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Marketing Insights: 2013 Vermont Forecast

Friday, February 8th, 2013

Published in New England Real Estate Journal on January 25, 2013.  Written by Ross S. Montgomery


Heading into 2013, overall market strength in the past year in conjunction with positive economic indicators project continued growth into the next calendar year. 2012 closed with improvements in both occupancy and rental rates throughout the retail, industrial, and Class A office markets, with Vermont posting the only increase in median household income in the entire United States, a 4% increase in 2010 and first increase in any state since 2009. This translated into increased consumer confidence, job growth of 1.4% in 2012, the retention and expansion of existing companies over a variety of industries, and the planned development of both owner occupied and speculative development heading into the new year and beyond. Chittenden County, which acts as the epicenter of economic activity in Vermont as well as a the indicator for the great activity and trends throughout the state, predicts a swell in population for the 24-34 age demographic of 9% in the next 5 years, a key factor in the contribution of Vermont’s increased economic growth and productivity moving forward.


We saw and expect continued stability throughout most suburban retail markets, with Burlington’s Central Business District expected to strengthen as we move into 2013. Since 2008, there has been very little new inventory introduced into the Chittenden County market, with only an average of 44,000 SF/year of new construction in the years 2009-2012. Estimates put new development at 161,000 SF (2.3%) for 2013. The historical average over the last 19 years is 107,000 SF, so retail development is showing signs of strength and confidence with consumer spending up. There is currently a 18,600 SF multi-tenant development in Williston currently underway with tenants such as Panera Bread and Verizon, along with a Trader Joe’s store in South Burlington, both representing the larger public projects coming online. Target is also in the permitting process of purchasing a 26-acre parcel in Williston, though this is likely to take some time before anything comes to fruition. The retail market has and looks to continue to gain strength moving forward into 2013 after a slow period beginning 2008 with nominal growth and high vacancy during that time.


Weakness in Class B resulting from an oversupply and shortage of demand is projected to continue into the early parts of 2013. While this results in the weakening rental rates of Class B office space in Chittenden County, Class A will continue the show increasing demand, stable rental rates, and projected increase to inventory over the next 12 months. Vacancy rates at year end hovered around 8.3%, nearly a full point above the historical average. When you look at the two sub-markets however, you see 2012 ending with a 5.5% vacancy in the Class A, with Class B down to 10.8% (form 11.1%) in December. This is projected to hold, potentially increasing slightly, due in large part to an existing oversupply of primarily Class B space in conjunction with a planned new developments, both owner occupied and speculative Class A projects coming online in the next 12 months, representing a projected growth of 2.1% in 2013 is scheduled, almost exactly the historical average over the last 15 years.


Industrial rates are stable with industrial supply categorized as Average and Above Average, with the expectation of improvement in 2013. Chittenden County vacancy rates were at 5.5% as 2012 came to a close, but expect to fall off as some of the large inventory responsible for the inflated vacancy gets absorbed. This market was stunted significantly by the economic downturn of 2008, where we saw negative growth in the industrial sector, whereas 2012 showing the first significant level of industrial development, with almost 400,000 SF of new inventory coming into the market (3.3% growth, highest in 13 years). Green Mountain Coffee Roasters was responsible for much of this growth with their new facility in Essex, and occupation of over 100,000 SF of additional space. Looking into 2013, moderate growth of new development is expected, with 212,000 SF of new inventory coming to the market, although this is a conservative estimate, with the expectation of much more new development to supplement the current low supply and continued increase in demand.

In summation, Vermont’s insular nature continues to allow and promote growth across many, if not all, sub-markets with trends of lower vacancy, higher rental rates, and new development taking us into 2013. Carrying the momentum created by our increase in median income at a time of national economic recovery has contributed to a swell in consumer and investor confidence, strengthening the industrial and retail markets along with formidable Class A office absorption. This combined with an array of planned new developments and increased growth of local economies give Vermont a position of strength heading into the New Year.

*Data provided by Census Bureau and December 2012 Allen & Brooks Report

2012 Vermont Forecast

Tuesday, February 14th, 2012
Written by Ross Montgomery for the January 27,  2012 issue of New England Real Estate Journal

Ross Montgomery

When discussing market trends, forecasts, or just general conditions of the state, you will at some point hear a variation of the following: While Vermont doesn’t see the big booms other more populated (and volatile) markets do, it is also relatively insulated from the deep troughs they are inherently susceptible to. Simply put, while the highs aren’t as high, the lows aren’t as low, and while that is true in many regards, Vermont is not immune to dramatic levels of both, and recent market conditions have reflected just that.

So what have we seen? Like many areas, recent years have brought significant ‘doom and gloom’ forecasts, with developers and investors largely sidelined due to significant market uncertainty at best. With that said, Chittenden County is projecting growth in many markets in 2012. An example of this is an industrial market, one that showed negative growth in 2011 but is projecting 4.3% increase in inventory over the course 2012. Additionally, we are seeing rents stabilize in both the retail and office markets, with Class A office space and retail rates in and around Burlington’s Central Business District stabilizing as vacancy drops. New national retailers and restaurants are again successfully entering the Vermont market, with astounding response from locals known to be conservative in their approach to choosing national chains over local retailers, and hesitant to approve new development without considerable thought and public forum (See: South Burlington Interim Zoning proposal measures). Overall, CAP rates have stabilized; markets are strong in each sector, a once saturated inventory of primarily office space is being absorbed, and as a state, displaying positive trends heading into 2012.

RETAIL: Rents stabilizing with growth just below the historical average, retail is making a comeback. Vacancy was below the 10-year average at the end of 2011, with a similar 5.6% vacancy forecast for 2012. Rates are stable as well, even increasing in certain sectors. Chittenden County suburban markets, which have been slightly weakening, are expected to stabilize as well.

OFFICE: Class A vacancy is way down with rates stabilizing in the Chittenden County market, although Class B vacancy still high (80% of the overall 9.3% vacancy in the Class B market). This trend is reflected in the rental rates, with Class A strengthening, and Class B beginning to stabilize after sustained vacancy drove rates down. Chittenden County is also projected to add nearly 300,000 SF of new office inventory this year, the most since 2008 and the second highest it will have seen since 2000.

INDUSTRIAL: As mentioned, growth indicators are strong in this market in the Chittenden County sector. Overall vacancy at the end of 2011 topped out at just over 8%, a number influenced by a small number of individual properties experiencing turnover that have had a significant impact on the overall figure. This uptick in the industrial market suggests a positive growth projection for 2012, with new inventory set for completion this year at a rate of almost double the historical average of 2.3% annually.

MULTI-FAMILY: This market has predictably seen sustained growth and miniscule vacancy numbers in Chittenden County due in large part to battered (yet comparably strong) housing market, as well as demographic trends such as the large student population. Another important trend we are seeing is an increase in an already high demand from investors in a market low on supply, with many owners holding onto these strong performing assets.

RATES OF RETURN: Industrial, retail, and office are all currently stable, with industrial CAP rates averaging 8.7% and retail and office at 8.2%. Multi-family properties on the other hand averaged 6.7% in 2011 with rates stabilized. This is just above the 2006 low of 6.3% and down from 7.2% in 2007.

(Data provided by December 2011 Allen & Brooks Report.)