Vermont’s Chittenden County experiencing a growing, changing commercial landscape - by Doug Nedde

Doug Nedde, Nedde Real Estate

Chittenden County has experienced a growing, changing commercial landscape. In October 2014, GlobalFoundries announced that it would be taking over IBM’s microelectronics business to include the semiconductor production plant in Essex Junction. At the end of June 2015 it was announced that this deal was closed, and in January of this year the State of Vermont awarded the company $1 million from the Enterprise Fund as part of GlobalFoundries’ plan to invest $72 million in capital in the Essex plant, ending years of uncertainty for thousands of plant employees and cementing our healthy state-wide unemployment rate, which was reported at 3.6% in December 2015, decreasing from 3.7% in November 2015. The national rate in December 2015 was 5% making Vermont the 10th lowest unemployment rate in the country. Burlington’s current unemployment rate, however, is only 2.4%, which makes it the third lowest in the country. In a recent press release the Vermont Department of Labor commissioner confirmed that the Vermont economy has been steadily improving since July 2013, taking us above pre-recessionary levels into a period of economic expansion.

Industrial

Chittenden County has a balanced industrial market. Current vacancy is 5.8%, down slightly from 6.4% in June 2015, which competes well with the historic rate of 7.4%. A project that has detracted from the industrial supply, and thus has had a hand in decreasing the vacancy rate in 2015, was the redevelopment of 747 Pine St. near downtown Burlington. This 53,000 s/f industrial building has been upgraded to a mix of retail, fitness and office space, redeveloped by Cresta Cooper Nedde, LLC and Nedde Real Estate. Market additions in 2016 are concentrated in Milton, Williston, Shelburne, Essex, Colchester and Winooski with the most notable project being a new 30,000 s/f owner occupied manufacturing facility in Milton that will be home to Bove’s pasta sauce company. The Hampton Direct building in Williston, recently purchased by Nedde Real Estate, is now up for lease with the State of Vermont and Hampton Direct leaving the premises. Overall rental rates remain stable and the market is only slightly undersupplied.

Retail

With a current vacancy rate of 5% (lower than the historic average of 6.6%), there is a consistent undersupply of retail space in Chittenden County. Tenant changes coupled with new supply has strongly affected the vacancy rate in Burlington’s Central Business District, which is currently 10.3%, a decrease from the 10.9% figure observed in June 2015. The suburban market has leveled off at 4% after dropping to 3.1% in December 2014, which remains 35% lower than the historical average vacancy rate of 6.2%. It is now exhibiting stable occupancy trends, largely attributable to Chittenden County’s resilient economy. A couple of major new retail projects are slated to begin over the next few years. One is the redevelopment of the downtown Burlington mall, which was purchased by Don Sinex in 2013. Construction plans include adding three new buildings including a 1.5 acre public rooftop park, 250 apartment units, convention-center style hotel, new underground parking garage and adding 225,000 s/f of retail space and 150,000 s/f of office to the existing 160,000 s/f. This development proposal has sparked a push for an upgrade of the University Mall in South Burlington to include residential uses and major commercial renovations. This is still in the beginning stages and will continue to hold the interest of residents over the next few years.

Residential

Historically the rental market has been consistently strong in Chittenden County, resulting in significant new apartment construction over the past 2-3 years. This new construction has begun to affect the vacancy rate, which has nearly doubled from 1.7% in December 2014 to 3% in December 2015. In 2015 alone 534 apartment units were added to the market including the Riverrun Luxury Apartments in Winooski. In addition, Pizzagalli Properties has proposed a new, 63-unit apartment development on Shelburne Rd. in South Burlington. New projects to hit the market in 2016 are 70 units at Great Cedars in Winooski, 90 units at The Village at Autumn Pond in Essex Junction and 29 units on Pearl St. in Burlington. This coupled with a surge in home ownership due to increase incomes and lower mortgage rates have had a dramatic effect on the rental market.

Office

The office market in Chittenden County remains over supplied. With a vacancy rate of 9.9% (a .8% increase from six months ago), office vacancy is 2.1% higher than the historic average of 7.8%. Office vacancy is lowest, however, in Burlington’s Central Business District where you will find mostly class A and class B spaces. Despite some modest improvement, we expect the office market in Chittenden County to be over supplied for the foreseeable future with over 100,000 s/f coming online in South Burlington in 2016 including 54,000 s/f of class A space at 88 Technology Park Dr. and two new buildings being developed by Hergenrother at Meadowland Business Park. Other significant additions will be 54,000 s/f of class A space at 88 Technology Park Dr. in South Burlington and Acabay’s 70,000 s/f building on Mountain View Dr. in Colchester.

*Data provided by The Census Bureau, Bureau of Labor Statistics, Homefacts and December 2015 Allen & Brooks Report.

Doug Nedde is the broker/owner of Nedde Real Estate, Burlington, VT.