maryland and are already rumored to have the larger facility under lease to Amazon. This would represent the second e-commerce related commitment of over 1 million square feet in Hagerstown during 2020 and would be the third largest fulfillment center along the I-81 Corridor in the Shenandoah Valley. NorthPoint’s groundbreaking brings the total of under-construction industrial product in the Shenandoah Valley to 2.13 million square feet, up from 1.57 million square feet at the mid-year mark.
In Martinsburg, WV Shockey Companies leased 100,000 square feet to environmental services group Heritage Interactive in their Berkeley Business Park and continues to market their recently-delivered 404,000 square foot spec warehouse project on the adjacent site. Further south in Winchester, another Shockey spec warehouse project totaling 65,000 square feet was leased to Kirkland’s Home Furnishings in the Graystone Industrial Park. Winchester saw a general uptick in leasing during the quarter with 150,000 square feet absorbed in 321 Apple Valley Industrial Park by Schenker. With respect to new product coming online, the largest delivery was a 350,000 square foot spec project developed by Equus Capital Partners within the Graystone Industrial Park.

Rental rates for Class A product remained strong, hovering between $4.75 and $5.00 NNN while rental rates for all industrial product along the corridor remained at a stable $4.17 per square foot. The pandemic has created a shortage in the development pipeline with capital markets taking a brief pause in the second quarter of 2020. However, demand remained strong with both new users and expanding companies contributing to continued industrial growth along the I-81 Corridor. There are new projects in the pipeline for spec construction but they will not break ground until early 2021 and not deliver until later that year or early in 2022. This will contribute to further constrained supply which may lead to lower vacancies and increased rental rates over the next 12-18 months.