Multifamily housing and office properties performed well in 2019, as the economy continued to grow and employment increased across the Granite State.  

But the commercial real estate market had an unlikely hero, an old friend who many had written off decades ago as a sector almost not worth following anymore: industrial properties.  

And looking ahead, most industry observers see roughly the same thing unfolding in 2020, with industrial properties once again leading the CRE pack. 

“As long as employment and the stock market remain strong, I don’t see things slowing down [in 2020],” said Chris Norwood, president of NAI Norwood Group, referring to the CRE market in general. “There’s some talk out there of a recession, but, right now, I’m not seeing any sign of it.” 

“We see long-term, steady growth for 2020,” agreed Paul Falvey, CEO of Bank of New Hampshire, which last year saw a 10 percent increase in its commercial loan activity, much of it tied to commercial real estate transactions. 

Industrial 

As if to make an emphatic, end-of-the-year point, the industrial sector finished 2019 with the announcement that Brady Sullivan Properties had sold a four-building industrial portfolio for $58.5 million, or $2.5 million above the asking price, after a brief bidding war for the facilities in Manchester, Hudson and Nashua. 

“We had interest from all over the country,” said Tom Farrelly, an executive director at Cushman & Wakefield, which represented Brady Sullivan in the sale of its nearly 600,000-square-foot industrial portfolio to Boston’s Albany Road Real Estate. 

But the Brady Sullivan-Albany transaction wasn’t the only big industrial property deal in 2019. The 366,000-square-foot 30 Jack’s Road in Manchester sold for a hefty $40 million in 2019, according to a Colliers International report, while the 337,000-square-foot 10-12 Celina Ave. property in Nashua sold for an impressive $25 million, among others. 

So, what’s driving the trend? First and foremost, the so-called “Amazon effect,” with online e-retailers demanding ever more warehouse space for distribution and logistics purposes.  

But light manufacturers – with their increasing use of computer-assisted equipment and even robotics – are also seeing a small comeback, and they’re looking for space wherever they can find it. Then, there are the mixed-use developers buying up old mills and other long-vacant industrial properties for a combination of office, residential and retail uses, industry-watchers say 

The net result: Industrial property vacancy rates are now running at 5 to 6 percent, out of 60 million square feet of space tracked by CBRE, said Roger Dieker, a vice president at the firm. 

Multifamily Housing 

Another 2019 mile marker was the $33 million sale of Manchester’s Residences at Riverside by SMC Management Corp. to Forest Properties, with CBRE representing both the seller and procuring the buyer.  

Meanwhile, 875 Elm St. – the old Citizens Bank building in the city’s downtown that was converted to multifamily housing – early in 2019 sold for a whopping $39 million. 

The strong demand for housing and relative low supply of recently built or converted high-quality housing helped drive these and other multifamily sales in the past year.  

“It’s one of the hottest investment products out there,” said Bob Rohrer, head of Colliers International’s New Hampshire offices. 

Others are encouraged by the expected massive influx of new housing at the mixed-use Tuscan Village in Salem and Woodmont Commons in Londonderry development projects – perhaps nearly 2,000 new units when the two ambitious projects are built out over coming years. 

But commercial real estate industry leaders stress the high cost of new construction and opposition to new housing in communities afraid of an influx of new students into their school districts will continue to challenge the multifamily market.  

Offices 

The good news for office properties, at least in Southern New Hampshire, is that the overall vacancy rate is now at about 8 percent, down from 18 percent at the start of the decade, according to a third quarter report by Colliers International and other industry sources. 

And older class B office space is doing particularly well, with the year-over-year occupancy rate increasing by 4.2 percent. In both subsectors, the growth has been driven by strength in the tech, health care and finance fields. 

“It’s been slowly coming back,” CBRE’s Dieker said of the office sector in general. “You have people saying, ‘I don’t have room to hire more people.’” 

That’s one of the reasons why many observers believe that 100,000 square feet of office space that Oracle plans to put on the market early next year in Manchester should be snapped up relatively fast, especially since it’s in the city’s popular Millyard district. 

Still, some say they’re a little surprised that office rents haven’t risen much, to about $18 per square foot for class B space and $22 per square foot for class A space. Those prices, while an improvement over past years, are just not high enough to justify widespread new office construction, observers say. 

Retail 

Bob Sheehan, a vice president at Keypoint Partners, said the same “Amazon effect” helping industrial real estate is creating massive upheaval and uncertainty for the retail property sector. 

Still, Sheehan said, the vacancy rate in southern New Hampshire’s nearly 30 million square feet of retail space stands at about 9.7 percent, a relatively low number considering the carnage within the industry and new space being built in places like Tuscan Village and Woodmont Commons. 

“This might be remembered as the ‘Year of the Mixed-Use Experiment,’” said Cushman & Wakefield’s Farrelly. 

Meanwhile, retail property owners are getting better at quickly filling up vacant spaces with non-traditional tenants, such as fitness clubs, medical clinics, restaurants and entertainment venues.  

Farrelly said the “half-empty” Apple Tree Mall in Londonderry was sold to developer George Vernet in 2018 who, after making improvements to the 195,000-square-foot facility, “quickly turned it around” with new leases, Farrelly said. 

Looking ahead to 2020 for all the CRE sectors – industrial, multifamily, office and retail – Colliers’ Rohrer said he sees the overall momentum of 2019 spilling over into the new year. 

“I really see a strong market,” he said. “We all wish we had more inventory to work with, of course. But it’s been a strong market and I think it will remain strong.”