New Hampshire’s industrial real estate sector is experiencing a mild case of the speculative-building blues.

For years, industrial buildings – which include warehouses, manufacturing facilities and various flex spaces – were the darling of the commercial real estate sector due to high demand from e-retailers and companies “reshoring” some light-manufacturing operations.

But the once red-hot industrial sector started to cool off a year or so ago, when large e-retailers like Amazon began to pull back on their demand for warehouse/distribution center space across New Hampshire and the rest of New England.

That softening within industrial real estate continued through the first quarter of 2025, according to new report from Colliers International.

In the first quarter, the vacancy rate for all industrial space in New Hampshire increased to 5.2 percent, up 0.9 percent compared to the same period a year ago.

Meanwhile, the statewide average asking rent price declined over the past year, with direct rates falling 8.3 percent and sublease rates decreasing 5 percent, according to Colliers.

But Colliers said those overall rate declines were largely caused by a 10.4 percent plunge in warehouse prices.

Spec Projects Delivered Vacant

One of the main culprits for rising warehouse vacancy rates and corresponding declining rent prices: over-building.

“New Hampshire’s industrial market continues to feel the effects of speculative projects delivered vacant during the first half of 2024,” the Colliers report stated. “While some of that space has been absorbed, the balance has contributed to the rise in vacancy over the past year.”

Not surprisingly, speculative construction noticeably declined in the first quarter, though the amount of inventory continued to creep up in Q1.

“While several projects are fully approved, many developers are holding off until an anchor tenant/user is secured, typically for at least half of the space,” according to the report. “As a result, most of the projects breaking ground now are tied to owner-user expansions or (specific) build-to-suit facilities.”

“The red-hot industrial market ended a while back, but overall activity remains strong,” said Bob Rohrer, managing director of Colliers New Hampshire. He stressed that the demand for smaller warehouse spaces remains solid.

The demand for flex- and light-industrial space also remains strong, particularly for spaces ranging from 10,000 to 30,000 square feet. Defense and medical-device companies are among those looking for flex- and light-industrial spaces in the state, Rohrer said.

Aron Brown, an associate broker at NAI Norwood Group, said there a combination of “good and bad” news within the industrial sector overall.

There may be a glut of large warehouse space, he noted, but there’s actually a shortage of multi-tenant flex- and light-industrial space.

“There’s strong demand, but there’s just not much inventory around,” he said.

When a flex/light-industrial space does come on the market for sale or lease, it’s snapped up fast, said Brown, noting he recently helped sell such a building for $4.5 million in the Manchester area.

“People are grabbing what comes on the market real quick,” he said.

Tripped Up By Tariffs

Unlike warehouses, there’s actually a need to construction more flex/light industrial space in New Hampshire, said Brown. But current construction costs and lease prices simply don’t pencil out.

He noted lease prices for flex/light-industrial space can range from $9.50 to $12 per square foot, depending on the quality of a building.

Yet the cost of construction for all types of industrial properties is running at about $200 per square foot and up – meaning owners would have to lease new facilities for $14 to $17 per square foot to recoup their investments.

“How can an owner make a profit on those numbers?” Brown asked.

And prices for construction materials, ranging from lumber to steel, are being pushed ever higher due to tariff-related uncertainties, he said.

Bill Norton, president of Norton Asset Management, agreed that flex/light-industrial spaces are generally doing better than some warehouse/distribution centers in New Hampshire.

As for flex/light-industrial space, many companies have lately been shifting some of their overseas operations back to the United States – a trend that has accelerated since supply-chain troubles surfaced during the Covid-19 pandemic.

That has resulted in higher demand for such spaces, Norton said.

As for warehouses, he said demand for smaller warehouse/distribution centers of 20,000 square feet or less remains strong. “That market is pretty steady,” he said.

But demand for larger warehouses/distribution centers is a different story. “It’s been overbuilt,” he said.

Norton said he knows of a new 100,000 square-foot warehouse in Nashua that’s been aggressively advertising its available space – and not getting much of a response.

Some Deals Still Going

Despite market challenges facing the warehouse/distribution subsector, a number of major warehouse deals nevertheless took place in the first quarter of 2025, according to the Colliers report.

They included:

• GXO Logistics’ expansion into 116,343 square feet of warehouse space at 333 Harvey Road in Manchester. “Already a tenant in the building, GXO – formerly XPO Logistics – expanded into part of the former True Value distribution space,” Colliers reported.
• Index Packaging expanded operations by leasing 65,577 square feet of warehouse space at 59 Daniel Webster Highway in Merrimack, “bringing the building back to full occupancy,” Colliers reported.
• Easygo Warehouse Services, a logistics and supply chain solutions provider, expanded by subleasing 63,797 square feet at 1 Bon Terrain Drive in Amherst. Easygo has been expanding fast in recent years, Colliers noted in its Q1 report.

As for the rest of 2025, industry experts say they don’t anticipate major changes.

“There will still be various inventory problems,” NAI Norwood’s Brown said. “But the market will remain competitive.”