Tyler Culberson, NAI Platform
The Capital Region continues to experience low vacancy rates across the industrial sector. The region’s growth over the last decade has primarily been driven by multibillion-dollar investments by GlobalFoundries, a semiconductor foundry, and State University of New York Polytechnic Institute (known as SUNY Poly).
With limited new construction and virtually no spec-built facilities, the rates on existing spaces have finally experienced some rental appreciation after remaining relatively flat over the decade from 2005 to 2015. For the most part, the region has seen existing tenants shifting to new locations within the marketplace as opposed to companies entering to the marketplace for the first time. Generally, new entrants to the market that have some technology component to their business are locating at the SUNY Poly campus or related facilities.
One of the most notable recent transactions was the $57 million sale of The Beltrone Portfolio to The Rosenblum Companies. The portfolio totaled 23 buildings made up of a mix of office and industrial properties. The industrial assets included 10 buildings that would be classified as Class A and B product. Historically the entire portfolio maintained a low vacancy status and at the time of sale it was approximately 5 percent vacant. This acquisition catapulted The Rosenblum Companies ahead in terms of total industrial inventory in the region, making them one of the top five largest industrial landlords.
Rates on new construction spaces in smaller size configurations generally start around $6.50 per square foot NNN, while some spaces with large office buildouts reach upwards of $10 per square foot NNN. Saratoga County continues to lead the market in terms highest lease and sale values. Class B spaces are trading in the $4.50 to $5.50 per square foot range depending on location and other attributes. The older industrial buildings in strategic locations continue to maintain value for select tenants with lease rates ranging from $2.75 to $4 per square foot.
Over the past five years the Port of Coeymans has exploded with new tenants and operations. The port secured Barker Steel as a tenant in the spring, and a new 40,000-square-foot building will be built for their operations. Renewed activity at this port is related to the replacement of the 3.1-mile Tappan Zee Bridge across the Hudson River.
Dynarex, a medical supply distribution company, moved into a 75,000-square-foot space in the spring to expand its distribution network. Regeneron Pharmaceuticals has acquired more than 100 acres of vacant land along the I-90 corridor to expand its East Greenbush, New York, campus. This expansion will include office and lab space and approximately 200,000 square feet of warehousing space.
The Galesi Group maintains its dominance as the largest industrial landlord in the region. Galesi, in partnership with BBL Construction, recently completed a spec building of 64,000 square feet located in Green Island Industrial Park. Within the park they have constructed approximately 750,000 total square feet. Prior to the completion of the new spec building, they had one vacancy of approximately 8,000 square feet.
On a larger note, there have been a handful of large regional distribution centers placed in the region recently. In March, The Albany Business Review revealed that Dollar General is pursuing a 750,000-square-foot building in Montgomery County. Several months ago, Ace Hardware completed a 400,000-square-foot expansion to an existing 800,000-square-foot building. In fourth quarter 2015, Ferguson Enterprises constructed a 450,000-square-foot distribution center in Greene County. Scannell Properties of Indianapolis has recently taken a large land position, proposing to build a total of approximately 1 million square feet. Vacant land for distribution centers of 300,000 square feet and larger has traded from $20,000 to $100,000 per acre depending on location, infrastructure, topography, and various other factors.
— By Tyler Culberson, Commercial Specialist, NAI Platform. This article originally appeared in the October 2016 issue of Northeast Real Estate Business magazine.