Brokerage Outlook: New Hampshire

• New Hampshire Retail

• New Hampshire Industrial

• New Hampshire Office

New Hampshire Retail Submitted by Jody Skaff and Vanessa Rozier, brokers with Portsmouth, New Hampshire-based The Kane Company, Inc. Posted 12-16-05. What area is your expertise? • Southern Maine, Southeastern/Seacoast New Hampshire and Northeastern Massachusetts What trends do you see presently in retail development in your area? • More franchised retailers such as Curves and Quiznos Sub. Also, due to the rapid growth in our area, we are seeing more big box users and national restaurant chains, such as Ruby Tuesday and Chili’s. What type of retail product is doing well in your area? • Food and off-price retailers such as TJ Maxx and Wal-Mart. What retailers are new to your area? • Target, Lowe’s Home Improvement, Quiznos Sub, The UPS Store, Ruby Tuesday, Smokey Bones, Pizzeria Uno, Jared Jewelers and Dick’s Sporting Goods Please name one or two significant retail developments in your area. What impact will these projects have on the market? • There are a number of new retail developments in our area. In Epping, a number of new developments surrounding the Wal-Mart have been built, including Lowe’s Home Improvement, Walgreens and a development called Epping Village. This new development of retailers is strategically placed at the entrance of the Wal-Mart. This area is servicing the Route 101 Corridor between Exeter and Manchester. • In Greenland, Target is seeking approvals. Target is also going into Somersworth, north of Portsmouth. • Also north of Portsmouth in Rochester, Lowe’s Home Improvement and Kohl’s will be entering the market. • In Portsmouth, Home Depot will be relocating. Christmas Tree Shops and Bed Bath & Beyond will be taking over Home Depot’s former location. • South of Portsmouth in Exeter, Stop & Shop is under construction on Route 108. There is an additional 10,000 square feet of retail space available in this new development. Where is the majority of development taking place? Why is this area doing well? • The entire Seacoast is experiencing relatively rapid development due to the fact that New Hampshire has no sales or state income tax and is therefore a favorable climate for both shoppers and retailers. We are also seeing a lot of people moving into New Hampshire from Massachusetts to take advantage of lower housing prices and other lifestyle advantages. What area do you expect to be the next big retail development market? Why? • Somersworth and Rochester as a natural overflow from Portsmouth. We are seeing more housing developments in these areas, and the commercial development is an outgrowth of such residential development. Please describe the retail leasing activity in your area. • There is very little vacancy. There are a number of retailers that want into the market, however, there is not a lot of retail vacancy or available land for development. What major leases have been closed recently? • Staples has taken a portion of the former Shaw’s on Route 108 in Stratham. Staples is also relocating its current Newington location to Crossings at Fox Run at the entrance to the mall. Both are around 24,000 square feet. Please give a measure of retail vacancy rates. • Vacancy rate in the Seacoast is likely to be around 5 percent. What types of retailers should look into your market in the coming year? What type of retail is needed? • Apparel, especially shoes, and natural foods. Would you like to make any additional observations about the retail market in your area? • The market is healthy and growing steadily to service incoming population, however there is limited area for future development in the current retail areas. We are also seeing more upscale retailers entering the market to accommodate the needs of the more affluent shopper.

New Hampshire Industrial Submitted by Peter Billipp, broker with The Kane Company in Portsmouth, New Hampshire. Posted 12-16-05. click here to see charts What area is your expertise? • Southeast New Hampshire and Seacoast New Hampshire. What trends do you see presently in industrial development in your area? • Over the past 2 years there have been a number of developments aimed at smaller industrial and office users in our market. Since the leasing of larger industrial and office vacancies has been slow, this has been a good strategy to build space suited to smaller, local users who are growing. What type of industrial product is doing well in your area? • Small condo and rental units of 1,500 to 3,000 square feet are doing well. Sales of industrial properties in the 10,000- to 50,000-square-foot range have been steady, with more demand than supply of this type of product. The cost of new construction and land prices have put new product at a disadvantage over existing buildings. A few regional investors have been buying larger vacant industrial properties for less than $30 per square foot and plan to subdivide them to appeal to smaller users. Who are the active industrial developers in your area? • Local developers and contractors including Astoria Properties, CCI and Jewett Construction have been building projects aimed at smaller users for lease or sale. The Kane Company is a developer of larger industrial/office projects. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • There has been no significant new speculative industrial development in the past few years. The area has seen company downsizings and plant closings and this has accounted for some of the large vacancies in the market. There have been some sales of industrial properties and some of the vacant space is being leased or subleased. Where is the majority of development taking place? Why is this area doing well? • Most of the industrial development in the past 5 years has been at The Pease International Tradeport in Portsmouth, New Hampshire. This former U.S. Air Force base has been slowly converted into the leading business park in the area. The Kane Company has undertaken a number of build-to-suits with clients such as Liberty Mutual, Flextronix, Ingersoll Rand and Emerson Electric This location has done well due to the on site airport, availability of zoned land and it’s easy access to major highways and other services. What area do you expect to be the next big industrial development market? • Towns such as Dover and Rochester, New Hampshire, should do well because they offer less expensive land and the towns between Portsmouth and Manchester should continue to do well as the cities grow toward each other. Please describe the industrial leasing activity in your area. • Industrial leasing showed a positive absorption of 96,000 square feet during the first 6 months of 2005, primarily due to subleases in Exeter and Newington, New Hampshire. Rents have increased slowly during the year and now range from $4.50 to $6.50 NNN depending on location, age, quality and amenities. Please describe the industrial sales activity in your area. • There is strong demand for buildings in the 10,000- to 50,000-square-foot range, with local and regional users interested in owning their real estate when debt service and operating expenses are favorably compared to lease rates. The highest owner-user sale price was reported for the sale of a 39,000-square-foot facility in Newington, New Hampshire, for just over $70 per square foot. Please give a measure of industrial vacancy rates. • Overall vacancy, including sublease space was reduced slightly to 8.7 percent during the first two quarters of 2005 for the area in and surrounding Portsmouth, New Hampshire. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in 2006? • Low interest rates have made the sales market strong for both users and investors. If interest rates continue to increase slowly and moderately in 2006, I don’t think it will have a significant impact on sales of industrial properties. Existing and older industrial properties will still be priced considerably below the cost of new construction. What industries do you expect to expand in 2006 to absorb a great deal of industrial space? • This area will not see a large amount of absorption in 2006, if the market and economy continue in a somewhat lackluster fashion. This is not a major urban area so we do not have significant warehousing and distribution facilities.

New Hampshire Office Submitted by Gail Hughes and Katherine W. Kane, CCIM, SIOR, of Portsmouth, New Hampshire-based The Kane Company. Posted 12-16-05. click here to see charts What area is your expertise? • Our market of expertise is the Greater New Hampshire Seacoast area, which encompasses Manchester to the west, Newburyport to the south and Rochester, New Hampshire/York, Maine to the north. What trends do you see presently in office development in your area? • One trend in the local office market is that Shadow Space, space for sublease, is expiring or filling. Previously, office absorption was occurring in this sector of the economy as opposed to direct lease absorption. • Another trend we are seeing is that growth is coming from existing local companies rather than start-ups or relocations. We are seeing this trend both with small tenants in executive suites as well as from larger users. Who are the active office developers in your area? • Major office developers in our area are Two International Group and Kane Development and Brady Sullivan Properties. Please name one or two significant office developments in your area. What impact will these projects have on the market? • Speculative new developments include    - 155 Borthwick Avenue, Portsmouth, NH (developed by Millenium LLC and Kane Development)    - 100 International Drive (developed by 2 International Group)    - The Jefferson Mill in Manchester (developed by Brady Sullivan Properties). • A few isolated smaller office buildings have been built for condominium sale or leasing for specific tenants. • One recent large build-to-suit development at Pease International Tradeport in Portsmouth was the construction at 231 Corporate Drive (developed by Kane Development) for Southern New Hampshire University’s new Portsmouth campus. Where is the majority of development taking place? Why is this area doing well? • The majority of development is taking place at Pease International Tradeport. The reasons the Tradeport is doing well are multifold. The availability of affordable large tracts of land over the last 10 years at Pease has encouraged development there even though the land is not sold to developers but leased on a long-term basis. The Tradeport is located close to downtown Portsmouth amenities and culture but is its own oasis of industry, with an onsite airport. Strategically positioned close to I-95 exit 5 north to Maine, south to Massachusetts and state highways to the west and north of New Hampshire enhance its desirability. What area do you expect to be the next big development market? Why? • Development in the Seacoast is going to be limited by the lack of affordable land for sale. Dover, New Hampshire, to the north of Portsmouth has been a residential refuge for charming and affordable housing but is gaining an edge on the office market as historic mills are converted to office space and filled. (Some have been empty for quite a while). • Liberty Mutual Insurance is adding 250,000 to 300,000 square feet to its existing facility at Sixth Street in Dover. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • The downtown central business district of Portsmouth continues to be popular among tenants and the newest, most glamorous buildings, such as 100 Market Street, continue to be able to negotiate Class A rental rates. Pease Tradeport and Commerce Center Business Parks also do well. Office space in northern communities such as Rochester, New Hampshire, vacated in recent years by high tech companies, continues to lag behind the more active markets to the south. Please give a measure of office vacancy rates. Please give a measure of available sublease space. • Overall office vacancy for the Seacoast of New Hampshire is running approximately 13 percent. This is down over previous quarters by about 1 percent per quarter. The total inventory of Seacoast New Hampshire office property is measured at 4.3 million square feet (of which 559,837 square feet is currently vacant). Year-to-date absorption has been 54,024 square feet. (Of the office vacancy just described, 121,601 square feet is sublease space.) What impact do current interest rates have on the office market? What predictions do you have for interest rates and their effect on the office market in 2006? • Current low interest rates encourage users to purchase real estate. The inventory of available office condominiums has virtually dried up. • As for 2006, Wall Street predictions appear to be for a gradual increase in interest rates. What will aid the leasing of office space in 2006 is a period of strong business expansion and it is difficult to determine whether we will be seeing that in next 12 months. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? • Job growth has been slow, unemployment rates have been stagnant and these trends directly mirror the demand for office space. Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in 2006 to absorb a great deal of office space? What areas will be affected? • Major local employers include Liberty Mutual, Timberland, Tyco, Irving Oil, Pannaway Technologies and Lonza Biologics. Expanding industries in the area are in the sectors of insurance, education, banking, high-tech and petroleum products and services. Would you like to make any additional observations about the office market in your area? • Whereas a local viewpoint on the next 12 months can be myopic and skewed, Citizens Bank recently conducted a survey of New England bank customers regarding their confidence in the local economies. The survey results revealed that mid-sized companies in New Hampshire are more positive about the economy than their counterparts in Massachusetts, Rhode Island and Connecticut.       “If you look at the New Hampshire perspective on the business climate here, it's much more robust here in New Hampshire than it is in New England and throughout the U.S. based on the survey," said Tom Metzger, president and CEO of Citizens Bank of New Hampshire. “New Hampshire companies show a higher percentage of companies planning to increase their workforce, and I think that is a very encouraging sign," he said. Citizens Bank surveyed 553 business executives, including 75 in New Hampshire. The others were in Massachusetts, Rhode Island and Connecticut.