
Retail and multifamily are likely to be the strongest performers in 2025, experts say, with industrial assets seeing challenges and office continuing to see weakness. iStock illustration
New Hampshire commercial real estate brokers expect modest improvements in the office, industrial, retail and multifamily subsectors in 2025 – but not much more.
The somewhat positive outlook for the coming year is tied to anticipated additional interest rate cuts by the Federal Reserve and a state economy that’s already produced a super-low jobless rate of only 2.8 percent remaining strong throughout 2025.
But it seems each CRE subsector has hit its own internal roadblocks that likely will prevent truly exceptional performances in the coming year, industry officials agree.
“I do see isolated [areas] of improvement, but otherwise generally see more of the same,” said Thomas Farrelly, executive managing director of commercial brokerage Cushman & Wakefield’s New Hampshire office.
Farrelly was referring to the state’s office market, but his observation generally reflects the views of other brokers towards the entire CRE market in New Hampshire: improvements here and there, status-quo elsewhere.
Following is a look at the major CRE submarkets in the Granite State and how they might fare in the coming year.
Offices Still a Weak Spot
Of the four CRE subsectors, office buildings are in the roughest shape, both locally and across the U.S.
The remote-work trend that started during the pandemic has eaten deeply into demand for office space – and few think the trend will radically change in coming months and years.
Sure, some companies have recently issued back-to-office orders. But many of them have implemented “hybrid” work schedules that call for employees to be in offices only two or three days per week – and letting employees work remotely other days of the week.
“You’re going to see more people back to work,” said Farrelly. “But I see continued softness in office demand.”
As of the end of the third quarter, New Hampshire’s office vacancy rate stood at 14.4 percent, up 3.4 percent year-over-year, according to Colliers International data.
Much of the third-quarter vacancy rate is tied to major tenants abandoning spaces across the state, such as Liberty Mutual moving out of its giant office campus in Dover or Southern New Hampshire University adding sublease space to the market, according to Colliers.
Christian Stallkamp, a partner and senior broker at Boulos Company, agreed that employers are calling back workers to the office.
“We’re starting to see more cars in parking lots – which is good,” said Stallkamp, who covers the Seacoast region.
But that doesn’t mean the office market in Portsmouth, where the vacancy rate was 18.1 percent as of Sept. 30, is back to its pre-COVID levels.
Stallkamp said a “bifurcated” office market has emerged between small office buildings and large office buildings – with the former seeing more activity than the latter.
A positive sign in the office market: The vacancy rate in Manchester, by far the state’s largest office submarket, stood at only 8.5 percent as of the third quarter.
Some of Manchester’s comparatively low vacancy rate is attributable to recent conversions of office buildings to residential complexes, brokers note. But Manchester’s economy remains strong and vibrant, they note.
Another statewide plus for offices: Asking prices were up by 4.5 percent year-over-year in the third quarter, rising to $21.78, according to Colliers.
Industrial’s Star Loses Some Shine
The industrial subsector has been the star of commercial real estate for a number of years now, due to huge e-retailer demand for warehouse and distributions spaces. A small comeback in manufacturing has also boosted demand for industrial space in New Hampshire.
But the industrial market noticeably slowed in 2024, with the vacancy rate rising by 2.5 percentage points to 5.6 percent in the third quarter, according to Colliers.
Meanwhile, industrial leases fell by 1.3 percent year-over-year to $11.89 per square foot in the third quarter, according to Colliers.
One of the main reasons for the slowdown: Large e-commerce tenants, such as Amazon, have apparently found all the space they need and aren’t actively looking anymore, at least for now.
But there’s still intense competition for smaller amounts of industrial space across the state.
Meanwhile, many major and medium-sized tenants are on the hunt to buy industrial space in New Hampshire, preferring ownership over leasing, industrial officials say.
Bob Rohrer, managing director at Colliers-New Hampshire, said the industrial subsector has overall seen a “leveling off from the torrid pace’ of recent years.
Yet the industrial subsector remains strong – and should remain so in 2025.
“I think New Hampshire’s industrial [submarket] is in a good place,” Rohrer said.
Retail’s Back – But Not Every Asset
A relatively surprising CRE development in 2025: the comeback of retail.
Not all retail has made a comeback. Many large shopping malls, which have been hammered by e-commerce competition over the years, continue to struggle and adapt.
Some mall owners are even signing up casino tenants to fill large spaces vacated by previous big-box tenants, such as Sears, Toys R Us and Bed Bath and Beyond, as The Registry Review reported in October.
But smaller retail spaces are in demand again in some parts of the state, said Bill Norton of Norton Asset Management.
Some of that demand is attributable to independent and boutique-shop owners rebounding from the bleak days of the pandemic, when many customers hunkered down in their homes and relied more on e-retailers for their shopping needs.
Yet some of the renewed demand for smaller spaces is also coming from larger downsizing firms, such as CVS, said Norton.
“There is now a counter-cycle of smaller [retailers] needing space,” Norton said. “There’s a churn in retail. There’s still a re-mix going on.”
In a recent report, Colliers noted that retail seems to be recovering in general in New Hampshire and the U.S.
Across southern New Hampshire, the retail market has remained stable, with vacancy rates shifting by only 0.1 percent, Colliers reported. In Portsmouth, the retail vacancy rate stood at only 2.1 percent.
“This stability is partly due to limited new deliveries, with only 3,800 square feet of new retail space added, helping to maintain flat vacancy rates despite negative net absorption over the past 12 months,” Colliers reported.
And, with only 300,000 square feet of new space planned for the near future, vacancy rates are expected to stay low as developers wait for tenants to sign on for spaces before shovels start to dig.
Multifamily Is for Optimists
Despite high construction costs and sometimes intense local opposition to any type of new housing in New Hampshire, commercial real estate officials are still bullish on multifamily housing in the long-term.
The simple reason: the giant imbalance between high demand and low supply within the housing market, which combined are driving up rents and homes prices and making the sector attractive to investors.
Late-year bank data from 2024 indicated that the multifamily lending market improved through the first nine months of the current year in New Hampshire, with multifamily purchase lending jumping by 18.4 percent to nearly $90 million compared to the same period in 2023, according to figures compiled by The Warren Group, the real estate analytics firm and publisher of The Registry Review and Boston’s Banker & Tradesman.
In the short-term, there are concerns about how much more interest rates will come down in 2025 and whether the 10-year Treasury bond yield, considered a benchmark for the direction of mortgage rates and other loan products, will come down enough to attract increased multifamily investments.
Nonetheless, most industry observers agree the longer-term economic fundamentals are all there for maintaining a strong multifamily subsector in New Hampshire.
Meanwhile, New Hampshire Republicans, fresh off of major party gains in the November elections, are guardedly optimistic they can deliver on their campaign promises to pass new laws designed to boost badly needed housing construction across the state, as The Registry Review reported late last year.
Governor-elect Kelly Ayotte, a Republican, has also vowed to back efforts to make it easier to build new housing in New Hampshire. That’s good news for multifamily developers.