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NORTHEAST SNAPSHOT, DECEMBER 2005
New Hampshire Office Market
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Tom Farrelly
Executive Director
Cushman & Wakefield
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The New Hampshire office market continues to endure relatively soft market conditions; thus, there is little new office development. The significant trend for users in this soft market is a twofold approach: 1) “flight to quality,” and 2) “blend and extend.” Flight to quality occurs when established tenants or tenants with good credit take advantage of market conditions by upgrading office space at relatively similar or lower rates. Under a “blend and extend” scenario, tenants attempt to lower their lease rates now by offering to extend their leases before the expiration date in exchange for lower lease rates.
Overall, modified gross rental rates for Class A office space in the New Hampshire market currently range from $17 per square foot to $25 per square foot. In the third quarter, vacancy rates for Class A and Class B office properties decreased slightly in the Manchester and Bedford, New Hampshire, markets, dipping to 12 percent and 27 percent, respectively. However, in the Nashua, New Hampshire, market, the overall vacancy rates increased to 31 percent.
The most notable office projects currently online are located on the Seacoast and in Concord, New Hampshire. The first of two 50,400-square-foot office buildings was completed earlier this year at 155 Borthwick Avenue in Portsmouth; the developer, The Kane Company, anticipates that the second building will break ground in 2006. At 100 Portsmouth Boulevard, also in Portsmouth, the same developer is planning a three-story, 80,000-square-foot office building is slated for development across from the future Homewood Suites Hotel. In addition, Two International Group has completed Phase I of 100 International Drive, a 62,000-square-foot office building that came online this summer and is almost 50 percent leased.
Liberty Mutual has begun construction of a new 250,000-square-foot office building in Dover, New Hampshire. The newest project in the market, Capital Commons, recently broke ground on South Main Street in Concord. The eight-story building encompasses 102,000 square feet, featuring retail on the street level. The developer, Capital Commons LLC, says delivery of the project is expected in late 2006.
Infrastructure improvements have been implemented across the state. For example, the much-anticipated construction of a new airport access road linking the F.E. Everett Turnpike directly with the Manchester Airport will provide access to hundreds of acres of developable land. As the educated labor pool grows, more companies will be attracted to New Hampshire.
Some of the larger insurance and finance industry companies have discovered New Hampshire's pro-business climate and have been showing significant interest in expanding their presence here. For example, several companies recently have signed major leases: Fidelity Investments leased 115,000 square feet at in Merrimack, New Hampshire; Liberty Mutual has signed on for 100,000 square feet in Exeter, New Hampshire; Cirtronics has signed a 98,000-square-foot expansion and renewal lease in Milford, New Hampshire; Nixon Peabody has leased 25,000 square feet in Manchester; Ascendant One has signed on for 22,000 square feet a in Nashua; Northwest Mutual Life has leased 13,000 square feet in Manchester; and Travelers Insurance signed a 13,000-square-foot lease at Bedford Executive Office Park in Bedford.
In the future, the Portsmouth market, which has historically proven resilient with software/high-tech users, along with Route 3 (DW Highway) in Bedford due to the new Airport Access Road, are likely to show the most office activity.
— Thomas Farrelly is an executive director of Cushman & Wakefield in Manchester, New Hampshire.
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