The New Hampshire industrial sector has continued to tighten over the last eight quarters. Even with the vacancy rate starting to level out, rents have continued to climb for the last nine quarters. Compared to last year, overall asking rents rose by 28.3% ($2.24 PSF). Both the flex and warehouse/distribution categories increased by over $2.00 PSF year-over-year, ending the second quarter around $10.50 NNN.
However, compared to prepandemic (second quarter of 2019), the overall vacancy rate has declined by 1.7%. This significant shift is even more impressive considering there was almost a million SF added by new construction over the past couple of years. The warehouse/distribution sector contributed the most to the shift, rising by 2.6% compared to 2019.
The warehouse/distribution sector in the Concord, Nashua, and Manchester submarkets were the most active over the past three years, causing the rate to fall by over 3.0%. In the Concord submarket, an Amazon distribution center leased the entire 109,000 SF building on Quality Way in Hooksett during the second half of 2019. The Nashua submarket had the largest amount of absorption due to Novo Building Products and Alene Candles leasing the 425,920 SF building at 1 Bon Terrain Drive in Amherst. Also in the submarket, 36 Executive Drive in Hudson, a 310,200 SF building, reached fully occupancy in August 2020 after BAE Systems leased 119,000 SF and RJ Schinner leased 91,000 SF. In the Manchester submarket, 10 Iron Horse Drive in Bedford sat mostly vacant for years, but after being purchased in 2021 the 141,000 SF was fully leased soon after by multiple tenants.
Many of these tenants were either new to NH or stayed and expanded, which is a positive sign for the state - increasing jobs, revenue, etc. However, this activity led to a dramatic drop in the vacancy rate making it difficult for other industrial companies to expand. The demand for space put strain on the warehouse/distribution sector leading to rents rising from $6.40 NNN in the second quarter of 2019 to $10.43 NNN this quarter.
The positive from the rent jump was that it led construction to pick up, for both owner-user and investors. Compared to three years ago, the warehouse/distribution inventory increased by 670,600 SF with another 280,500 SF under construction this year.
The amount of new construction is starting to slow down or be delayed due to the elevated price for labor and materials, but owner-user and build-to-suit projects are moving forward. RJ Kelly Company purchased land on Aviation Drive in Londonderry during the first quarter of 2021 with the plan of developing the site for tenants. The 40,500 SF facility for Loomis was just completed and the neighboring 42,000 building is under construction for Yogibo. Alternatively, Prep Partners, completed its 150,000 SF facility that it will fully occupy in Rochester earlier this year.
Colliers tracks more than 71.2 million SF of industrial space across 6 submarkets in New Hampshire. Its inventory includes buildings and condominiums 10,000+ SF and are classified as manufacturing (Mfg), flex/R&D, or warehouse/distribution (W/D).
Current Issue - April 2024