Fall 2010 Market Insights: Office
Friday, September 10th, 2010The 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.