Aggressive Leasing and Spec Development Foreshadows Bullish 2021
| The Shenandoah Valley Market wrapped up the final quarter of 2020 with a series of lease commitments that set the stage for increased action from developers in the upcoming year. Amazon announced the preleasing of an additional 1 million square feet of distribution warehouse at NorthPoint’s new project off Wesel Boulevard in Washington County, MD. Once delivered next year, the facility will sit less than 10 miles from their existing Amazon Fresh warehouse which was constructed earlier in the year on Crayton Blvd. Further south in Martinsburg, West Virginia, consumer products giant Procter & Gamble continued to expand their footprint by leasing all 404,000 square feet of Shockey Companies’ new spec warehouse project in the Berkeley Business Park. Shockey Companies also leased 175,000 square feet to Thermo Fischer Scientific in Winchester’s Graystone Industrial Park for an immediate distribution need related to the COVID-19 pandemic.
DemandDemand for industrial space in the Shenandoah Valley market increased during the fourth quarter of 2020, with 381,525 square feet of net absorption, bringing the year-end absorption to 2.87 million square feet. During the quarter, demand for warehouse product was 413,004 square feet, while the demand for flex product dropped slightly, giving back 31,479 square feet to the market.
SupplyDuring the quarter, 175,760 square feet of new space delivered in the market. The construction total at the end of the quarter was 1.95 million square feet. One building was delivered during the quarter, specifically 201 Prospect Drive, a 175,760 square foot warehouse leased to Thermo Fisher Scientific in the Frederick/Winchester area. Throughout the year a total of 2.64 million square feet of space delivered.
VacancyThe market’s overall vacancy decreased 20 basis points to end the quarter at 5.1 percent. The warehouse product vacancy dropped 30 basis points to end at 5.0 percent while flex vacancy increased from 5.1 to 5.8 percent during the quarter. Warehouse product vacancy stood at 5.4 percent a year ago while flex vacancy was 5.0 percent at that same time.
Overall asking triple net rates in the Shenandoah Valley market decreased $0.22 during the quarter, ending the year at $4.29 per square foot. This compares to a year ago when the overall rental rate stood at $4.28 per square foot. Overall average rental rates for warehouse product increased $0.22, as well, to end the quarter at $4.26 per square foot while rental rates for Flex remained flat and ended the quarter at $6.26 per square foot. Although asking rates for all warehouse decreased, Class A warehouse product rates are holding closer to $4.75-$5.00 per square foot in the market.