Archive for the 'Market Conditions' Category

Vermont Business Magazine, Wednesday, September 21, 2011

In August 2011, New England posted an 8.9 percent increase in sales compared to August 2010, indicating that the housing market continues to recover. Vermont helped fuel the surge, with year-over-year home sales up 18.8 percent. However, it was also the only state in the region to post month-to-month declines in both units sold, -6.7 percent, and median price, -3.3 percent.

Connecticut was also the only state to experience month-to-month gains in both units sold, up 6.6%, and median price, up 1.7 percent. Maine also experienced New England’s largest increase in units sold, with month-to-month sales up 8.4 percent. However, the median price took a hit, dropping -6.6 percent. Month-to-month home sales in Massachusetts actually dropped -3.0 percent. However, when comparing August 2011 to August 2010, home sales were actually up 2.6 percent. New Hampshire’s 8.0 percent surge in month-to-month home sales was second only to Maine. Rhode Island helped fuel the surge, with year-over-year home sales up over 31% in the Ocean State. Month-to-month home sales were also up 7.6 percent.

“We’re pleased to see an increase in transactions in August without any artificial stimulus,” said Jay Hummer, Executive Vice President, RE/MAX of New England.“ Although the housing recovery will continue to hit bumps along the way, it is slowly returning despite tighter lending because of continued low interest rates.”

He said low interest rates continue to help the market rebound.

“Vermont’s high cost of housing highlighted in national housing affordability report” as reported in Vermont Business Magazine E-News on May 2, 2011.

Check out this article in today’s VermontBiz e-newsletter regarding the hight cost of renting in Vermont.  It also provides numbers for median household income and median cost of a home in Vermont.  Numbers were provided by VHFA.

RE/MAX reports surge in NE real estate, Vermont home sales up 32 percent (Vermont Business Magazine, Wednesday, April 13, 2011.

With over 12 million square feet (SF) of industrial space in Chittenden County, with Williston accounting for 3,578,000 SF alone, there is apt to be a decrease in growth in a down economy. In fact, with the removal of a 46,000 SF recycling facility and just 36,000 SF of new industrial space coming on the market, 2009 actually saw negative growth, an almost unheard of circumstance under normal market conditions. All in all, we have seen the vacancy rate move to 10.6%, up more than a percentage point from the end of 2009. Industrial vacancy rates can be much more volatile in comparison to other markets because of the way single vacancies of significant size (in square footage) have such an impact on the whole. To illustrate that point, only six separate vacancies, each in excess of 50,000 SF and most notably a 73,000 SF of industrial warehouse in Shelburne, account for nearly 40% of the total vacancy. However, signs are showing at least some of these gaps will be filled soon, as companies learn to adjust their spatial strategies to current and ongoing economic conditions.
Looking ahead, projections show approximately 285,000 SF of new industrial space hitting the market over the course of 2010, with the potential for even more starting toward the end of the year. Many of these projects are on hold, and an overwhelming 87% majority of them are planned for owner occupation, another clear sign of modest risk and conservative speculation strategies. This number is encouraging when compared to 2009 however, when 100% of new industrial development was owner occupied. While these numbers still aren’t strong, they certainly point toward encouraging movement forward, and hopefully a continued recovery in this sector.

The overall Chittenden County record breaking vacancies we experienced in 2009 of 12.3% have increased to 12.8% in 2010.

The suburban market has experience a slight improvement from 14.7 in 2009, downward to 14.2 in 2010.  Central Business District (CBD) of Burlington vacancy rate has increased.   I expect that trend to continue with Gallagher Flynn’s relocation from a 17,000 SF office building on College St. to Technology Park, So. Burlington.  Also in the works in the relocation of General Dynamics from 180,000 SF on Lake side Avenue to the IBM’s Williston campus.    I.C.V. is permitting a 24,000 office building Battery Street which may come on line in 2011.  Champlain College has broken ground on a 30,000 SF office/IT facility that it will occupy on Lakeside Avenue.  The pending occupancy of that building by Champlain College will create additional vacancies in the Burlington community.   Dealer.Com’s purchased the balance of 54,000 SF of Pine Street from Lake Champlain Chocolates.  Dealer.Com plans to further develop the space for more offices to accommodate their growing work force.

Parking costs, high property taxes and limited access to the Downtown continue to limit new development and in some cases motivate business to occupy office space in the suburbs.

Building activity in the suburb is limited as well.  There is an abundant inventory of new Class A office space available.  The absorption of that product has been limited in the last 12 months. 

Those who are building are benefiting from construction costs being 20-30% lower than three years ago and record low interest rates.

We predict stable rental rates in the CBD market, holding steady at $13-$17 per SF for Class A and $8-$13 per SF for Class B.

We believe the suburban market will continue to weaken as developers complete to fill empty buildings with limited demand.  The suburban market rental rates  will soften from there currently rates of:   Class A office $12-$16 per SF, and Class B $6-$12 per SF range.

A national rating firm RealtyTrac(R) (www.realtytrac.com) has reported that Vermont has both the fewest foreclosures over the first half of the year and the lowest rate as a percentage of housing units. Foreclosure filings were reported on 336,173 U.S. properties in June, the fourth straight monthly total exceeding 300,000 and helping to boost the second quarter total to the highest quarterly total since RealtyTrac began issuing its report in the first quarter of 2005. Foreclosure filings were reported on 889,829 U.S. properties in the second quarter, an increase of nearly 11 percent from the previous quarter and a 20 percent increase from the second quarter of 2008. “In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” noted James J. Saccacio, chief executive officer of RealtyTrac.

See the full article here:

http://www.vermontbiz.com/news/july/vermont-continues-have-far-lowest-foreclosure-rate-us-0

For the first two quarters of 2009, the vacancy rate for industrial/warehouse space in Chittenden County has been 9%. This is a very acceptable vacancy rate considering the depth and severity of this recession, and given that the historic average vacancy rate is 7.4%. Although we have experienced a net decrease in occupancy over the past 12 months, there are still local companies which have contributed to space absorption, such as Green Mountain Coffee Roasters and Blodgett Ovens.

The industrial market in this recession versus the last significant recession in 1989-1992 seems to be quite different. The 1989-1992 recession provided significantly more foreclosures, and bank-owned properties and vacancy rates increased to over 10%. It is widely believed that the Vermont State and Chittenden County economies tend to be insulated and lag behind national economic trends. This seems to hold true with many fearing that national economic impacts will still be chiseling away at our economic foundation after the rest of the nation has turned.

With the increased vacancy rates, lease rates are trending lower. Average industrial space is currently leasing at $4.50 – 6.00 per SF with the tenant paying the NNN expenses which will typically add another $1.50 per SF to the occupancy costs. A prime example of warehouse/ industrial space is 68 Nesti Drive in South Burlington. The other factors that favor lower lease rates are the cost of construction and cost of money, which have significantly been reduced in the last twelve months.

However, capitalization rates have recently increased. This is a bit unusual as the interest rates are historically low. Investors seem to be more cautious with their cash, and are looking to the capitalization rate for their return on money, not appreciation.

New supply in 2009 is projected to be limited with no new speculative projects planned and a few small owner-occupied driven projects. These projects will most likely contribute approximately 50,000 SF of space to the marketplace.

68 Nesti Drive, South Burlington:

http://www.redstonevt.com/Office-Warehouse-Industrial-For-Lease-VT-Commercial-68-Nesti-South-Burlington-Vermont/

Other exceptional Industrial Properties include:

133 Elm Street, Winooski:

http://www.redstonevt.com/Warehouse-For-Lease-VT-Commercial-133-Elm-1-Winooski-Vermont/

312 Commerce Street, Williston:

http://www.redstonevt.com/Office-Warehouse-For-Sale-For-Lease-VT-Commercial-312-Commerce-Williston-Vermont/

823 Ferry Road, Charlotte:

http://www.redstonevt.com/Office-Warehouse-For-Lease-VT-Commercial-823-Ferry-2-Charlotte-Vermont/

The Chittenden County office vacancy rate continued to climb this spring, reaching greater than 12% of the approximately 7.1 million total square feet of office inventory.  This is up from a 10% vacancy rate last fall, and almost double the historic average of 6.7%.  Despite these numbers, projections show record growth of office space in this market for the coming year. Space at 110 West Canal Street in Winooski is a prime example of the newer office space. A total of 326,000 SF of new office space is scheduled for completion by the end of 2009, a 5% total increase.  Notable additions to the supply include a 27,200 SF build to suit Homeland Security complex in South Burlington, the development of a 32,650 SF building for US Immigration in Williston, and a 138,000 SF former IBM building in Williston that is now available for lease.  With the abundance of supply and variable demand, we expect vacancy to exceed 14% by the end of 2009.   In terms of lease rates, office space in the Central Business District (CBD) are stable, demanding $13-$17 per SF for Class A, with Class B ranging from $8-$13 per SF.  An example of Burlington CBD office space is 115 College Street, 2nd and 3rd floor.  Despite current economic conditions, occupancy in the CBD is still strong.  We are seeing vacancy declining, down from 4.5% last fall to 4% currently.  With a 16 year historic average of 6.2%, these are encouraging numbers.   The suburban market however is weakening, with Class A calling for $12-$16 per SF, and Class B in the $7-$12 per SF range.   This is primarily due to a surplus of supply in this sector, and a vacancy rate of 14.7%, more than double the historic average.

115 College Street, Burlington, 2nd Floor:
http://www.redstonevt.com/Office-For-Lease-VT-Commercial-115-College-2-Burlington-Vermont/

115 College Street, Burlington, 3rd Floor:
http://www.redstonevt.com/Office-For-Lease-VT-Commercial-115-College-3-Burlington-Vermont/

110 West Canal Street, Winooski:
http://www.redstonevt.com/Office-For-Lease-VT-Commercial-110-West-Canal-Winooski-Vermont/

While Vermont brings some extreme temperatures during the Winter months, (especially February, my favorite month to leave Vermont to vacation somewhere warm and tropical), our economy seems to be insulated by extreme ups and downs.  Fortunately, we’ve seen little slow down in our market in the past few months.  In a recent article in Kiplinger, which was noted on Yahoo! Real Estate, Burlington, Vermont is listed as one of six safe havens for real estate in the United States.  To read the entire article go to: http://realestate.yahoo.com/promo/safe-havens-in-real-estate.html