SHENANDOAH VALLEY INDUSTRIAL MARKET Third Quarter 2017

Transcription

1 RESEARCH & FORECAST REPORT SHENANDOAH VALLEY INDUSTRIAL Third Quarter 2017 Amazon and P&G set to Occupy Large Blocks as Construction Remains Strong Market Indicators 2018 (Projected) The summer months of 2017 ushered in a brief lull in leasing activity along the Mid-Atlantic of Interstate 81 as massive construction projects for Procter & Gamble and Amazon continue to make headway in Berkeley County, WV and Frederick County, VA, respectively. In anticipation for the holiday rush, Hillwood has already delivered portions of Amazon s new 1 million square foot e-commerce distribution center in Clear Book, VA with the remainder of the facility set to deliver before the year s end. Procter & Gamble continues work on Phase I of their massive new manufacturing campus in Martinsburg, WV which should see 1.2 million square feet deliver this winter. In Winchester, Equus broke ground on Phase III of their Stonewall Industrial Project which will see a new 287,000 square foot speculative distribution warehouse facility deliver this upcoming Spring of This comes as Equus closes on a 19-acre site on the southern end of Frederick County that will see another 250,000 square foot speculative warehouse project break ground in March or April of The Stonewall project combined with Amazon s new distribution center brings the amount of under-construction warehouse product in Frederick County, VA to over 1.3 million square feet. This number will again increase once work begins on the FBI s new 256,000 square foot Central Records Complex off Route 50 on the east side of Winchester. The northernmost portion of the Mid-Atlantic region around Hagerstown, MD is still struggling to compete with West Virginia and Virginia to the south as two corporate tenants pull out of the area. This quarter Kelloggs vacated 215,000 square feet at Newgate Blvd in Hagerstown, a full three years ahead of their lease expiration, increasing the vacancy rate for Washington County, MD from 5.8% to 7%. Volvo is also expected to vacate some 150,000 square feet at Shawlee Drive in Hagerstown before the year is out. Still, what warehouse product remains available is for the most part institutional-grade facilities controlled by reputable developers and private equity firms. To the south in Botetourt County near Daleville, work continues on a 250,000-square-foot build-to-suit automotive parts manufacturing facility for Eldor Corporation that should deliver in early 2018 and bring over 600 manufacturing jobs to the Roanoke Valley. In summary, construction remains robust along much of the corridor on both build-to-suit and speculative warehouse projects with leasing remaining relatively quiet as we head into the last few months of the year. Depite this, the year-to-date net absorption is above 2016 levels, rents are increasing, and vacancy, especially for Class A product, is stable in the single digits. Summary Statistics Industrial Market Industrial Total Warehouse Flex Vacancy Rate 6.5% 6.5% 6.5% Change From (basis points) Absorption (Square Feet) New Construction (Square Feet) Under Construction (Million Square Feet) Asking Rents Per Square Foot Per Year NET RENTAL ,126-23,307 58, Direct Asking Rates $4.08 $3.95 $5.76 Change From -$0.03 -$0.07 $0.32 Net Absorption (Thousands SF)

2 Demand Demand for industrial space in the Shenandoah Valley market remained flat, growing 35,126 square feet during the third quarter of This brought the year-to-date net absorption total up to 1.26 million square feet. This marks the fifth straight quarter of overall positive net demand. Warehouse product saw a drop in demand, falling 23,307 square feet while flex saw a 58,433 square foot increase in demand during the quarter. Under Construction (Millions SF) Supply During the third quarter, no buildings delivered. One building broke ground during the quarter, Stonewall Industrial Park in the Frederick, VA submarket. This building will be 287,000 square feet when completed. There were five buildings were under construction totaling 2.75 million square feet of space. The largest building under construction, 5293 Tabler Station Road, a 1.07 million square-foot build-to-suit for Procter & Gamble in Berkeley County, is expected to deliver at the end of Amazon s 1 million square foot distribution facility is under construction in the Frederick County submarket, which is anticipated to be ready for the holiday season in the winter. 500 International Parkway, a 250,000 square-foot build-to-suit is underway in the Botetourt submarket with an expected to delivery at the end of A 100,000 square-foot building was also under construction in the Warren submarket. Deliveries Vacancy The market s overall vacancy increased slightly, rising from 6.4 to 6.5 percent. Vacancy rates remained fairly flat in the warehouse sector rising from 6.4 to 6.5 percent. The flex sector decreased from 7.9 to 6.5 percent during the quarter. Vacancy Rate (%) 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% Rental Rates Overall rent expectations in the Shenandoah Valley market have decreased slightly during the quarter, falling $.03 to end the quarter at $4.08 per square foot. This compares to a year ago when the rental rate stood at $3.90 per square foot. Rental rates for warehouse product fell $.07 cents to end the quarter at $3.95 per square foot. Even though a drop was witnessed, this rate is among the highest the market has seen. Rental rates for Flex product increased during the quarter, rising from $5.44 to $5.76 per square foot Direct Asking Rental Rate ($/SF) $4.25 $4.00 $3.75 (Thousands SF) $3.50

3 Shenandoah Valley Warehouse Product INVENTORY NEW SUPPLY Washington/Hagerstown 17,000, , , % $4.35 Maryland Total 17,000, , , % $4.35 Berkeley 9,222, ,074,273 42,000-16, % $4.47 Jefferson 1,666, , % $3.37 West Virginia Total 10,889, ,074,273 42,000-6, % $4.11 Augusta 4,598, ,335-32, % $4.31 Botetourt 2,896, , ,000-18, % $2.00 Buena Vista 738, , % $2.89 Frederick 9,748, ,400 1,325,000 16, , % $4.31 Harrisonburg 1,602, , % $4.60 Page 338, ,200 66, % $4.38 Roanoke 5,213, , % $4.13 Roanoke City 11,954, ,765 10, % $2.77 Rockbridge 1,816, , % $3.67 Rockingham 3,566, ,000 67, % $4.23 Salem 4,888, , % $2.81 Shenandoah 2,232, % $3.78 Staunton 1,500, ,075 97, % n/a Warren 3,517, , % n/a Waynesboro 1,609, , % $4.24 Winchester 2,348, ,000-73, % $4.73 Virginia Total 58,571, ,400 1,675, , , % $3.75 SHENANDOAH VALLEY TOTAL 86,461, ,400 2,749,273-23,307 1,093, % $3.95

4 Shenandoah Valley Flex Product INVENTORY NEW SUPPLY Washington/Hagerstown 1,040, ,000 1, % $5.09 Maryland Total 1,040, ,000 1, % $5.09 Berkeley 118, ,100 63, % n/a Jefferson 72, % n/a West Virginia Total 190, ,100 63, % n/a Augusta n/a n/a Botetourt 33, % n/a Buena Vista n/a n/a Frederick 1,067, ,667-29, % $6.57 Harrisonburg 64, % n/a Page 150, , % $3.75 Roanoke 146, % n/a Roanoke City 232, , % $5.00 Rockbridge n/a n/a Rockingham 90, % n/a Salem 391, , % $7.62 Shenandoah n/a n/a Staunton n/a n/a Warren n/a n/a Waynesboro n/a n/a Winchester 705, % n/a Virginia Total 2,882, , , % $6.45 SHENANDOAH VALLEY TOTAL 4,113, , , % $5.76

5 Shenandoah Valley Industrial Market INVENTORY NEW SUPPLY Washington/Hagerstown 18,041, , , % $4.46 Maryland Total 18,041, , , % $4.46 Berkeley 9,340, ,074, ,100 47, % $4.47 Jefferson 1,739, , % $3.37 West Virginia Total 11,079, ,074, ,100 57, % $4.11 Augusta 4,598, ,335-32, % $4.31 Botetourt 2,930, , ,000-18, % $2.00 Buena Vista 738, , % $2.89 Frederick 10,816, ,400 1,325,000 9, , % $4.91 Harrisonburg 1,667, , % $4.60 Page 488, , , % $3.92 Roanoke 5,359, , % $4.13 Roanoke City 12,186, ,765 27, % $2.81 Rockbridge 1,816, , % $3.67 Rockingham 3,656, ,000 67, % $4.23 Salem 5,280, , % $4.82 Shenandoah 2,232, % $3.78 Staunton 1,500, ,075 97, % n/a Warren 3,517, , % n/a Waynesboro 1,609, , % $4.24 Winchester 3,053, ,000-73, % $4.73 Virginia Total 61,453, ,400 1,675, , , % $3.92 SHENANDOAH VALLEY TOTAL 90,575, ,400 2,749,273 35,126 1,264, % $4.08 FOR MORE INFORMATION John Lesinski Senior Vice President john.lesinski@colliers.com Ben Luke Assistant Vice President ben.luke@colliers.com Robert Hartley Director of Marketing robert.hartley@colliers.com Miles Rodnan Research Analyst miles.rodnan@colliers.com Copyright 2017 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. Colliers International 7900 Tysons One Place McLean, VA colliers.com/washingtondc 5 North American Research & Forecast Report Office Market Outlook Colliers International