by Justin Lamontagne, CCIM, SIOR, Partner, Designated Broker at NAI The Dunham Group
How’s the market? It is the most common question asked of any commercial broker in these trying times. And, most often, the answer is “…depends”. Unlike retail and the mixed-bag office market, the industrial sector is thriving through Covid. Manufacturing, warehousing and distribution are proving essential. And examples abound of industrial companies pivoting in a positive way to provide much needed services and products in account of this pandemic.
At NAI The Dunham Group, we are pleased to present a mid-year update to our annual Industrial Market Survey. Indeed, the statistics reflect a dynamic market and confirm our anecdotal and transactional workload. In 2020 we’ve added Falmouth to our survey and are now tracking a nearly 20,000,000 SF Greater Portland market including Saco & Biddeford.
Today, our vacancy rate holds steady at 2.79% and that includes the only significantly large vacancy in all of Greater Portland, a 167,000 SF warehouse at 203 Read Street in Portland. That building is getting a lot of activity and, if leased, our overall rate will drop to a stifling 1.95%. And, practically speaking, because most industrial end-users are looking for smaller units, that sub-2% availability is what tenants and buyers are dealing with. Herein Sam LeGeyt reports on the “sweet spot” for industrial users and the dramatic lack of this type of inventory. We are hopeful these market conditions lead to long-awaited speculative development.
Sales demand for existing inventory remains at an all-time high. Bullish investors, both local and regional, are competing with end-users. This consistent and competitive demand has driven average sales prices towards $80/SF with peak pricing well over $100/SF. It seems the volatility of the stock market and the uncertain economic outlook is driving investors to bricks & mortar. And, as mentioned, no sector is better positioned to weather the Covid storm and prosper post-pandemic than industrial.
Nationally, the industrial sector remains as healthy as ever. Unlike in Maine, speculative construction has kept up with demand and vacancy rates remain historically low throughout most of the country. Tertiary markets, in particular, are seeing great new development as businesses are attracted by cheaper land, tax incentives and interstate connectivity to find Mid-Year Review employees. In fact, many manufacturing businesses are choosing labor pools over geography as the driving reason for plant location.
Of course, the great caveat to all of this is Covid and the still lingering long term ramifications. I’ve said to many clients, we’re very much IN this. This pandemic is happening right now. It’s never been harder to make projections or predictions because there are so many variables and possible trickle-down effects from this pandemic we haven’t even considered.
In summary, the industrial market is proving Covid-resistant and the environment has never been more competitive. We see few signs of change in the near-term but this pandemic is truly unlike anything we’ve ever seen. It would be irresponsible to say the industrial market is immune to the effects of this crisis. But so far it sure is putting up a good fight.