John Reed, CBRE New England

The Greater Springfield Industrial market experienced considerable leasing and sales activity through 2016 marking another year of positive absorption. As forecasted, the velocity of industrial transactions slowed down due to the diminished modern inventory. Despite the lack of inventory, the market displayed reasonable momentum throughout 2016, and is expected to continue into 2017.

Small to mid-size manufacturers and distributors are the drivers in this market. Historically, this demand is in the 10,000-50,000 s/f range. This segment of the market was less active due to limited availability of quality inventory.

A continuing trend is the increased interest from regional distribution operations, e-commerce and food processing companies that investigate Greater Springfield due to its attractive labor pool and excellent highway accessibility. Last year the medical marijuana industry entered the market with the construction of two medical marijuana cultivation facilities in Westfield and West Springfield. Due to the required vertical integration of this industry, there will be continued activity in this sector.

Construction is becoming a relevant alternative for growing companies due to the limited existing alternatives. Expansions to existing facilities include Prolamina and Jarvis in Westfield and a 100,000 s/f addition that will add to US Tsubaki’s Chicopee complex. Regarding ground-up build-to-suit activity, there is a slow evolution that is evident due to the price differential between existing product and the cost of construction. There is desirable industrial land available. Pricing for industrial land remains between $75,000-100,000 per acre or $5.00-7.00 per s/f FAR for highway accessible sites with the appropriate infrastructure. The greatest inventory of sites is in Westfield, Springfield and Chicopee.

User sales and leasing propelled the activity in 2016. Three different examples included the sale of 340 Taylor St., a 140,000 s/f facility in Springfield, 27 Taxiway Dr. in Chicopee, a 190,000 s/f facility sold to the existing tenant, and the 72,000 s/f building at Enfield’s 96 Phoenix Ave. Leasing activity was demonstrated by Suddekor leasing 120,000 s/f in West Springfield, Holden Humphrey absorbed 82,000 s/f in Chicopee and the remaining 83,000 s/f at 1559 King St. in Enfield was occupied by A.H. Harris.

Developers were active in 2016. 102 First Ave. in Chicopee was purchased with the intent to upgrade and reposition this well-located industrial facility. 25 Bacon Rd. in Enfield, a 1.05 million s/f distribution building originally built by Hallmark Cards, was acquired mid-2016. The developer is in the process of a full building upgrade and is negotiating with multiple tenants for space in the complex.

At the end of Q3 2016, the industrial vacancy rate in the Greater Springfield industrial market was 7%. This includes the 1.05 million s/f vacancy where 700,000 s/f will be absorbed by Q1 2017, which will dramatically reduce the vacancy rate.

Greater Springfield Industrial Market Forecast

The Greater Springfield Industrial market experienced activity in leasing and sales activity through 2016, marking another year of positive growth. As absorption continues leaving limited existing alternatives, construction will become a relevant alternative for growing companies. There will be a minor slowdown, due for no other reason than a lack of available product. Nevertheless, the market displayed reasonable momentum throughout 2016 and will continue through 2017.

John Reed, first vice president/partner at CBRE/New England, Hartford, Conn.