Market Conditions for Chittenden County
Tuesday, July 29th, 2008
INDUSTRIAL: Growth for industrial space in Chittenden County expanded approximately 2% in 2007 while 2008 projections are approximately 1.5%. One of the speculative contributors to the industrial market is O’Brien Brothers Agency Inc. which developed a 50,000 SF multi-tenant building at Meadowlands in South Burlington of which more than 50% is leased or sold. The high cost of construction has limited the demand for new buildings as the market has been satisfied with recently vacated, less expensive existing spaces. As a result, the approximately 225,000 SF of net industrial space being absorbed yearly is being provided by recently vacated older industrial/manufacturing facilities such as Belden, York, and Specialty Filaments. The vacancy rate in the industrial market for 2007 was approximately 6%. This is below the 20 year annual average of 7.5%. These vacancy rates have dropped due to the absorption of existing vacant facilities and the cost of new construction. The vacancy rate for 2008 is projected to stay flat at 6%. Industrial lease rates are projected to remain stable. New construction lease rates are $7.00 to $8.50/SF NNN while average grade industrial space is $4.50 to $6.50/SF NNN with tenants paying a proportionate share of property taxes, insurance and maintenance at $1.25 to $1.75/SF plus utilities. Coupled with current low interest rates and high construction costs, we have experienced record sale prices for small/mid size industrial properties ranging from $70-$98.00 SF.
OFFICE: The Chittenden County office vacancy rate is approximately 7.4% which is slightly higher than the 14 year average vacancy rate of 6.3%. A couple of planned projects that have been taken off the board (Cherry Street: 66,000 SF and 23,000 SF on the corner of Battery Street and Main Street) will help to keep upward pressure on rents. The strongest office sector is “Class A” space in downtown Burlington. Lease rates for downtown space range from $12.00 to $17.00/SF NNN with tenants paying for property taxes, insurance and common area maintenance at $4.50 to $6.00/SF.