Another solid quarter for the industrial market as its reputation grows

 

snapshot_Industrial.pngShort on time? Here are the highlights of our first quarter Greater Boston Industrial MarketView. To request the full report, fill out the form at the bottom of this post.

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After ending 2016 with record-breaking absorption of over 3.4 million sq. ft., the Greater Boston Industrial market set its bar high. While it would have been difficult to replicate that sort of showing two quarters in a row, Q1 2017 was still a solid three months, with positive absorption in all three markets for a cumulative 440,000 sq. ft.

Vacancy remained low, with single-digit numbers across the board, and asking rents stayed elevated year-over-year.

Two distinct themes shaped and bolstered the market in the first quarter, the first being organic growth by local companies, and the other new entrants to the Greater Boston market—indicative of the area’s increasing visibility and appeal on the national stage.

Recap: 2017 CBRE/New England – Hartford Market Overview

Next up in our New England Market Overview recap series, we cover the Hartford market. Our Connecticut team presented on the state of the industrial, office and investment markets.

Industrial Market Overview

John Reed, Senior Vice President/Partner, led with an in-depth overview of the Greater Hartford Industrial market.

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“Last year there was 4 MSF of industrial volume and 1 MSF of net absorption. Consequently, the vacancy was down 9.2% from 2015. This led to improving values, rising lease rates, increased sales prices and higher land prices per acre, creating a premium on large industrial sites.” – JR

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“The distribution model has changed. Drivers need to get to their destination and back in one day. Being centrally located in New England has fueled this demand. With the evolution of e-commerce, next-day—if not same-day—delivery will continue.” – JR

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“UPS absorbed 230,000 SF of space at Cornerstone’s 1 Market Circle in Windsor. FedEx Ground is building a 525,000 SF distribution center at 1000 Middle Street in Middletown. You may recognize this as the former 1 MSF Aetna office campus; it is a perfect reuse of this property. This is the fourth FedEx operation established in Greater Hartford in the last four years.” – JR

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“Due to the diminished inventory of quality existing buildings, some users are having to build.” – JR

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Our industrial forecast for 2017 includes:

  • Continued demand for large existing buildings
  • Continued demand for large permitted sites
  • One million square feet of absorption in 2017
  • 2017 will be a better year than 2016

Office Market Overview

John McCormick, Executive Vice President/Partner, and Alexis Augsberger, Vice President, covered the Connecticut Office market.

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“2016 was a relatively flat year for leasing velocity, with renewals outpacing relocations. The market saw approximately 100,000 SF of net absorption and the sublease inventory was reflective of a fairly healthy economy.” – AA

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“The Greater Hartford Office market is still very much a traditional economy. By comparison, in Metro Boston approximately 40% of the tenants in the market for 2016 identified themselves as ‘tech’ companies.” – JM

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“Buildings in submarkets with walkable amenities and superior highway access led the way in 2016.” – AA

Our office market forecast for 2017 includes:

  • Increased renewal activity
  • Continued urban migration
  • State and City budget impacts on the region

Investment Market Overview

Patrick Mulready, Senior Vice President/Partner, covered the Connecticut Investment market.

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Our investment market forecast for 2017 includes:

  • Continued demand for industrial product
  • Interest rates will have minor impact on pricing
  • Liquidity not going away
  • Overall lower sale volume
  • Strong pricing for well-positioned assets with good fundamentals

Overall, market fundamentals in Greater Hartford are strong and the outlook is positive for 2017, particularly in the Industrial Sector.

Did you miss our Boston Market Overview or Rhode Island Market Overview recaps? Click on the following link to catch up.

 

 

Recap: 2017 CBRE/New England – Rhode Island Market Overview

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

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2016 Development Progress

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“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

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“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

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“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.”

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“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

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“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.