The Seacoast-Portsmouth Office Market: 2024 Update

By Christian Stallkamp | Senior Broker, Partner

2023 represented a fundamental shift in the commercial real estate landscape, including office space on the New Hampshire Seacoast. The blistering pace at which companies had been working, with a combination of remote work over the past few years, slowed down following the pandemic boom of 2021. Companies have been in the process of adapting to a new normal, which has been evolving throughout the year. As we enter 2024, we should gain a clearer understanding of what this new normal entails.

Presently we see that office buildings still have existing leases in place, and there are plenty of available parking spaces. These signs indicate that companies may be in the process of adjusting. In the Seacoast, the office market is experiencing a division between small offices ranging from approximately 2,500 to 5,000± SF and larger office spaces around 25,000± SF and greater. The demand for smaller office spaces appear to be higher than that for larger ones.

Furthermore, rents for larger office spaces have started to show some softening, while rents for small offices have remained relatively stable, particularly in Class A buildings equipped with amenities and move-in-ready conditions.

The Seacoast office vacancy rate increased to 19.8% in 2023 compared to 10.9% in 2021 and 14.8% in 2022. Average asking rent has also decreased to $14.93 NNN from $15.87 NNN in 2022.

Companies operating in New Hampshire and across the United States are reevaluating their revenue expectations and placing a greater emphasis on efficiency and cost-cutting measures. This shift in priorities will significantly influence their decision-making process in the future, particularly concerning the extent of office space they require. These decisions may involve an array of options, ranging from full remote work arrangements to mandatory in-office attendance

In the Seacoast we have seen big pockets of office space become available in 2023 like Liberty Mutual’s 600,000± SF campus in Dover and Bottomline Technologies’ 100,000± SF building at the Pease Tradeport. Based on the overall size of the market these two buildings represent a substantial portion of the office market on the Seacoast. If we remove those buildings the vacancy rate would be ±13.22%, not too far off from the 10-year average of 10.9% . When viewed from this perspective, the Seacoast office market does not appear as dire as portrayed in the media.

Landlords looking to re-tenant buildings with larger vacancies are likely to offer more significant concessions or opt for full-scale repositioning efforts. On the other hand, smaller office spaces have fared better, as companies adapting to their new normal have adjusted their office space requirements. A larger proportion of office users have chosen to downsize their space rather than expand.

Office Trends to Watch

• Employers are decreasing the work from home days. With New Hampshire experiencing larger office vacancies, companies from Massachusetts may consider relocating to fill the gap, attracted by lower wages, the absence of Massachusetts’ “millionaires’ tax”, a higher quality of life, and no income tax.
• The conversion or redevelopment of office buildings into residential uses.
• “Move-in-Ready” space, as in 2023, will continue to be desired, driven by high renovation costs.

In this evolving landscape, our recommendation to clients is to allow themselves additional time for assessing their real estate requirements, conducting thorough market research, and gaining a deeper insight into the current conditions within their specific submarket. What’s clear in the current landscape is that you can’t apply one size fits all throughout New Hampshire.

The importance of leveraging local market expertise cannot be overstated. Building strong relationships with local banks, landlords, and commercial brokers is crucial for achieving the best possible outcomes.

Want more commercial real estate insights?

Sign up for The Boulos Report

We’ll send you a concise email newsletter once per month featuring CRE market updates, and a transaction report telling you who’s buying what and who’s moving where in Maine & New Hampshire.