Report: ‘Unanswered questions’ face Seacoast office space market
Boulos analysis sees possible ‘calm before the storm’ as demand for industrial sizzles
A recently released report on the commercial real estate market on the Seacoast reads very similarly to a report released earlier this year about the state of the entire New Hampshire commercial market.
This time around, the Portsmouth-based real estate firm The Boulos Company has issued its Seacoast New Hampshire Market Outlookfor 2021. It follows the release last month of Colliers International’s overviews of the state’s officeand industrialmarkets, which found a strong demand for industrial space – a statewide vacancy rate 4.4% – but demand for office space looking very unsettled, with a 9.5% statewide vacancy rate.
The same holds true in the Boulos report. It finds that the office market on the Seacoast had an average vacancy rate of 10.6% for 2020, compared to a vacancy rate of 7.3% a year earlier. The 2019 rate was the lowest vacancy rate in 20 years, according to the report. The highest vacancy rate over that 20-year span was reported in 2009, the depths of the Great Recession, when it was 20.3%
In his office market office analysis, Kent White, Boulos’ principal broker, called the 10.6% vacancy rate “relatively healthy,” but he warned that, in light of the effects of the pandemic and the ongoing adoption of remote work, 2020 was no “typical” year, adding, “unfortunately, we believe this slight increase in vacancy is just the calm before the storm.”
He said that at this point it’s difficult to offer up a firm prediction for the coming year because many businesses are taking a “wait and see” approach before making long-term decisions regarding their office space.
“There are so many unanswered questions as we re-enter a post-Covid world in 2021,” writes White. “Will office tenants return to their office space at pre-COVID occupancy levels, or will tenants continue to work remotely? This is the biggest question for 2021 and could have significant short- and long-term effects on the office market, not only in New Hampshire, but across the country.”
The picture is much different in the industrial market which, according to the report, is “extremely tight,” according to the analysis written by senior broker Christian Stallkamp.
At the close of 2020, the vacancy rate for industrial space stood at 3.9 percent, a big drop from the 5.6% rate reported at the close of 2019.
He said what he called a “remarkably low vacancy rate” is expected to continue “for the foreseeable future,” with businesses “scrambling to renew their current space or look to relocate, which typically includes only one or two options, if any.”
He also pointed out that companies looking to relocate to the Seacoast are being forced to look farther afield in the region because of the lack of space, although that raises issues of commuting times and the ability to attract employees.