NORTHEAST SNAPSHOT, DECEMBER 2004

Vermont Industrial Market

Vermont’s industrial market has shown strong signs of growth in 2004. The growth rate — the amount of newly constructed/redeveloped industrial space in square feet — for 2004 is 3.1 percent, up from 2.1 percent in 2003 and a record low of 0.5 percent in 2002.

“Continuous improvement over the last 2 years indicates economic recovery as measured by business expansion, job growth and stabilization,” according to Doug Nedde, principal broker for Redstone, a full-service commercial real estate firm in Burlington, Vermont.

The vacancy rate, at 6.6 percent, is indicative of the stable Vermont industrial market. The current number is substantially lower than the 10 percent vacancy rate of 2001 and 2002.

The increased demand for industrial space is further illustrated by the swell in leasing activity. In 2002, only 29 lease transactions were completed, representing 245,000 square feet. That number doubled to 58 transactions in 2003. In the first 5 months of 2004, 40 leases were brokered for a total of 268,000 square feet. A vast majority of the leases so far completed in 2004 are for smaller space. “Of the 40 leases completed, 37 were for spaces of 15,000 square feet or less, which is a reflection of the size of Vermont’s industrial market as compared to larger, urban markets,” says Nedde. Rental rates for high-quality properties in Vermont range from $6 to $7. For average industrial space, rates range from $4.50 to $6; for below-average properties prices range from $2.50 to $4.50.

“There are few businesses requiring manufacturing and high-tech space. There is more of a demand for warehousing and distribution,” Nedde notes.

The majority of industrial development is occurring in Williston, where Redstone Construction has just completed a 38,000-square-foot facility for FedEx Ground/Home Delivery, which has a planned expansion of up to 59,000 square feet. In Bradford, REM Development Company has two 12,000-square-foot buildings and two 15,000-square-foot buildings ready for occupancy along Interstate 91 in the Upper Valley corridor.

According to Nedde, the Chittenden County submarket, which includes Greater Burlington, is an area to watch for future industrial development because companies such as IBM and Fletcher Allen Health Care have created a strong economic base. Another area poised to experience growth in industrial development and leasing activity is the Upper Valley, near White River Junction, Vermont, and Hanover, New Hampshire.

The industrial market in Vermont is steadily recovering from the record lows experienced in 2002 and improving economic conditions are allowing developers to take more risks. The market should continue this positive trend as the economy strengthens and businesses continue to experience growth.

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