RI Market Analysis
In 2016, Rhode Island continued what seems like the never-ending lack of inventory cycle regardless of product type. Although not so much in the location based retail sector, but the office and industrial markets tend to stagnate with low vacancy rates, but a total lack of new product, causing these low vacancy rates more than high demand. The only new industrial construction, which is very limited to begin with, is specific to a users’ pre-defined requirements. First generation rental space is generally not available for a tenant. On the office side, much of the downtown “B” office space has been gobbled up by investors and converted to residential uses, reducing the available office inventory.
Within the industrial market, the demand and need remains steady, but the complete lack of any spec development leaves the existing requirements doing nothing and either living with their inefficient situations during 2017, leasing some short term, off-site space, or trying to figure out how to expand their existing facility. 2016 saw some larger properties absorbed in the market. Berkeley Acquisition (Dean) purchased 2000 Plainfield Pike in Cranston (240,000’) for a mix of their own inventory and 3rd party leasing. Hope Valley Industries purchased 13 Powder Hill Road in Lincoln (120,000’) for the expansion of their manufacturing capabilities. Finlays Fine Teas from England broke ground on a new 65,000’ facility in Quonset Park. The smaller requirements are having the most difficult time finding space, either for lease or for sale.
The office market, in general, is facing the same issues as the industrial market, lack of product. A twist to this is that a substantial segment of the downtown market has gone from available “B” office space to a conversion to residential space and off the market. This may improve the market statistics by lowering the vacancy rate, but it takes away available office space that could be improved and leased. The suburbs remain active. 24 Albion Road and 640 George Washington Highway in Lincoln are now essentially 100% occupied. Airport Professional Park and The Summit in Warwick are about 95% occupied. In the northern RI sub-market, you are hard pressed to find a good 5,000’ alternative for a tenant. In Warwick, there is 100,000’ that may come out of the ground in 2017, easing the large user bottleneck. 53 Technology Way in West Greenwich remains available to the large (30,000’ – 100,000’) user with highway visibility, large floor plates and good parking. The big winner for 2016-2017 seems to be the Northwoods office development in Johnston with 3-4 new users coming in during 2017.
Garden City continues its expansion and conversion into an elite shopping experience with the top national retailers and the opening of the first L.L. Bean store in RI along with the development of another 30,000 square feet of building area allowing for a few more restaurants and additional retail space. Many retailers that have previously evaluated the RI market as weak, (e.g. O’Reilly Auto Parts, the Container Store, Sonic & Chick-fil-A), have now decided to close the geographic gap between the neighboring states and are ready to enter the new territory. A good example of new retail development is Highland Commons in East Providence, providing the convenience of the Route 6 corridor and the infrastructure restaurants require (sewer versus septic systems). The closing of several Walgreens locations seems to be a good fit for discount retailers and urgent care facilities.
The Rhode Island market is still quite reasonable in terms of pricing. Quoted rents in Providence range from $ 15.00 to $ 20.00/SF NNN, about a 2% increase compared to 2016. You will find the prime retail locations in the center of RI – Garden City & Carpionato’s Chapel View development, quoting north of $ 30.00/SF NNN, as well as the major malls in Providence & Warwick. We are seeing an increase in activity in the market now that the election season has ended. This may be due to the saturated & pricier markets in the surrounding areas.
2017 will see much of the same as 2016, lack of inventory with all market segments hunting for available space. The South Street Landing project is behind schedule and now expected to see new students in the fall of 2017. In the end, this will create hundreds of thousands of square feet for Brown University, University of Rhode Island and Rhode Island College. The large parking garage next to South Street Landing will open in the 1st quarter. The major life sciences project on the 195 land is now a reality for parcels 22 and 25 that could be in excess of one million square feet. It would be a joint effort between Brown University (adjacent to its medical school), Wexford and CV Properties, developer of the South Street Landing project.