Commercial real estate in Albany: Lots of demand for industrial and office space, and room to grow for coworking

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Twice a year, CBRE-Albany releases an overview of the office and industrial market in the region.

This week, the region’s largest broker released the report covering the second half of 2019. The data provides a snapshot of what’s happening in commercial leasing, development and construction trends across the region.

Here are three takeaways from the report:

Demand continues to outstrip supply in the industrial market

The vacancy for industrial properties in the region was just 3.5% in the second half of 2019, the lowest percentage in the past five years. That has continued to push asking lease rates higher, rising 5.1% between2018 and 2019.

A new report on commercial real estate trends from CBRE-Albany shows vacancy is down for both office and industrial space in the region.

The report says new construction projects of 50,000 square feet or larger are seeing triple-net lease rates upwards of $7.50 to $8 per square foot, which the report states are “levels not previously experienced in the region.” Despite that, few industrial properties are being built on spec.

Developer Mark Rekucki of MJ Properties is one of the few to start construction without a specific tenant in place, and recently purchased more land on a busy corridor in Saratoga County.

The office market remains steady, but some industries are doing better than others

 The vacancy rate fell to 11.8% for the region’s office space, down from 12.4% in the second half of 2018, and occupancy increased both in downtown business districts and the suburban office parks.

There are several large new offices expected to open this year, including new 150,000-square-foot buildings for Empire BlueCross BlueShield and Ayco in Albany County. In Saratoga County, four medical facilities are under construction now totaling around 118,000 square feet of new office space. While demand for health care space is growing, the report notes that changes in the legal industry are beginning to alter demand patterns from law firms, with more seeking 10,000-square- foot or smaller sites. That is opening up larger professional spaces for other clients.

Room to grow in the flexible office market

 Flex office and coworking space is a very small piece of the local market. In 2018, it was just 0.25% of office inventory, rising to 0.33% last year. But that could change quickly this year, with new investors taking up far larger locations.

The big market mover: Novel Coworking’s $6.5 million investment in downtown Albany. The 136,000-square-foot building is being renovated now, and the first phase of that project — 40,000 square feet — would be nearly double the size of the current largest coworking space in the region.

Albany has a ways to go to catch up to larger markets, though: Among the top 40 U.S. metros, flex office space took up about 2.1% of inventory at the end of 2019, according to national data from CBRE.

Published by The Albany Business Journal

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