2018 Commences With Strong Growth & Expansion
The start of the new year in the Shenandoah Valley saw a healthy mix of activity ranging from steady construction progress on large projects to tenants signing significant renewals as well as moving into new space. The talk of the town along the I-81 corridor once again surrounded Procter & Gamble’s delivery and move into the first 1 million square feet of their massive 400-acre campus in Martinsburg, WV. Construction is already underway on the next million square feet, all of which is pre-committed to either P&G or support services such as Logoplaste and Technomark which both provide bottling services to the mega-manufacturer. Despite having the capability to expand further on site, Procter & Gamble has also preleased 182,000 square feet of the 356,000 square foot project currently being developed by Equus Capital Partners in Martinsburg and breaking ground this April.
Also in Martinsburg, Shockey Companies was able to renew both Hollingsworth Logistics in 314,000 sf as well as Quadgraphics in roughly 515,000 square feet in their Shockey Commerce Center at 891 Auto Parts Place. Next door at 621 Mid-Atlantic Drive, Bowman Devevlopment was able to secure a 191,000 square foot tenant to backfill the space vacated by Dex Media in 2017.
Elsewhere in the corridor several larger construction projects began to take shape. In Winchester’s Stonewall Industrial Park, Equus Capital Partners is nearing the final stages of their 287,000 square foot project off Tyson Drive, all of which has been preleased by Rubbermaid. Further north in Hagerstown, Bowman Development is in the early stages of a 430,000-square-foot expansion to their existing 360,000-square-foot building at 11710 Hopewell Road which should be completed by the fourth quarter of this year. In Botetourt County at the southern end of the Valley, work continues on a 250,000 sf build-to-suit in the Greenfield Business Park for Italian auto manufacturer Eldor Corporation which should see operations start this spring.
DemandDemand for industrial space in the Shenandoah Valley market remained strong with 1,194,994 square feet absorbed during the first quarter of 2018. This was lead by Procter & Gamble’s delivery and move in of over a million square feet in the Berkeley, West Virginia submarket. This compares to the fourth quarter of last year when 1,141,335 square feet was absorbed. Warehouse product saw the bulk of demand, increasing 1,196,955 square feet for the quarter, while demand for flex fell 1,961 square feet over the same time period.
SupplyThere were five buildings were under construction at the end of the quarter, totaling 2.36 million square feet of space. During the first quarter, Procter and Gamble delivered 1.07 million square feet. This building is fully occupied. The next phase for over a million square feet is currently being constructed and is supposed to deliver this Spring. That project has the opportunity to build over 5 million square feet. The FBI’s 256,000 square foot Central Records Complex, also in the Frederick County, VA submarket is underway and will be fully occupied by the agency. Stonewall Industrial Park Phase III, a 287,000-square-foot building is also underway in the Frederick, VA submarket and will deliver next quarter. 888 International Parkway is a 250,000 square-foot project that is underway in the Botetourt submarket with an expected to delivery during the first half of the year.
VacancyThe market’s overall vacancy rate fell, dropping from 6.4 to 5.7 percent during the quarter. The vacancy rate dropped 68 basis points to end the quarter at 5.5 percent in the warehouse sector while the flex sector remained flat at 10.0 percent.
Overall asking triple net rates in the Shenandoah Valley market have increased during the quarter, rising $.11 to end the quarter at $4.18 per square foot. This compares to a year ago when the rental rate stood at $3.99 per square foot. Overall average rental rates for warehouse product increased $.08 to end the quarter at $4.04 per square foot while rental rates for Flex increased from $5.36 to $5.41 per square foot. Since demand has been for higher-end product, those asking rates are taken off the market which slows the rate of which rental rates increase. Class A product is seeing rates closer to $4.50 per square foot for warehouse space.