Shenandoah Valley Fundamentals Remain Strong Despite Ongoing Pandemic
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.
DemandDemand for industrial space in the Shenandoah Valley market increased during the third quarter of 2020, with 373,024 square feet of absorption. During the quarter, demand for warehouse product was 359,931 square feet, while the demand for flex product was flat, with 13,093 square feet of demand.
SupplyDuring the quarter, 453,520 square feet of new space delivered in the market. The construction total at the end of the quarter was 2.13 million square feet. This increase was due to Northpoint breaking ground on their 1 million square building at the Hagerstown Logistics Center. This building is being built on a speculative basis and is in addition to Building 3 which will be 177,673 square feet once completed. Three buildings were delivered in the market. 151 Business Park Drive, a 40,000 square foot flex building in Berkeley County completed. 101 Prospect Road, a 63,520 square foot building delivered in Frederick County, VA. This building is occupied entirely by Kirkland’s. The largest delivery, a 350,000 square foot building in the Graystone 81 Logistics park delivered vacant.
VacancyThe market’s overall vacancy remained flat during the third quarter ending at 5.1 percent. The warehouse product and flex product vacancy rates ended at 5.1 percent as well. Warehouse product vacancy stood at 5.3 percent a year ago while flex vacancy was 4.1 percent at that same time.
Overall asking triple net rates in the Shenandoah Valley market decreased $0.10 to end the quarter at $4.17 per square foot. This compares to a year ago when the rental rate stood at $4.23 per square foot. Overall average rental rates for warehouse product decreased $0.11 to end the quarter at $4.14 per square foot while rental rates for Flex ended the quarter at $6.26 per square foot. Class A warehouse product is still seeing rates closer to $4.75-$5.00 per square foot in the market.