February 8, 2022
Demand for industrial/flex space is at what amounts to an all-time high for many of our careers. As Kent shares in his Seacoast Industrial Market Overview article, our 2021 Market Outlook indicates that the average asking lease rate has gone up more than 60% in some towns in the past year alone. With inventory also at an all time low, tenants in the market have very limited options for space and may be forced to consider a location, property type, or price point that would not have been their first choice.
The best example of this is a property we marketed this past year in Somersworth, New Hampshire at 100 Tri City Road. Once a former Consolidated Communications industrial and office facility, this 69,217± SF building sat vacant for several years. Its location, condition, and mix of office and industrial space made it difficult to find a large tenant in the market for whom it made sense. This was three years ago, when demand for industrial space was on the rise and we recommended to the Landlord that he remove the second-floor office area and convert the entire building to industrial use. During this time, we had experienced a severe lack of smaller industrial/flex options in the market. Tenants looking for industrial/warehouse spaces under 6,000 SF had virtually nothing to consider on the Seacoast. Units of that size typically provide space for contractors, painters, woodworkers, and other local businesses in our communities.
With this information in hand, the owner of 100 Tri City Road took our advice and removed the second floor, reducing the square footage from 69,217± SF to 52,138± SF and built 20 separate units, ranging in size from 1,506± SF to 6,733± SF. Each unit comes equipped with one ADA compliant bathroom, a small air-conditioned office space, poured concrete floor, and heated warehouse space. Depending on the size and layout of the space, each unit has one or two large overhead doors. Additionally, each unit comes with two to four parking spaces.
The units were advertised as a monthly rate, plus tenant’s heat, electric, and trash removal costs. The asking rent averaged $14.00/SF Modified Gross annually. Within twelve months on the market, all 20 units were leased. At various points throughout the year, multiple tenants were making offers on specific size units, and a week didn’t go by without at least one or two showings at the property.
Some of the tenants include a custom van builder, a general contractor, a screen-printing company, and parts storage for larger businesses. We heard anecdotally throughout the year that tenants were not originally considering the location, but couldn’t find this type of small flex option anywhere else on the Seacoast. These small flex units fuel the local economy and allow these types of businesses a location of their own to grow.
Kat Gemmecke on our team managed most of the showings and negotiations over the last year. “The reach of interest we saw throughout the initial leasing process was pretty amazing. We had people as far away as California inquiring on the property. A few of the current tenants commute from Massachusetts to Somersworth daily because of the lack of industrial inventory they found in their home area. We received a lot of really positive feedback on the way the units were constructed and the growth potential that tenants have with the various sized units,” explained Gemmecke.
Ultimately, 100 Tri City was a huge success for both the landlord and tenants alike and, for the time being, will remain one of the few sources of inventory of small industrial flex units on the Seacoast. The landlord took a risk to design and build these units without having any tenants precommitted – a risk that paid off within the first year.
Caitlin Burke, Senior Associate
