George Paskalis As we approach the"/>

Low supply and stable demand are the trend

Freshman Julie

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George Paskalis

As we approach the last quarter of 2022, the Rhode Island industrial market continues to remain strong with activity on both the rental and sales side. On the sell side, there has been more activity from investors/developers than owners/users. The Rhode Island market continues to show historically low vacancy rates in the 1-2% range for “modern” industrial buildings, which has resulted in fewer empty buildings available to owners/users. On the other hand, there are many fully leased industrial buildings, and for owners looking to sell, there are still a large number of investors looking to buy.

Inflation and rising interest rates are driving changes in the Rhode Island industrial market, forcing some potential buyers to rent rather than buy, reducing buyer purchasing power and forcing investors to reevaluate their subscription.

Demand for industrial space continues to come from the logistics, medical supply, public storage and direct-to-consumer sectors, as well as persistent supply chain challenges. The demand for industrial space is also increasing from manufacturers, contractors and engineering firms in the energy and environmental sectors (ie wind, water, etc.).

Recent sales transactions include a fully leased 51,120 s/f flex building at 1275 Park East Dr. in Woonsocket that was sold to an out-of-state investor for $6.3 million, an empty industrial property of 114,036 s/f at 180 Mill St. in Cranston which sold $775,000 to a Florida group which will rehabilitate the building to use part of it for its headquarters and rent out the rest. Fully leased 28,714 sq. ft. industrial building at 1 Angell Rd. in Cumberland sold to out-of-state investor for $2.38 million, 10,310 s/f industrial building at 141 Carolina Ave. in Providence sold for $625,000 to a company that will use it to store inventory for its online business, a 96,323 s/f industrial building and 116 acres of industrial and residential land in Coventry are under contract, and a facility 32,000 square foot LEED-certified industrial building at 81 Ocean State Dr. in Quonset is also under contract. Additionally, two parcels over 30 acres along Wampanoag Trail and Pawtucket Ave. in East Providence are under contract.

On the leasing side, 9,200 square feet of industrial space at 2 Carol Dr. in Lincoln has been leased to a general contractor and custom millwork company, 8,500 square feet of industrial space at 305 Lincoln Ave. in Warwick were leased in July 2022 to a company that services wind turbines, 6,100 square feet of industrial space at 25 Thurber Blvd. in Smithfield was leased to a beer distributor in August 2022, 4,895 square feet of flex/industrial space at 1 Wholesale Way in Cranston was leased to a cabinetmaker in August 2022 and 18,000 square feet of space of storage at 80 Vineyard St. in Pawtucket was leased to a tenant on credit in October 2022.

There are still a historically high number of speculative warehouse development and/or custom build projects proposed and/or underway statewide in Smithfield, Pawtucket, Warwick and Cranston, ranging in size from 165,000s /f to a million s/F. It is not yet clear if these spaces will be leased in larger sections (100,000 s/f) or if landlords will have to start considering dividing them into smaller spaces of 20,000 to 30,000 s/f.

Rental rates and sale prices remain the same as at the beginning of the year. Rental rates are between $5 and $6.00 per s/f, NNN for bulk storage space, between $6.50 and $7.50 per s/f for industrial use general, and about $10 per s/f for flexible spaces. Selling prices for 20,000 s/f to 50,000 s/f remained as high as $75 to $85 per s/f.

The “Rhode Island Ready” program, which was announced in January of this year and aims to create an inventory of pre-approved properties ready for industrial development throughout the state, recently approved six new sites for listing, bringing the total number to 11. Eligible sites must be zoned for industrial or offshore wind support uses. Sites must allow for an upgrade or improvement of infrastructure in support of an industrial use, allow an existing industrial use or facility to expand significantly, or be 10 acres in size or be able to support a building of approximately 100,000 square feet and be located within one mile of a designated national highway. The 11 listed sites include 649 Waterfront Dr., East Providence; 275 Ferris Avenue, East Providence; 20 Goddard Road, Cranston; 9 Dexter Road, East Providence; 195 Francis Ave, Cranston; 1347 Roger Williams Way, North Kingstown; 1 Moshassuck Street, Pawtucket; 1307 Hartford Avenue in Johnston; 0 Comstock Pkwy. in Cranston; 40 Keyes Way in West Warwick; and 550 Romano Vineyard Way at Quonset Business Park in North Kingstown.

Speculative warehouse development and bespoke construction projects, coupled with the RI Ready program creating additional ready-to-use industrial development sites, are expected to eventually generate more supply in the RI industrial market. However, in the short term and for the foreseeable future, historically low supply and stable demand will continue to be the trend.

Julie Freshman is Vice President and George Paskalis, SIOR, is Executive Vice President of MG Commercial Real Estate, Providence, RI

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