New Hampshire’s industrial real estate market is going through what some are calling a “healthy correction” amid falling demand and speculative construction grinding to a virtual halt.

Real estate experts say that the overall long-term fundamentals of the industrial market remain relatively strong in New Hampshire – with historically low vacancy rates and high rental prices still prevailing.

But demand for industrial properties – which includes mostly logistics/warehouses and light manufacturing facilities – has noticeably softened over the past year, particularly for larger storage spaces usually sought by giant retailers.

In all, the statewide industrial market saw a negative net absorption of 322,000 square feet of space last quarter, according to research by commercial brokerage Colliers International.

Combined with the construction of millions of square feet of new warehouse space over the past five years, the net result has been a slight increase in the overall statewide industrial vacancy rate to 5.8 percent in the third quarter, up from 5.6 percent in third quarter of 2024, according to Colliers.

Meanwhile, asking rents have fallen by 4 percent to 6 percent to $11.30 per square foot, over the same time period.

And all of that – along with higher interest rates and skyrocketing building costs — has helped bring speculative construction of new logistics/warehouse space to a virtual halt in recent months.

“It’s all about supply and demand – and it’s all about costs,” said Robert Rohrer, managing director and principal at Colliers International in New Hampshire. “It’s hard to make the numbers work for new construction.”

Little Spec Space Under Construction

Indeed, today there’s only 2 million square feet of new warehouse space under construction in New Hampshire – and 1.5 million square feet of that is the now stalled Target distribution-center project in Hudson, said Kristie Russell, research director at Colliers.

There’s some private talk of possible new speculative projects in New Hampshire. But right now it’s only that: talk, said Russell.

In the Seacoast area, speculative construction has definitely come to a virtual halt after years of aggressive new building, said Kent White, a partner and principal at the Boulos Company.

“No developer is going to build speculative any time soon, at least not in the Seacoast area,” said White, who covers the southeastern area of New Hampshire.

The Portsmouth and Manchester industrial markets – where vacancy rates have risen slightly over the past year, to 3.3. percent and 4.6 percent, respectively – look relatively solid compared to the Nashua market, where the vacancy rate is 8.1 percent, up from 7 percent a year ago, according to Colliers data.

In recent years, Nashua, located just across the border from Massachusetts, has seen a tremendous amount of new construction – and now some warehouse facilities are sitting empty, or partially empty, as a result of overbuilding and falling demand, officials say.

Vacancy Expected to Tighten

Yet despite the market challenges facing the state’s industrial market, many say they’re not overly concerned about current trends.

Colliers, in its third-quarter report, suggested current trends may not be all that bad.

“As existing space is [eventually] absorbed, and minimal new supply comes online, vacancy rates are likely to tighten,” the Colliers report said. “The recent rate decline appears to be a healthy correction rather than a sign of weakness, as pricing normalizes after pandemic-era spikes in construction costs and demand. For both investors and tenants, this stabilization period offers improved negotiating conditions before fundamentals strengthen again.”

Some are taking advantage of current leasing and sales opportunities.

Boulos’s White noted the recent $24.5 million sale of new warehouse space at 100 New Hampshire Ave., within the Pease International Tradeport.

Originally co-developed by the Kane Company and Tidemark as a build-to-suit project, the 102,000-square-foot Pease facility was completed earlier the year and ultimately leased out to HCA Health Care and Georgia Pacific, after an earlier tenant backed out of the deal, White noted.

Meanwhile, Colliers reported on positive industrial lease activity in other parts of the state, including a recent 150,000-square-foot deal with Sullivan Tire Company in Merrimack and a 48,690-square-foot renewal deal with Omni Component in Hudson.

Smaller Tenants, Buyers Still Active

In general, smaller tenants remain more active in the leasing market, completing “roughly four times the number of transactions compared to medium and large tenant occupancies in the last year,” according to Colliers.

Recent sales activity includes the $46 million purchase by Celsius Londonderry Prop LLC of a 108,000-square-foot facility in Londonderry and the $10 million purchase by V12 46RR LLC of a 83,420 property in Hudson, according to data.

There’s recently been other good news on the industrial front, specifically within the manufacturing subsector, with SynQor of Boxborough, Mass. announcing that it plans to move hundreds of employees to a new facility in Salem.

Earlier this year, Gregstrom Corporation, a plastic manufacturer, announced that it was moving its operations and headquarters from Woburn, Mass. to Bedford, citing the availability of suitable industrial space, lower taxes, and a business-friendly state as reasons for the move.

Boulos’s White said the post-COVID industrial-space boom is definitely over in New Hampshire – but there are still positive signs out there.

“We’ve certainly seen a slowdown over the past year,” White said.

“There has not been a lot of demand for most of this year. But vacancy rates have remained relatively low by historic standards. And there’s still leasing and investor activity. For tenants and buyers, it’s healthy to have some vacancies around.”