NORTHEAST SNAPSHOT, FEBRUARY 2006
Chittenden County, Vermont Industrial Market
Chittenden County in Northwest Vermont is the largest county in the state both in terms of geographic size and population, as well as having the highest percentage of employment statewide. In the first half of this decade, the fluctuations in the economy, both nationally and globally have had a direct influence on the commercial sector of this small state. However, it appears that the negative trends from a few years ago may be declining and commercial real estate is experiencing cautious and steady growth.
Rental rates throughout the Chittenden County industrial market vary depending on property type. For above average class, rates range between $7 per square foot triple net-leased and $8.50 per square foot triple net-leased. For average class, the rates run from $5 per square foot triple net-leased to $7 per square foot triple net-leased, and for below average properties, rents stand between $2.50 per square foot triple net-leased and $4.50 per square foot triple net-leased. Vacancy rates in the market are at an all time high, 10.4 percent, due to plant closings that represent more than 1.25 million square feet. However, a more realistic calculation — not including these closings — stands at approximately 4.1 percent. This trend indicates a strong demand for smaller industrial/warehouse units in contrast to larger blocks of space, many of which are located in the outskirts of Greater Burlington, Vermont. Thus, property owners are considering the costs associated with subdividing buildings to attract multiple tenants as well as offering affordable rents or other incentives to attract qualified tenants and buyers.
Several new development projects are online for 2006. Two of the following projects have already commenced construction, with the balance breaking ground in the near future. An 83,000-square-foot project in Essex, Vermont, developments of 71,000 square feet and 12,000 square feet in Williston, Vermont, 57,000 square feet in South Burlington, Vermont, a 19,000-square-foot property in Colchester, Vermont, and a 15,000-square-foot building in Burlington all will contribute to the positive growth in the coming year.
Throughout the Chittenden County industrial sector, manufacturing space and high-tech operations are in limited demand; the push is higher for warehousing and distribution space. Many of the large manufacturing facilities on the market are seeing inquiries from both American and foreign companies that are attracted to Vermont's quality of life, yet while some manufacturers are consolidating or moving overseas, a number of Vermont companies still have a niche product and specialized market, putting them in position to expand this year.
Despite the high vacancy rate, which was due to specific circumstances, leasing activity was healthy in 2005. In the first 11 months of last year, 82 lease transactions were completed totaling 597,000 square feet. Industrial space between 2,000 square feet and 4,999 square feet was in highest demand, representing 40 percent of the space absorbed. Only 10 percent of last year's leases absorbed more than 15,000 square feet.
Assuming a continued stable influence from IBM, Fletcher Allen Health Care and many colleges, the Chittenden County commercial real estate market will continue to maintain a healthy economic base. Vacancy rates across all sectors are averaging near or below historic 20-year averages. In the future, expect modest expansion of new product developed; growth primarily will be fueled by incremental expansion of existing companies.
— Rachel DiGiammarino is the director of marketing for Redstone in Burlington, Vermont. Statistics quoted in this article were obtained from Allen & Brooks Report, So. Burlington, Vt., December 2005.
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