Southern New Hampshire Office Market Trending Positive In 2014
With economic improvement and job gains returning the region to its pre-recession vitality, the Southern New Hampshire office sector through mid-year 2014 has enjoyed renewed momentum.
The state has nearly regained all of its jobs lost during the downturn, resulting in an unemployment rate of 4.4 percent, which is well below the current national average of 6.3 percent.
At the same time, the picture has changed a bit. The hard-hit financial services sector is rebounding, although slowly, while notable expansion in business services, technology, education and health services has translated to a surge in demand for office space among diverse industries.
Over the past several months, Comcast leased 147,000 square feet in Hudson; Hospital Corporation of America leased 48,000 square feet in Salem; Anthem Health of New Hampshire took 46,000 square feet in Manchester; and Citizens Bank committed to 29,418 square feet in Manchester. In Bedford, Mass Mutual committed to 18,000 square feet while engineering firm Vanasse Hangen Brustlin took 19,000 square feet.
This steady activity has led to improving fundamentals across the board. The overall office vacancy rate fell to 17.6 percent during the first quarter (compared to a long-term average of 18.6 percent and a recession–prompted high of 21 percent in 2010). Asking rents have risen to $18.61 per square foot after falling to $14.37 per square foot in 2010.
A Thriving Seacoast Market
This robust performance is most striking in the Portsmouth region, which remained a steady performer even during the worst of the downturn. This vibrant, young Seacoast submarket offers a high quality of life that continues to draw a desirable Millennial workforce and, therefore, employers.
Today, Portsmouth is enjoying the lowest vacancy rate and highest asking rents of the six New Hampshire office submarkets tracked by Cushman & Wakefield. At the end of the first quarter, the region recorded 13 percent vacancy and a $22.28 per-square-foot average asking rent (up 52 percent from the 2010 low of $14.66 per square foot). Looking at Class A space alone, asking rents are up 60 percent, to $25.21 per square foot.
Significant tenant activity in Portsmouth includes Novocure’s expansion to occupy 50,000 square feet at 195 Commerce Way; the company initially leased 15,000 square feet there in 2012. Portsmouth also is home to recent build-to-suit projects for Hospital Corporation of America (43,000 square feet), Sprague Energy (40,000 square feet) and Florida Power and Light (20,000 square feet).
Portsmouth is one of the few office markets where developers are showing enough confidence to launch speculative projects. In fact, Portsmouth is home to the only spec project delivered to the Southern New Hampshire market so far this year. Farley White built a 67,000-square-foot spec office building as Phase II of 100 Arboretum Drive in Portsmouth, for which Cushman & Wakefield serves as leasing agent. Following 100 percent lease-up of the project’s 65,000-square-foot Phase I, tenants already have committed to more than 9,000 square feet in the new building.
Additionally, The Katz Company recently broke ground on a 37,000-square-foot spec office building at 249 Corporate Drive in Portsmouth. Additional projects in the design and approval phases include a 102,000-square-foot building at 245 Commerce Way and a 72,000-square-foot building at 1 International Drive.
Forecast for Positive Trending
As always, Southern New Hampshire as a whole provides a lifestyle that contributes to the health of its office market. Proximity to Boston makes it a commutable region that has attracted a healthy residential population and the professional services that support it. The region’s favorable tax rates and laws make it an attractive location for other corporate users as well.
During the next three years, New Hampshire is expected to see average annual growth of 2 percent in office-using employment (about 3,300 jobs), according to Moody’s economy.com. This compares to the state’s 10-year historic average of 1.2 percent growth in office-using jobs. Considering this healthy outlook, New Hampshire’s positive office market trending is expected to continue.
— By Sharon Joyce, Research Director – New England, and Thomas Farrelly, Executive Director, Cushman & Wakefield of New England. This article originally appeared in the June/July 2014 issue of Northeast Real Estate Business magazine.