Bordering on Recovery: Small Northeast States Leverage Their Sizes and Statuses as Border Towns, College Towns and Tourist Towns to Bolster Their Commercial Real Estate Markets
Hunt, Kristin Gunderson, Journal of Property Management
The recession's wrath impacted even the smallest U.S. commercial real estate markets, including New Hampshire, Rhode Island and Vermont--three of the country's 10 least populous states. But, they too are on the mend, said area CPM Members, in part because of their accessibility to other well-performing major cities.
"Being close to Boston and New York, but not in either of those places can be a big draw depending on the tenant or resident," said Anthony Natale, CPM, CFO at Salvatore Capital Partners and president of the IREM Rhode Island chapter. "Not having the negatives of higher rent costs and other obstacles, while still being able to easily get to those areas, can really benefit bordering cities and towns throughout the Northeast."
Southern New Hampshire's resilience is partially because of its proximity to Boston, said David Barrett, CPM, director of operations at Crowninshield Management Corp., in Peabody, Mass. Barrett resides in Salem, N.H.
"The recession has affected us, but it was slower to hit here because we didn't over-build and because we're close to Massachusetts," he said. "Massachusetts was quick to recover because of its big base of recession-proof healthcare, research and education facilities. Being on the border, we have benefitted from that."
Such industries are spilling over into New Hampshire, too, helping along its office market, particularly along the Seacoast/Interstate 95, (which includes Portsmouth, N.H.). According to the CB Richard Ellis 2013 New England Market Outlook, activity from a mixture of office tenants--from medical and call center tenants to research and development and government users--helped further decrease the area's office vacancy rate in 2012 to less than 14 percent.
Along Interstate 93/Route 3 (which includes Manchester, N.H.), vacancy decreased from 15.6 percent to 14.2 percent during the 12 months of 2012, according to the CBRE report. It indicated that the decline stemmed from smaller companies backfilling vacancies formerly occupied by larger entities that downsized during the recession.
While Boston industries might be positively influencing the New Hampshire office market, Massachusetts residents are also helping along its retail market--drawn to New Hampshire border towns, where no sales tax exists, Barrett said.
"Having no sales tax brings a lot of consumers and retailers to the area," he said. "We have a lot of shopping centers in these border towns, and they're managing just fine."
The tax structure in Massachusetts-border state Rhode Island, however, is not helping draw in business. The state's high taxes actually can spur flight, Natale said. In fact, in 2012, CNBC ranked Rhode Island 50th out of 50 states in its annual ranking of appealing places to grow or do business. Still, the market is recovering.
"We're seeing some improvement in the commercial real estate market," he said. "Things appear to be going in the right direction. …