1/1/2007   

Industrial, Q1 2007..............................The Greater Hartford industrial real estate market continued on its upward track in 2006....While there were concerns about the market at the beginning of 2006, much of that worry has proven to be wasted energy. Leasing activity continues to be active in all markets (north, south, east and west) with vacancy rates in most of these markets in the high single digit to low double digit range...Lease rates have followed suit with an average appreciation of approximately 8-10 percent...Notable lease transactions of 2006...Clark Steel Framing in Bristol (250,000 sf), New Breed in North Haven (530,000 sf) and Traveler's Insurance in Windsor (138,000 sf). Active leasing has fueled speculative development...While most speculative development continues to occur in the northern markets (Windsor and Bloomfield), speculative construction is also occurring in the southern market (Rocky Hill) and being considered in other markets as well. Griffin Land continues to lead the way in this department with as many as seven 100,000 square foot, high bay warehouses slated for construction in the airport region. Additional speculative construction is occurring on Blue Hills Avenue by DeMattia (100,000 sq ft under construction with an additional 100,000 sq ft slated to be built) and Sponzo (continue to build 40,000 - 80,000 sq ft high bay buildings). It is also reported that Winstanley Enterprises is poised to begin building three buildings between 50,000 and 60,000 square feet in soon-to-be purchased land on Brook Street in Rocky Hill. Sales activity continues to be brisk, both in the "user" and investor markets. The most noted investment sale in the year of 2006 was the sale of the "Winstanley Portfolio" a 13 building, 1.5 million square foot industrial building portfolio which sold for $97 million to HRPT Properties Trust. Significant not only because of the size of the sale but just as significant for who bought it...yes, a REIT. And while there weren't any singularly notable "user" sales in 2006, the number of user sale transactions was very notable...This (the number of transactions) coupled with the increase in construction and land costs has continued to drive the average sale price per square foot...While there aren't any definitive "appreciation rates", it appears that the average price for a "typical" medium size industrial building has appreciated 10 -15 percent...While the crystal ball is always a little fuzzy this time of year (the typical broker always believes that the coming year will NEVER be like the last) we believe that the prospects for a solid year in 2007 are excellent...We believe that...1) Industrial companies will continue to see growth in 2007, albeit at a slower pace than 2006. 2). New speculative construction will continue at a pace that won't exceed demand. 3) Pricing (both lease rates and sale prices) will remain consistent and strong however will not experience the appreciation of 2006. 4) Land prices will continue to feel upward pressure. 5) Connecticut will continue to be attractive to "big box warehouse" and 3PL operations.

 

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