John Reed, CBRE New England

The Greater Springfield Industrial market experienced a steady increase in leasing and sales activity in 2015, marking the third consecutive year of positive traction. While velocity of industrial transactions will slow due to the lack of inventory, the market will continue to prosper throughout 2016 and beyond.

The confidence of national and local businesses continues to strengthen as the economy shows signs of growth and unemployment rates decline. According to the Manufacturing ISM Report on Business, manufacturing expanded in September as the PMI reached 50.2%, indicating growth for the 33rd consecutive month, and the overall economy grew for the 76th month. Greater Springfield continues to attract and retain small to mid-size manufacturers and distribution operations that serve the region. Distribution companies as well as e-commerce companies continue to seek properties in Greater Springfield due to its geographic orientation with New England and its proximity to highway systems.

Industrial sales continued to drive activity throughout 2015. One notable user-sale was Falvey Linen’s purchase of 100 Brookdale Drive, a 240,000 s/f facility located in Springfield. A significant investment transaction was the sale of a 290,000 s/f manufacturing and distribution facility located at 1 Better Way in Chicopee. The facility was 90% leased at the time of the sale. A number of other buildings traded hands in the surrounding suburban industrial parks over the course of the year.

At the end of Q3 2014, the industrial vacancy rate in the Greater Springfield Industrial market was approximately 10.9%, down 110 basis points from 2013. As of Q3 2015, the vacancy rate has continued to drop reaching 7.3%. Vacancy rates continue to decline as higher quality industrial product is absorbed. While this is a positive sign for the market, it does not improve the position of many of the older functionally obsolete properties within the remaining inventory.

The lack of quality space in Springfield specifically in the 10,000 to 40,000 s/f range could hinder local momentum due to minimal relocation options. As a result, the demand for good developable industrial land has recently increased. Several new tracts of land have been identified as “shovel-ready” while others are currently undergoing the permitting process. The Chicopee River Business Park is ready for development for 10,000 to 250,000 s/f users, while the WMDC is beginning the permitting process for AirPark South, which will ultimately support the development of 600,000 to 800,000 s/f of manufacturing and distribution. Pricing for sites with all utilities and highway access remain at $75,000-$100,000 per acre or $5.00 to $7.00 per buildable foot. While construction timelines and costs can often deter prospects, their ability to move into a new, economically friendly facility designed to meet their specific needs often outweighs the burden.

Greater Springfield Industrial Market Forecast

The Greater Springfield Industrial market continues to thrive, driven by intra-market growth and out-of-market demand on both the lease and sale fronts. While absorption will be impacted by the lack of inventory, the addition of new industrial product will help to stabilize the market. As confidence continues to improve, 2016 will see sustained growth in the Greater Springfield Industrial market that will continue in all industrial sectors throughout the year.

John Reed is an industrial and office specialist and concentrates on the Greater Springfield market at CBRE New England, Springfield, Mass.