Shenandoah Valley Industrial Report Report Q1 2019

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2019 Kicks Off With Robust Construction & Absorption

    

The year 2019 commenced with a steady continuation of several large industrial projects along the corridor spanning from Hagerstown to Winchester. On the northern end of the corridor in Washington County, MD, construction continued on Trammell Crow’s 1.2 million square foot speculative development project as well as Bowman Development’s 504,000 square foot expansion to their Newgate project off Hopewell Road in Hagerstown which saw 163,000 square feet deliver this quarter and 341,000 sf the previous quarter.


Further south in the eastern panhandle of West Virginia, Equus Capital Partners delivered their 356,000 square foot facility at 261 Development Drive, the majority of which is committed to Procter & Gamble, and plans on breaking ground on a second building within the next few months. In neighboring Jefferson County, WV, walls are going up at Roxul’s controversial insulation manufacturing plant which will see 460,000 sf deliver in Ranson later this year. Further south still in Winchester, VA, the FBI continues work on their 256,000 sf Central Records Complex on the east side of Frederick County while Johnson Development is in the beginning stages of constructing a 324,000 build-to-suit warehouse for Mercury Paper in Winchester’s Fort Collier Industrial Park. All told, by the end of Q1 a 2.2 million square feet was under construction.


Although much of the speculative construction currently underway has not been pre-committed, the first quarter also saw robust absorption of a total of 958,345 sf. Much of this was Procter & Gamble occupying a total of 882,000 square feet of which 182,000 was leased from Equus Capital Partners and the remainder constructed on P&G’s mega campus in Martinsburg. Rental rates continue to increase modestly with an overall rental rate of $4.16 NNN although Class A space is being marketed for no less than $4.50 NNN. .

 

Demand

Demand for industrial space in the Shenandoah Valley market continued to be positive with 958,345 square feet absorbed during the first quarter of 2019. This was largely due to Procter and Gamble delivering and occupying the remaining 700,000 square feet of their 2.2 million square foot Phase One on their Berkeley campus.  During the quarter, demand for Warehouse product was 936,545 square feet, while demand for flex product was 21,800 square feet.

Supply

At the end of the first quarter, 2.2 million square feet of space was under construction. The largest delivery was Procter and Gamble’s completion of 700,000 square feet of their 2.2 million square foot campus to complete Phase 1. At 11710 Hopewell Road, the Phase 3 expansion delivered 63,208 square feet during the first quarter. This follows the delivery of Phase 2 which delivered 340,992 square feet during the fourth quarter of last year. 261 Development Drive delivered 356,000 square feet in the Berkeley submarket. 182,000 square feet is leased to Procter and Gamble, while the remaining area is still available. Trammell Crow’s 1.19 million square foot warehouse continues to be the largest development underway, which is being built on a speculative basis in Hagerstown, MD. The FBI’s 256,000 square foot Central Records Complex, in the Frederick County, VA submarket is underway and will be fully occupied by the agency upon
completion.

Vacancy

The market’s overall vacancy increased slightly during the quarter, rising from 4.7 percent to 4.9 percent. Vacancy rates increased during the quarter in the warehouse sector due to the delivery of new space, rising from 4.5 percent to 4.8 percent. This is down from 5.7 percent a year ago.

Rental Rates

Overall asking triple net rates in the Shenandoah Valley market decreased $0.03 to end the quarter at $4.24 per square foot. This compares to a year ago when the rental rate stood at $4.20 per square foot. Overall average rental rates for warehouse product remained flat to end the quarter at $4.16 per square foot while rental rates for Flex decreased $0.20, ending the quarter at $5.30 per square foot. Class A warehouse product is seeing rates closer to $4.50 per square foot in the market.


warehouse

Shenandoah Valley Industrial Report Report Q1 2019

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