2019-07-12_DTZ戴德梁行_Industrial_Q2_2018_Central_Connecticut_2页_214kb

Central Connecticut Industrial Market Summary

Core Content

This document provides an overview of the economic and market conditions in the Central Connecticut Industrial sector, focusing on employment trends, vacancy rates, net absorption, and rental rates for the second quarter of 2018 and the 12-month forecast. It also highlights key lease and sales transactions in the region.

Economic Overview

• Unemployment Trends: Over the past 12 months, Connecticut's unemployment rate dropped by 20 basis points, but total employment decreased by nearly 20,000 jobs. This suggests that people are either leaving the labor force or the state.
• Sector Growth:
  • The manufacturing sector saw a 2.6% year-over-year (y-o-y) increase in employment.
  • The Trade, Transportation, and Utilities sector experienced 0.9% y-o-y moderate growth.
• Statewide Concerns: Despite positive industrial trends, Connecticut faces broader economic challenges that may impact the market.

Market Overview

• Net Absorption: Central Connecticut continued to show positive net absorption in the first half of 2018, with YTD net absorption of 370,000 square feet.
• Vacancy Rates:
  • Vacancy rates reached 8.2% in Q2 2018, the lowest in over 20 years.
  • The Overall Vacancy Rate for the region is 8.2%, indicating strong demand for industrial space.
• Rental Rates:
  • Asking rents have increased to $4.90 per square foot (psf) year-over-year.
  • Rental rates are at their highest level since 2008 and are expected to continue rising due to limited available space.
• Construction Pipeline:
  • Under construction inventory increased from 1.2M sf in Q2 17 to 2.1M sf in Q2 18.
  • Most of the construction is build-to-suit, which means there will be limited supply of new space in the short term.

Submarket Analysis

Key Lease Transactions Q2 2018

• 75 Aircraft Road, Southington (216,000 SF): Economy Spring signed a new lease, expanding from a smaller facility in the same town with an expected move-in in early 2019.
• 33 Stiles Lane, North Haven (175,000 SF): BYK USA Inc signed a new lease.
• 35 Manning Road, Enfield (165,000 SF): Namco expanded with a new lease.

Key Sales Transactions Q2 2018

• 550 Research Parkway, Wallingford (338,093 SF): Sold to Sky Management Corp for $10.5M / $31 psf.
• 160 Corporate Court, Meriden (241,333 SF): Sold to Sky Management Corp for $7.5M / $31 psf.
• 600 Day Hill Road, Windsor (187,992 SF): Sold to NL Ventures / Propco for $10.4M / $56 psf.
• 33 Stiles Lane, North Haven (175,301 SF): Sold to Equity Commonwealth / Calare Properties for $110.5M / $60 psf.

Outlook

• The market outlook for Central Connecticut Industrial remains positive, driven by strong macroeconomic conditions and increasing demand from distributors and e-commerce companies.
• The national industrial real estate trend is favorable, with investors and users building complex distribution networks.
• While the statewide economic issues are a concern, the distribution network usage of Connecticut as a springboard between New England and NYC is expected to continue supporting the industrial market.
• Vacancy rates are at a historical low, and construction activity is limited, leading to continued upward pressure on rents.

Conclusion

The Central Connecticut Industrial market is experiencing positive absorption, rising rents, and limited supply, which suggests a strong and resilient market. Despite statewide employment challenges, the distribution and e-commerce demand is driving growth. Key lease and sales transactions indicate increased activity and investment confidence, reinforcing the positive outlook for the region.