PROVIDENCE – The vacancy rate of Downtown Providence office space at the end of the second quarter of 2019 was 11.8%, an increase from 9.8% at the end of 2018, according to a report from CBRE Inc. Thursday.
Total net absorption, or how much square footage was leased in the market, declined 25,553 square feet from the end of 2018.
Class A net absorption increased 3,812 square feet over the first two quarters of 2019. The vacancy rate of Class A office space in the area was 12.1%. Average lease rate per square foot was $33.69. The report noted that with the delivery of new inventory to market, rents for Class A commercial space in the area increased 3.1% over the first two quarters.
Class B office space had a negative net absorption of 43,140 square feet over the first half of the year in Downtown Providence. The Class B vacancy rate was 12.4%. The average rent per square foot was $22.59.
Class C office space had a net absorption of 13,775 square feet from the end of 2018 to the end of the second quarter of 2019. The vacancy rate of Class C commercial property in Downtown Providence was 6.2% at the end of the second quarter. The average rent per square foot was $20.74.
CBRE said that leasing within walking distance of the Providence Station has remained active.
Construction costs were said to have risen over the year, along with rent prices. However, the company expects landlords to increase incentives to tenants in the second half of the year.
The Downtown Providence submarket with the largest net absorption over the first two quarters of the year was the Westminster market, which increased 14,500 square feet.
The submarket in Downtown Providence with the largest absorption decline was the Promenade area, falling 25,239 square feet over the first half of the year.
The highest average lease rate of any submarket was in the Capital Center at $33.48 per square foot, followed by the Jewelry (Richmond) submarket at $32.33 per square foot. The lowest average lease rate of all included submarkets was the South Main area at $21.46 per square foot.
The Rhode Island suburban office space market had a negative net absorption of 40,835 square feet over the first two quarters of the year, falling to 9.3 million square feet. The suburban market vacancy rate was 12.4%.
The East Bay market had the largest loss of square footage rented over the first two quarters, falling 35,292 square feet to 1.2 million square feet. The vacancy rate was 12% at the end of the second quarter. The market was said to have declined due to a vacant property at 10 Tripps Lane in East Providence.
The suburban market with the largest net absorption was the West Bay market, rising 15,746 square feet over the first half of the year. The vacancy rate was 15.4% at the end of the corner. CBRE said the West Bay market is the largest suburban market in Rhode Island.
Statewide the vacancy rate of commercial property for lease was 12.2%.
Rhode Island’s industrial market had a vacancy rate of 1.6% at the end of the second quarter, a decline from 1.8% at the end of 2018. Net absorption was 88,691 square feet over the first half of the year.
The highest vacancy rate in the industrial market was in the East Bay at 3.7%.
The report said that lease demand remained steady while the “buy-side” continued to be strong. The strong market was said to be expected to cause challenges for companies searching in all size ranges due to low inventory and lack of new construction.
CBRE said it has seen an increase in land inquiries, as companies explore new construction options.
Lease rates were said to have increased, most notably for buildings under 15,000 square feet, while sale prices rose for buildings in the 10,000- to 50,000-square-foot range.
Chris Bergenheim is the PBN web editor. You may reach him at Bergenheim@PBN.com.
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