Shenandoah Valley Industrial Report Report Q4 2018

Download Report

Market Fundamentals Increasingly Strong Heading Into 2019

Screen Shot 20190214 at 120907 PM   

The Northern Shenandoah Valley industrial market caught its breath in the fourth quarter of 2018, resting on the laurels of record overall net absorption in the previous three quarters. Although fourth quarter net absorption for 2018 was only 53,468 square feet, the year-end number was an astounding 3,375,626 rentable square feet. Demand for 2018 was nearly double the 1,839,273 square feet of new supply that delivered resulting in vacancy rates plummeting almost two full percentage points from 6.2 percent at the end of calendar year 2017 to 4.3 percent at the end of 2018. Even more acute, large blocks of space over 500,000 square feet were 2.4 percent vacant and mid-sized blocks of 300-399,999 square feet were a meager 1.5 percent vacant. Direct asking rental rates continue to strengthen with averages up $0.20 in 2018 to end at $4.27 NNN. Asking rates for Class A are even higher at approximately $4.75 NNN.


On the heels of a strong year, approximately 3.3 million square feet was under construction at the end of 2018, led by 1,000,000 square feet for Proctor & Gamble in Berkeley County and 460,000 square feet for Roxwool in Jefferson County, West Virginia. In Frederick County, Virginia, 256,000 square feet is under construction for the FBI’s Record Complex and 68,000 square feet of cold storage space is being added to 188 Brooke Road in the Ft. Collier Industrial Park. Of this, the only uncommitted building is Trammell Crow’s 1,190,700 square foot speculative building in Hagerstown, Maryland.

Demand remains strong along the I-81 Corridor and existing tenants are expanding. New development players are trying to rezone land to industrial and get product out of the ground. Despite this, there is no sense that things will soon be overbuilt or that vacancy rates will spike. Market fundamentals remain strong and are expected to continue throughout 2019.

 

The Northern Shenandoah Valley industrial market caught its breath in the fourth quarter of 2018, resting on the laurels of record overall net absorption in the previous three quarters. Although fourth quarter net absorption for 2018 was only 53,468 square feet, the year-end number was an astounding 3,375,626 rentable square feet. Demand for 2018 was nearly double the 1,839,273 square feet of new supply that delivered resulting in vacancy rates plummeting almost two full percentage points from 6.2 percent at the end of calendar year 2017 to 4.3 percent at the end of 2018. Even more acute, large blocks of space over 500,000 square feet were 2.4 percent vacant and mid-sized blocks of 300-399,999 square feet were a meager 1.5 percent vacant. Direct asking rental rates continue to strengthen with averages up $0.20 in 2018 to end at $4.27 NNN. Asking rates for Class A are even higher at approximately $4.75 NNN.


On the heels of a strong year, approximately 3.3 million square feet was under construction at the end of 2018, led by 1,000,000 square feet for Proctor & Gamble in Berkeley County and 460,000 square feet for Roxwool in Jefferson County, West Virginia. In Frederick County, Virginia, 256,000 square feet is under construction for the FBI’s Record Complex and 68,000 square feet of cold storage space is being added to 188 Brooke Road in the Ft. Collier Industrial Park. Of this, the only uncommitted building is Trammell Crow’s 1,190,700 square foot speculative building in Hagerstown, Maryland.

Demand remains strong along the I-81 Corridor and existing tenants are expanding. New development players are trying to rezone land to industrial and get product out of the ground. Despite this, there is no sense that things will soon be overbuilt or that vacancy rates will spike. Market fundamentals remain strong and are expected to continue throughout 2019.

Demand

Demand for industrial space in the Shenandoah Valley market remained positive with 444,654 square feet absorbed during the second quarter of the 2018. This was led by Eldor’s delivery and move in of 250,000 in the Botetourt, Virginia submarket. This brought the year-to-date absorption total up to 2.09 million square feet, led mostly by Procter & Gamble’s growth in Berkeley County, West Virginia. Warehouse product saw the bulk of demand, increasing 380,999 square feet for the quarter, while demand for flex totaled 63,685 square feet over the same time period.

Supply

There were six buildings under construction at the end the quarter, totaling 3.33 million square feet of space. During the fourth quarter, the largest building to break ground was Trammell Crow’s 1.19 million square foot warehouse which is being built on a speculative basis in Hagerstown, MD. Procter & Gamble continued construction at their campus, with over a million square feet still underway at the end of the quarter. 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. 180 Admiral Byrd Drive, a 120,000-square-foot speculative building delivered in the Frederick County, VA submarket.

Vacancy

The market’s overall vacancy remained flat, ending the quarter at 4.3 percent. This is down from the start of the year when the vacancy rate was 6.2 percent. Vacancy rates remained unchanged during the quarter in the warehouse sector, ending the year at 4.1 percent. This is down from 6.0 percent from the start of 2018. The vacancy rate for flex increased from 7.4 to 7.8 percent during the quarter.

Rental Rates

Overall asking triple net rates in the Shenandoah Valley market increased $0.04 to end the quarter at $4.27 per square foot. This compares to a year ago when the rental rate stood at $4.07 per square foot. Overall average rental rates for warehouse product increased $0.01 to end the quarter at $4.16 per square foot while rental rates for Flex increased $0.46, ending the quarter at $5.50 per square foot. Class A warehouse product is seeing rates closer to $4.75 per square foot in the market.


warehouse

Shenandoah Valley Industrial Report Report Q4 2018

Download Report