R.I. commercial real estate market strengthened in 2014, trend expected to continue in 2015

GOV. GINA M. Raimondo speaks at the 2015 Rhode Island commercial real estate outlook, presented by executives at CB Richard Ellis-New England, on Thursday at the Omni Hotel in Providence. / PBN PHOTO/MARK S. MURPHY
GOV. GINA M. Raimondo speaks at the 2015 Rhode Island commercial real estate outlook, presented by executives at CB Richard Ellis-New England, on Thursday at the Omni Hotel in Providence. / PBN PHOTO/MARK S. MURPHY

PROVIDENCE – The Rhode Island commercial real estate market has strengthened in the past year and is expected to continue that trend into 2015, with vacancy rates in office space declining in both the downtown Providence and suburban markets.
The 2015 Rhode Island commercial real estate outlook, presented by executives at CB Richard Ellis-New England Thursday morning, represented a sunnier forecast than in recent years, according to attendees.
Downtown Providence in 2014 had the lowest vacancy rate in office space of the past six years, said Andrew Galvin, a CBRE vice president. All classes of office space in the city were leased at higher levels, ranging from an 8.6 percent vacancy rate for premier Class A space to 25 percent in Class C properties.
In the suburban markets, vacancy rates also declined, to an average of 18.1 percent in 2014, the tightest level in seven years. The suburban office market has seen a “substantial recovery” since 2009, when vacancy rates topped out at 25.5 percent across all classes of property.
Among submarkets in the suburban office market, only Aquidneck Island had an increase in office vacancy rates last year, Galvin said.
In the industrial market, the vacancy rates also fell, to 7.8 percent, down from 9 percent at the end of 2013, according to Thomas Barry, a CBRE vice president. Rhode Island faces challenges in this segment, including insufficient inventory of modern buildings, and industrial sites that are 10 acres or larger, he said.
In other trends, investment flowing into the Boston market has started extending out to secondary markets in Massachusetts, including the I-495 corridor, according to analysts participating in a panel discussion.
Providence and other markets could see that trickle-down effect as well. As recently as a year ago, investors wanted to be in Boston or along Route 128, and did not want to locate further west or south. “Today, that has expanded significantly,” said Steve Allison, managing director of Boston-based Paradigm Properties.
Gov. Gina M. Raimondo spoke briefly at the session at the Omni Hotel in Providence, encouraging the assembled brokers and property managers to continue their efforts to attract companies.
In her remarks, she referenced, as did others, the strength of the Boston commercial real estate market, which CBRE executives described as among the top five in the U.S.
“It is no secret that times are tough in Rhode Island,” Raimondo said. “It’s no secret that our neighbor to the north” has a more dynamic economy. “It’s time to change that.”

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