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Finding the Hot Markets

Published Wednesday Jul 3, 2013

Author GEORGE PELLETIER

American business executive Louis Glickman claimed, “The best investment on Earth is earth.” That may be true, but location is everything, making some pieces of earth a gold mine and others worth little. As the commercial real estate market comes back, identifying real estate hot spots is a game of increasing importance to maximize the return on investment by developers.

Not surprisingly, the Seacoast is one of those places developers have long kept their eyes on. “Portsmouth didn’t go down very much in the downdraft. And it’s coming back strong. Rockingham County is one of the strongest. It was the first county to come back residentially and also seems to be very strong commercially. Vacant spaces are filling up rapidly with tenants, and we’re getting offers for buildings that we haven’t solicited,” says Tom Duffy, president of the NH Commercial and Investment Board of Realtors.

Portsmouth’s success has had a domino effect reaching further and further from the sea itself. East of Route 125 and in Southern NH, commercial real estate is hot. That includes Durham, Dover, Rochester and Epping. Chris Norwood, executive vice president of NAI Norwood Group in Bedford, points out that a new movie theater built on the corner of Routes 101 and 125 in Epping has helped to attract investors to that area and transformed that strip. “Market Basket, which is also in that plaza, is growing and is one of the few that’s been doing leaps and bounds.”

“Retail is coming back,” agrees Tom Riley, past president of the NH Association of Realtors and owner of Riley Enterprises in Bedford. “We’re finding a lot more interest in our retail space than we’ve had in the past. There are a lot more nationals opening doors and knocking on doors again.”

The Coast Calls

Portsmouth is not only doing well but is bustling. “You can’t take three steps without passing 17 different cranes and bulldozers. Downtown Portsmouth is really going gangbusters. But being in a small urban environment, with the constraints of where do you physically put your construction crew and so forth, that’s got to be a more difficult process to do as it relates to development.” The newest development, Norwood says, is a condominium highrise. He says with the new hotel recently completed, Portsmouth now has three hotels within a two-block radius of each other.

Riley says the Dover/Rochester market might be a sleeping giant. “For some reason, people have a stigma on that bridge going from Portsmouth to the Dover/Rochester area,” he says. “I find the Dover/Durham area more affordable, the work force is there and I think it’s going to be the next area of growth in New Hampshire.” He points out that area is attracting major employers like Albany International in Rochester and has less expensive rents than the Portsmouth area. “Instead of spending $12 to $18 in [the Portsmouth] area, we can go out there and do it at $7 to $10, same facility, 10 minutes away.”

Another example of the seacoast’s rising heat index is Riley’s recent acquisition of the previous headquarters of Cabletron, a 63,000-square-foot facility in Rochester. “When we purchased it last year, our anticipation was it would be empty for three to four years. We’re remodeling and rehabbing it now and we’ve done a lot in it in the past four months since we bought it. And we’ve already got close to 20,000 square feet leased.”

North Country Tepid

The picture is not as rosy in the Berlin region. “We really haven’t seen an uptick in commercial activity,” says Russ Ramsey, principle owner of Coulombe Real Estate in Berlin. Right now, there are a number of properties for sale on Route 16 between Berlin and Gorham. “We have seven pieces of real estate for sale on the Gorham road. The lowest is going for $50,000; some for $200,000. We’re not talking millions of dollars here. The properties have been for sale for nine months.”

Berlin and neighboring towns can offer properties or land for sale, but the lack of economic activity and population means the area is locked in a Catch-22. “Berlin doesn’t have the infrastructure,” says Duffy. “They don’t have the infrastructure because they don’t have the market. Berlin has been a distressed market since I’ve been in business 22 years. You need the people for Burger King and retail, you need the demographics, you need to see the dollars. The national realtors or super regional retailers count heads, they count rooftops, they count money. … I have a hard time getting anyone to go above Concord.”

That said, there is construction activity in the North Country. The former Burgess Pulp Mill in Berlin is the site of a $275 million project to build a biomass plant, one of the largest construction projects in the state now. Even further north, the new owners of the Balsams, Daniel Dagesse and Daniel Hebert are in the process of securing funding to renovate The Balsams, a resort in Colebrook that once employed hundreds but is now closed and under renovation.

Other Hot Spots

The Seacoast may be the hot place for development, but there are developments around the state that signal businesses and organizations need new or expanded space and are willing to make the investment.

Riley says the Manchester/Bedford outlook is very positive. “We own hundreds of thousands of square feet of office building. Everything we have up and repositioned is 100 percent full. We just got approvals for a new 44,000-square-foot facility," he says, adding while it is not leased, his firm is in negotiations with national companies to occupy the space. "We feel confident we’ll be able to get some tenants,” Riley says.

In Nashua, Jeff Luter, president of Fulcrum Associates, says there is a lot of repurposing of existing buildings. In many cases, he says, the repurposing leads to medical facilities. Luter says medical facilities want their facilities located in population centers. Sometimes that means repurposing an existing building that is in a prime location. “When I look back at the work that we’ve done with Southern NH Medical Center, a third of what we’ve done has been repositioning existing buildings: the old Newick’s in Merrimack was converted to a medical office; and the YMCA on Prospect Street in Nashua was [also] converted to medical,” he says.

He also has been building new medical facilities in Southern NH as many medical operations are choosing new construction on land that is located near its patient population. “Everybody wants to know where their patients are and their convenience and accessibility are pretty big factors in locating. You start drawing a ring around where you can locate a facility and then you start looking at existing buildings that might be candidates for repositioning and then the list gets pretty short, pretty fast,” Luter says.

The manufacturing sector has been gearing up in different parts of the state. “As businesses expand, they need places to store, they need places to manufacture. So about a year and a half ago, industrial space began getting hotter and hotter to a point today that vacancies are getting lower and lower. So industrial is the second hottest market in southern New Hampshire,” Riley says. Examples of this include a $4 million building at Watts Water in Franklin and a new building for Airmar in Milford.

 

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