As Charles Francis took to the lectern, the wind had just stopped howling and the rain was slowing to a sputter. Francis, president of CB Richard Ellis Rhode Island, said the crummy weather served as a sign of the times for the commercial real estate market in Rhode Island. But unlike the weather outside that quickly turned sunny, the market is unlikely to recover as swiftly.
A market summary CB Richard Ellis (CBRE) released Dec. 3 found commercial vacancy rates increased in every category around the state. CBRE predicted office vacancy rates in Providence would hit nearly 22 percent by next year, up from 17.2 percent currently. Suburban office vacancy stood at 25.5 percent, up from 19.1 percent. And vacancy rates in the industrial market were approaching 9.2 percent, up from 8.6 percent at the end of last year.
The report came on the heels of a survey by Hayes & Sherry Real Estate Services that found similar vacancy rates in Providence. And the day before Francis spoke, the Federal Reserve Bank of Boston released a report that said an emerging glut of Class B office space in downtown Providence remained a “key concern.”
An excess of space across all categories drove down advertised rents between 1.7 percent and 3.5 percent, according to CBRE. Senior Vice President Alden Anderson described Rhode Island as a tenants’ market while his colleague Andrew Galvin told a crowd of real estate professionals that deals were closing for 10 percent to 12 percent lower than the asking price. And the market is likely to remain weak for at least a few years, Anderson said.
“Rhode Island historically has been a little slow to recover, being a secondary market,” he said, predicting larger cities like Boston would recover faster.
With the exception of Class B space, it is lackluster demand, as opposed to an overabundance of supply, that is fueling the vacancy rates, Anderson said. The amount of available Class B space remains high.
Across all classes, the Ocean State has seen a wave of companies move out entirely or shift operations to other parts of the state during the past year.