Red hot downtown
Eight times a year the Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from bank and branch directors and interviews with key business contacts, economists, market experts and other sources.
The most recent version of this survey — commonly known as the “Beige Book” – was released Dec. 1, 2004, and it includes an unflattering picture of New England’s commercial real estate markets:
“Commercial real estate markets in New England remain sluggish. Contacts report few changes over the past quarter. Although some areas have experienced positive market absorption, continuing slow job growth in the region has generally failed to help the already lackluster markets. Boston has experienced the fourth consecutive year of negative market absorption, its worst streak on record. Office vacancy rates remain in the mid-teens in Boston, and exceed 20 percent in the suburbs. Contacts do not expect conditions to improve markedly until the region’s economy strengthens and job growth picks up.”
But, although the Boston commercial real estate market is weak, the Manchester area market seems, at this point, to be on the mend.
Local real estate professionals are pointing to positive trends in stabilizing rents, declining vacancies and lower interest rates as fueling sustained market activity. New Hampshire real estate prices tend to be lower than those for similar properties in metropolitan Boston, so Manchester offers an attractive alternative to expansion in the Bay State.
Manchester also is in the process of changing itself from a former mill city into a destination city — and that fact is being reflected in an active commercial real estate market.
The largest 2004 sales in the Manchester area include the 250,000-square-foot New Hampshire Tower at 1750 Elm St., purchased by Brady Sullivan in April 2004 for $15 million, and the 100,000-square-foot, mixed-use Opera Block on Hanover Street, purchased by Red Oak Properties for $4.7 million.
In addition, the 250,000-square-foot Jefferson Mill was purchased for $3.4 million two years ago by Brady Sullivan, and is now more than 80 percent full.
Another notable improvement to the downtown area came when the newly renovated McQuade’s building opened in early November as rehabilitated commercial space housing several new businesses. The building was purchased and renovated by the Anagnost Companies for $2.7 million, using loans from the U.S. Department of Housing and Urban Development and the Community Development Block Grant program. Dick Anagnost and his partners at the Anagnost Companies have so far redeveloped 14 buildings in downtown Manchester.
According to an end-of-the-year 2003 assessment by the CB Richard Ellis company, major cities and towns in the Manchester area Interstate 93/Route 3 corridor have almost 17 million square feet of combined area office space, and have an average vacancy rate of about 17 percent. The larger area surrounding Manchester added over 1.2 million square feet of office space from 2002 to 2003, with Manchester alone adding more than 700,000 square feet.
The high-quality office space in the downtown Manchester area (about 1.7 million square feet) represents more than one-third of Manchester’s total office space of 5 million-plus square feet. Downtown Manchester office and commercial buildings hold about 790 businesses that employ almost 14,000 people. Downtown employees have easy access to dozens of restaurants and retail shops in the area.
On the industrial side, the same CB Richard Ellis study estimates that major cities and towns in the Manchester area I-93/Route 3 corridor have close to 37 million square feet of industrial space, again with an average vacancy rate of about 17 percent.
Manchester alone accounts for more than 8 million square feet, with a lower vacancy rate of about 11 percent. Only Nashua, with close to 9 million square feet, has more square feet of industrial space than Manchester, but Nashua’s 20 percent vacancy rate was almost double Manchester’s at the end of 2003.
As the economy continues to gather strength, commercial real estate markets in Manchester should continue to improve. For example, a September 2004 report from the Federal Deposit Insurance Corp. noted that New Hampshire is doing the best of all six New England states. Loan growth was reported as being strong in New Hampshire, with home equity loan activity providing a boost. The median growth rate for total loans in New Hampshire was almost 10 percent as of June 30, representing “a rebound in growth after slowing the previous three years.” nhbr
Dennis Delay is an economist who lives in Manchester. This article originally appeared in the Greater Manchester chamber of Commerce’s e-newsletter, “Economic Insight.”