2016 has been a healthy build-to-suit year and I predict 2017 will be a good year for new projects - by Charles Reilly

Chuck Reilly, Dacon

Build-to-suit projects including spec high-bay warehouse projects have contributed to a strong 2016 to date. From Rte. 128 north, west, and south, the ground-up projects’ list is impressive.

In New Hampshire, F.W. Webb Co. leads the list with a one million s/f distribution center located in Londonderry, next to the recently completed 614,000 s/f UPS / Pratt & Whitney Northeast Logistics Center. EFI Express is under construction with a 200,000 s/f facility also in Londonderry. Prudential Overall Supply broke ground in September on a 131,000 s/f clean room / commercial laundry facility on Simon St. in Nashua. In Rochester, Rand Whitney just occupied its 110,000 s/f corrugated manufacturing plant as did Stonewall Kitchen for its new facility of 90,000 s/f.

Massachusetts’ list includes two spec high-bay warehouse projects – 200,000 s/f in Myles Standish Industrial Park, Taunton and 90,000 s/f on West St. in Mansfield. Quality Beverage is under construction for a 38,000 s/f expansion and renovation of its headquarters and distribution building also in Myles Standish. Alnylam Pharmaceuticals is building a 200,000 s/f pharmaceutical plant in the abutting Norton Commerce Center. New England Ice Cream is close to occupying its new facility of 65,000 sf in Norton. Amazon just occupied its one million s/f distribution center in Fall River. FedEx Ground just occupied a 170,000 sf renovated to spec building on Industrial Way in Wilmington for FedEx Ground’s Metro North Sorting Center. In Worcester, Imperial Distributors, Inc. will soon occupy 350,000 s/f of a 600,000 s/f high-bay distribution building on Blackstone River Rd. Krohne America, Inc. is about to break ground on an 82,000 s/f office manufacturing U.S. headquarters building at 55 Cherry Hill Dr. in Beverly. In Peabody, Christian Book Distributors just held a ribbon-cutting ceremony for a 75,000 s/f high-bay addition. And in MetroWest, Mathworks is under construction with two office buildings each in the 100,000 s/f range.

The total is an impressive 4.865 million s/f for 18 build-to-suit projects. At the beginning of the year in this space, I predicted a healthy build-to-suit market. I was not anticipating this level of project momentum. So what’s next?

With two spec high-bay buildings under construction, I don’t expect to see additional high-bay projects until some of that space leases which may not take too long given extremely low vacancy rates in the high-bay market. I am also not sure this level of build-to-suit projects is sustainable, although I say this, with Dacon looking at Q1 and Q2 2017 with a decent backlog of ground-up projects.

The capital market is actively seeking this industrial high bay product type and permitting is less cumbersome as municipalities are eager to grow their current tax base. There are developers out there chasing well-located land sites for new projects, most having various wetland and topographical challenges resulting in above-market rental rates for tenants. Construction costs have increased anywhere from 3-5% over the year reflecting increases in construction costs that should be absorbed in the market. From my perspective, 2017 will be a good year for build-to-suit projects.

Charles Reilly is vice president of Dacon Corp., Natick, Mass.