What's Hot and What's Not in NH's Real Estate Market

As new businesses come online and others expand, the question of where to locate is on many people’s minds. Commercial real estate, like residential real estate, has its ups and downs and can run in cycles. So in 2016, what’s hot and what’s not in NH’s commercial real estate market?

What’s Hot: Industrial Space
During the past 12 to 18 months, there has been healthy activity in the industrial market in both leasing and sales. Vacancy rates for industrial space have slowly been creeping down.  

A lack of Class A facilities in prime locations within short range of the interstate corridors has forced established companies to break ground on new facilities in order to enter or expand in southern NH. Nearly 1.3 million square feet of new construction for industrial space has been developed for end users during the past 24 months. FW Webb will be constructing a new 785,000-square-foot distribution center in Londonderry adjacent to the Manchester-Boston Regional Airport. It was expected to break ground in May and is scheduled to be completed by fall 2017.

FW Webb will be joining USPS (614,000 square feet), FedEx (300,000-plus square feet) and Caterpillar (100,000-plus square feet), which all completed new facilities in Londonderry in 2015 and 2016. In Hooksett, GE Aviation just completed a 55,000-square-foot addition to its existing manufacturing facility. In Dover, Rand Whitney has nearly finished construction on its new 120,000-square-foot, high-bay distribution facility. Also in the same industrial park, Stonewall Kitchens has a new 75,000-square-foot facility with room for growth upwards of 250,000 square feet.

1000,000-plus square-foot Caterpillar facility in Londonderry. Courtesy of Milton Cat.

Along with the new construction, there has been a slow but steady rate of activity with existing properties being leased and purchased by end users. Among that trend is 14 Garabedian in Salem, a 110,000-square-foot facility purchased in 2015 by an unnamed buyer who intends to occupy the building. Law Warehouses relocated from its facilities in Nashua to 140,000 square feet at 59 Daniel Webster Highway in Merrimack in March, as Law aggressively leased out roughly 230,000 square feet of its Nashua space in 2015 and 2016. In Merrimack, two buildings totaling more than 120,000 square feet were just purchased, including 237 DW Highway, which was bought by Boyle Energy Services & Technology Inc., taking more inventory off the market.  

With this recent activity, there are fewer available options across all classes of building. The well-located properties are being filled and that is spurring activity in some of the older, more difficult-to-access properties.

Currently, inventory of industrial space has allowed the market to handle the improved interest and vacancy rates in southern NH are declining.

What’s Not: Office Space
With the exception of the Seacoast and Salem markets, the office market for the Route 3/Interstate 93 corridor has experienced slower growth. Many towns saw vacancy rates improve slowly, but cities like Nashua and Concord saw increases in vacancies. Along the Route 3/Interstate 93 corridor, demand for new office space remains low as many tenants and users are focusing on efficiency and reducing
their footprint.

Among the companies that reduced their space needs is Anthem, which relocated from Goffs Falls Road to Elm Street in Manchester in 2014, leaving a 310,000-square-foot office building empty.  Citizens Bank moved from an 85,000-square-foot building at 875 Elm St. to a 20,000-square-foot space at 900 Elm St.

Such downsizing is in part due to more employees working remotely instead of the classic office environment.

The health insurance and banking industries also continue to downsize in NH. It has not been uncommon to see companies in these fields cut their space requirements by 25 to 50 percent. An example of lack of demand for some of these older office buildings is 875 Elm St. in Manchester, the former home of Citizens Bank. The property was purchased in 2015 to be redeveloped as residential with retail/mixed-use on the first floor.

It is not all doom and gloom in the office market. Overall, the southern NH office market saw a decrease in vacancies for 2015 but, leading into 2016, industrial space remains the hot trend.

Mike Tamposi is a vice president with CBRE/New England, a real estate firm with offices in Manchester and Portsmouth. He can be reached at mike.tamposi@cbre-ne.com.