Hartford Business Journal

HARTFORDBUSINESS.COM | AUGUST 5, 2024 5 Deal Watch Silverman Group Vice President of Leasing Toby Nelson (left) and President Blake Silverman at a July 18 groundbreaking for a new 250,240-square-foot warehouse/logistics center the development company is building at 30 Hamilton Road, in Windsor Locks. HBJ PHOTO | MICHAEL PUFFER Despite new projects in pipeline, pace of Greater Hartford speculative warehouse construction slows New equilibrium Mark Duclos, president of Hartford real estate firm Sentry Commercial, said demand for speculative warehouse construc- tion in greater Hartford is "down significantly" over the past year to 18 months. "It used to be everywhere you turned there was a big-box require- ment sitting out in the marketplace," Duclos said. "While there was specu- lative construction going up, there wasn't enough to satisfy the demand. Nobody is building substantially on spec anymore." According to real estate firm CBRE's latest market report, Greater Hart- ford's industrial market displayed stronger leasing activity in the second quarter after a quiet start to the year. Tenants from April through June added 494,000 square feet of space vs. only 41,000 square feet added in the first quarter, CBRE said. Even still, Greater Hartford indus- trial tenants overall relinquished more space than they added during the second quarter, causing the vacancy rate to increase to 4.3%. Rents posted a "healthy" 3% increase from the prior quarter, reaching $7.16 per square foot, according to CBRE. "Despite this quarter's improved demand, cost consciousness among large corporate occupiers continued to hinder larger transactions," the CBRE report said. "But Hartford's shallow construction pipeline and lack of overhanging construction completions suggest continued firm fundamentals in the near term." Most second-quarter leasing activity was for smaller 10,000-square-foot to 50,000-square-foot spaces, CBRE reports. The one big outlier was Marvin Windows' pre-lease of 146,000 square feet at 205 Baker Hollow Road in Windsor. A trend toward smaller leases by local companies will likely continue, CBRE predicts, as e-com- merce-fueled demand spurred by the COVID-19 pandemic abates. CBRE Senior Vice President Kyle Roberts said a combination of rising construction costs and conservative lenders has held up projects in greater Hartford. There is also a lack of feasible building sites, he noted. Ongoing economic uncertainty might also be giving developers pause when it comes to building on speculation. Demand is still strong enough that quality spaces of up to 100,000 square feet should be able to quickly land tenants, Roberts said. GREATER HARTFORD INDUSTRIAL REAL ESTATE MARKET SNAPSHOT INVENTORY 80.3M sq. ft. VACANCY RATE 4.3% 2Q NET ABSORPTION -146,257 sq. ft. UNDER CONSTRUCTION 250,240 sq ft. AVG. ASKING RENT $7.16 per sq. ft. Source: CBRE By Michael Puffer mpuffer@hartfordbusiness.com W ith industrial real estate demand continuing to slow, Massachusetts-based Winstanley Enterprises has put on hold plans to build an 819,000-square- foot logistics warehouse in Enfield. At least until a tenant can be identified. Some experts, including Winstanley Principal Adam Winstanley, agree the demand for logistics space remains healthy in the region north of Hartford, but has slipped from the white-hot highs of two years ago. This has dampened, but not extinguished, developers' appetite for speculative building. After winning a court battle over the Enfield project last fall, Winstanley Enterprises, along with partner North- Point Development of Kansas City, planned to begin construction in early 2024 on a $135 million warehouse at 35 Bacon Road, which was once part of Hallmark's campus. Winstanley, in a recent interview, said that launch will now wait until a tenant is identified. He said he has "abandoned" the idea of working on speculation. "I think the market and the economy have softened quite a bit in the last two years," Winstanley said. "There is a lot less tenant activity in the market." Winstanley said he is speaking with a potential user for the 188-acre Bacon Road site, but doesn't expect to break ground until mid-2025 at the earliest. The development company is continuing to advance other projects. Winstanley said he has lined up a user for a planned 400,000-square- foot building at 1678 King St., in Enfield. Construction on that project could begin in the first quarter of 2025. Winstanley bought that 133.6- acre site last year for $4.6 million. Winstanley has traditionally identified tenants for at least half of a building before launching a new project. It also previously worked with North- Point. The partners, in 2022, kicked off construction on a 750,000-square- foot logistics center at Winstanley's "Great Pond" mixed-use development site in Windsor. That project started without an identified user. Winstanley later sold the development site to NorthPoint, and retail giant Target signed a lease before construction was complete. Unlike other markets, including Massachusetts, Connecticut has not overbuilt its industrial inventory, Winstanley said. That's resulted in steady demand for available space and stable rents. Mark Duclos Kyle Roberts Continued on next page

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