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Shenandoah Valley Industrial Report Report Q3 2020

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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.

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.


Demand 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.


During 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.


The 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.

Rental Rates

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.


Shenandoah Valley Industrial Report Report Q3 2020

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