Next up in our New England Market Overview recap series, we cover the Ocean State. Our team down in Rhode Island presented on the state of the downtown, suburban and industrial markets. Alden Anderson, Senior Vice President/Partner, led the presentation by introducing Governor Gina M. Raimondo, who provided a compelling presentation on the status of the Rhode Island economy.
The first speaker to follow was Andrew Galvin, First Vice President/Partner, who highlighted the Downtown Providence and Suburban Rhode Island Office markets.
“Major themes for the Providence Office market include the continued progress and or delivery of several major projects; the continued growth in the multifamily space; the many newly proposed development projects attracting and growing an exciting tenant base; and the existing fundamentals in the market.” – AG
2016 Development Progress
“We’ve had the continued conversion of obsolete office buildings to housing stock, which has further tightened the available supply in the office market. The current downtown market vacancy rate sits at 13.4%. To put some context to this, since 2013, 11 office buildings totaling 544,000 SF have been converted to residential uses.” – AG
2017 Development Pipeline
“These referenced projects, many of which have commenced construction or will break ground in 2017, total several hundred million dollars in in new development.” – AG
Rhode Island Suburban Office
“Since 2012 there has been approximately 675,000 SF of positive absorption. Nearly 240,000 SF of that amount occurred in 2016. Similar to 2015, there were not market-changing types of large transactions, but 2016 represents continued improvement in the suburban market.” – AG
Rhode Island Industrial Trends
Tom Barry, Vice President, covered the Rhode Island Industrial market, stating that, “flexibility, creativity and persistence were all required to satisfy industrial needs in 2016.”
“Pricing has gradually increased for leasing as well as properties sold in the range of 3-5%, but has not increased as much as the declining vacancy would seem to imply.” – TB
“Companies searching statewide for alternatives, no longer can concentrate on a specific geographic area to solve their needs. The search radius continues to get wider and wider in search of viable options.” – TB
Our industrial forecast for the coming year includes:
- The shrinking supply of quality product will continue to present limited options and will call for creative solutions from the available existing inventory along with exploring new construction as an option.
- Both tenants and buyers will need to be opportunistic and ready to act once an opportunity presents itself.
- Many tenants will be forced to renew leases at their present location given the limited options.
- A good tenant and landlord relationship has become more important given potential renewal rather than losing their space and being forced to settle for a less desirable solution as well as a different geography, which may affect the labor force.
To wrap up the presentation, we were fortunate to welcome back CBRE’s Spencer Levy, Head of Americas Research, for his take on the state of the capital markets in Rhode Island.
Stay tuned for our next post, where we will cover this year’s CBRE/NE Hartford Market Overview. Did you miss our Boston Market Overview recap series? Click on the following link to catch up.