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“Investor confidence hits a high note. The economic recovery and greater access to capital are fueling property sales in 2012…”
Read the entire article in National Real Estate Investor
“The cost of housing in Vermont continued to decline in 2011, according to The Vermont Economy Newsletter’s annual housing affordability analysis.”
““The share of median family income needed to finance the payments on a median priced home in Vermont fell to 13.1% in 2011,” said Art Woolf, author of the study. “That means housing is more affordable today than it has been in the 25 years we have been tracking housing affordability. Other evidence suggests that housing has not been this affordable since at least the early 1970s,” he continued.”…
Read the entire article Housing affordability in Vermont at record level in 2011 vtbiz.com, Monday, April 9, 2012.
“The Vermont housing market was the only one in New England to experience a year-over-year decline in both number of transactions, down -2.4 percent, and median price, down -4.3 percent, according to RE/MAX. Vermont’s median home price is $180,900, down from $189,000. This still places Vermont third highest in the region, behind only Massachusetts ($260,000) and Connecticut ($232,500).”… vermontbiz.com, February 15, 2012
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.)
As a result, rental vacancy rates are dropping and rental rates are increasing. Read the entire article in today’s Burlington Free Press.
Looks like multi-family properties are where it’s at if you’re looking for a solid commercial property investment. Check out a few of Redstone’s Multi-Family property listings below:
457 St. Paul Street, Burlington
389 Riverside Avenue, Burlington
86 Pearl Street, Essex Junction
246-250 Main Street, St. Albans
Some good news in terms of the Vermont housing market. “Vermont reverses trend: Home prices down, sales up”, as reported on vermontbiz.com, Monday, July 18, 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.
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
INDUSTRIAL: Growth for industrial space in Chittenden County expanded approximately 1% in 2008 while 2009 projections are similar. At the moment the market is very healthy with an approximate 5% vacancy rate in Chittenden County. We believe the vacancy rate in 2009 will be increasing with the accompaniment of lower lease rates. The 20 year vacancy average is 7.5%. Historically, 5% vacancy rate would stimulate the market to build new product. The recent financial uncertainty in the global markets has affected the local markets negatively, not due to a shortage of capital. Local banks have funds and are willing to loan. Based on these uncertain economic times many business owners are putting expansion plans on hold. The relative high cost of construction has also limited the demand for new buildings in the market. As recent construction volumes decrease, construction prices are coming down as a result of lower labor/profit margins. The cost of raw materials, steel, wood, and concrete has been flat or has increased slightly. With little new inventory being developed, existing renovated space continues to be absorbed. Again, this abortion is expected to slow in 2009. Industrial lease rates are projected to experience downward pressure. 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. Interest rates continue to be historically low and are believed to be trending downward for 2009. Overall, 2008 has experienced record sale prices for small/mid-size industrial properties ranging from $70.00 to $98.00/SF. It seems the top of the market has been reached for this cycle.
OFFICE: The Chittenden County office vacancy rate has surged to over 10% in the last six months. The current vacancy rate is significantly higher than the 14 year average vacancy rate of 6.3%. The suburban “Class A” office market is the weakest and offers the highest vacancy. Technology Park in South Burlington has approximately 130,000 SF of new product. Pizzagalli Properties is finishing a 30,000 SF building off of Hinesburg Road in South Burlington. The repositioning of The Champlain Mill in Winooski to office space is offering 120,000 SF of new space to the marketplace. There is downward pressures on lease rates for this type of space. The strongest office sector continues to be “Class A” space in downtown Burlington with a vacancy rate of 3%. 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.
New “Class A” suburban office space is currently being offered at $13.00 to $17.00/SF NNN ($5.00 to $8.50 SF). The suburban “Class B” office space is being offered at rents ranging from $7.00 to $13.00/SF NNN ($2.50 to $4.00/SF).
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.