NORTHEAST SNAPSHOT, APRIL 2005

SOUTHERN NEW HAMPSHIRE OFFICE MARKET

The New Hampshire office market has seen little activity in office leasing of late, yet investment activity is not stagnant. Both investors and office users are becoming increasingly interested in plunging into ownership due to low interest rates. Rental rates for Class A office buildings are generally ranging from $14 per square foot to $23 per square foot, and vacancy rates for the key cities in New Hampshire are as follows: Manchester, 13.6 percent; Nashua, 19.4 percent; Bedford, 23.9 percent; Concord, 23.4 percent; Portsmouth, 25.1 percent; and Salem, 7.4 percent.

Several significant projects are underway in the area. The Fisher Cats, the new affiliate of the Toronto Blue Jays, is opening its season on April 7 along the Merrimack River in downtown Manchester. Ideally, this endeavor will produce a similar effect to the Manchester Monarchs’ arrival a few years ago. The American Hockey League team opened the Verizon Wireless Arena and effectively drew retail to the downtown area, which produced a higher quality of life for the entire community.

In addition, there has been a resurgence of development of the old mills in downtown Manchester. Formerly tired old complexes dilapidated beyond use, these areas are now being renovated into office layouts housing some of New Hampshire’s most prestigious law, technology and real estate firms. In the southern portion of the state, New Hampshire has initiated strong infrastructure changes. Plans are underway for an access road that will ease traffic to the Manchester Airport from Route 3 and the Everett Turnpike corridor. Long-term designs for the widening of Route 93 and plans for rail expansion are also under consideration and discussion.

Many areas in the New Hampshire office market are currently seeing significant development, but a majority of the activity is taking place along the Hooksett/Manchester corridor. Both the southern portion of Bedford along Route 3, which is the major feed connecting Bedford to the Manchester airport, and the actual airport area, including Manchester and Londonderry, are seeing the largest project development increases in this sector. An airport area quintessentially attracts a variety of business opportunities from hotels, car rental agencies and other travel-related enterprises that are naturally affected by a developmental increase. In New Hampshire, the airport sector has been targeted for industrial and manufacturing developments as well, due to its proximity to the highway network in addition to its convenient access to air-shipped goods.

Moving north, the Hooksett/Manchester area continues to attract large big box retailers such as Target and Kohl’s, both of which are serving the Concord and Manchester areas. Finally, the Route 3 corridor south of Bedford and toward Merrimack has recently seen marked growth in various sectors: mixed-use residential units are under construction; there is a newly developed medical facility; and lastly, in the retail market, a new Target and Lowe’s Home Improvement Warehouse will open soon, and a strip mall has been proposed in order to serve the consumers of the Bedford/Merrimack corridor.

No large single tenant is absorbing a majority of space, and recently, no major leases have been closed. Rather, a variety of smaller businesses are springing up in highly visible locations. Mortgage companies and financial advisors are playing an increasing role in the absorption of vacant space, and since the demise of the dot-coms, an influx of incubator-type users are attempting business life outside the home office environment. Medical practitioners, including dental and chiropractic as well as neurologists and sleep disorder specialists, are moving to the area. Attorneys in individual practice and small law firms also are filling the office niche.

In the future, the greater Manchester area will continue to flourish, as it has been recently, and the southern part of the state is quickly pushing real estate interest northward. Southern New Hampshire is becoming saturated with housing and overburdened with higher lease rates for industrial space; therefore, the northern locales are becoming increasingly attractive to potential businesses and homeowners. As a result, retail and other related businesses will inevitably follow.

Overall, the commercial real estate investor market remains strong, mainly due to the stock decline several years ago. New retail is breaking ground, and obsolete buildings are being converted to useful office space. If lifestyle and infrastructure improvements maintain their current trends, smaller firms will continue to sprout and flourish, creating a strong job base. In effect, the southern New Hampshire office market retains a positive outlook, and as long as the interest rates remain low, the investment market will stay strong.

— Louise and Chris Norwood, The Norwood Group

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