I-93 / Route 3 Industrial Market Overview

Kendra Hardesty  /   March 7, 2023

New Hampshire I-93 / Route 3 Corridor Industrial Market Outlook: 2023



By Christopher Healey | Partner




2022 proved to be a year of not only sustained, but reinforced trends throughout the Southern NH Industrial Market. Trends surrounding a few key metrics further tightened the industrial market to a point where securing space is no small feat, and those who do are looking at historically high pricing and lease rates.


With a vacancy rate below 2% at year end, businesses seeking industrial space throughout the region have quickly found options to be very limited and challenging even to identify. This vacancy rate has trended sharply downward from a higher point between 5–6% just a few years prior (late 2019 into early 2020).

Fueling the region’s tight vacancy rate are a few factors:

  • Demand for industrial space continues to be very strong.
  • The pipeline for speculative construction/delivery of new space to the market is extremely limited. • With a lack of additional inventory being delivered, existing inventory continues to be absorbed, even if it lacks key features desired by today’s tenants and buyers.
  • Strong demand coupled with the lack of supply is resulting in a sustained imbalance that has run up over the past 18- 24 months or so.


Lease rates, the inverse “friend” of vacancy, have rapidly climbed as quality industrial space becomes scarcer throughout the market. For many years, industrial rents in Southern NH hovered in the $6.00-$7.50/SF NNN ballpark; a far cry from the current average of $10.08/SF present in today’s market. With that simply being an average, it’s important to note the regularity at which we see industrial leases completed at $12.00/SF NNN and higher. While these rates may seem rich, just south of the NH/MA state line, it’s not uncommon for industrial lease rates to be in the range of $16.00-$20.00/ SF (or more), further adding to the appeal of New Hampshire given our proximity to Boston and its northern suburbs. This additional demand is another factor that has helped keep vacancy low and lease rates high.


Picked up where 2021 left off with regard to the appetite for industrial sales in the market. There was increasing demand from many users seeking their own space to occupy, as well as an ever-growing pool of investors in search of industrial product. We are regularly seeing institutional capital chasing industrial real estate in Southern NH – something that was far less common just a few years ago.

While a user generally will always pay more than an investor, many deals that transacted in Southern NH traded at extremely high price points. While $100/SF for industrial property was once a “pie in the sky” number, the overwhelming majority of deals easily eclipse this point in today’s market, and by a healthy margin. $150-$200/SF is not uncommon and is still considered to be well below replacement cost.

For investors, cap rates remained very low in the first half of the year (low-mid 5% range, and in some instances, below 5%), but that has quickly changed with the rapid rise in interest rates. The climate throughout 2021 and into 2022 was extremely seller-friendly, but with an increasing cost of debt, investor buyers have been forced to recalibrate. The bid/ask spread has grown considerably, as the investment deals of 2021 and early 2022 aren’t feasible in the current climate. Many would-be sellers are looking for the pricing of last year and are reluctant to consider transacting at levels investors can comfortably pay today.


The Southern New Hampshire Industrial Market remains desirable with solid fundamentals expected to continue into 2023. We can’t expect lease rates to skyrocket forever (as they have over the past few years) and having some functional vacancy in the market is healthy. There is much talk about a potential looming recession or slowdown, and while this may have a larger effect on the overall economy, we would anticipate our regional industrial real estate market to weather potential headwinds fairly well.

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