Written by nereal on March 15, 2017
Chittenden County Vermont Showing Slowed Growth with Areas of Opportunity
Chittenden County has experienced a flurry of development and change in the last two years and the market is one to watch. A low point was the closing of Burlington College, which offered an alternative to larger, more expensive, traditional schools such as the University of Vermont. Due to overwhelming debt they sold 27.5 acres of waterfront property in 2015, closed their doors in May of 2016 and then sold an additional 32 acres and their 77,000 SF headquarters building. Developer Eric Farrell has purchased the Burlington College property and is proposing a 675 unit development containing a mix of multi-story condos and rental apartments.
The retail market in Chittenden County showed steady growth in 2016 with a growth rate of 0.7% and a vacancy rate of 4.8%. The historical average vacancy rate is 6.5%. Growth in 2017 is projected to be 2% with the help of the redevelopment of the Burlington Town Center property in downtown Burlington. Though previously slowed due to public opinion and zoning regulations, the redevelopment that will add 274 apartments (55 of them affordable), 211,000 SF of office and 132,000 SF of new retail space is moving forward and construction is expected to begin in 2017. This year will also see an additional co-op food store location open in Burlington consisting of a new 27,000 SF store.
Many mixed use projects combine retail with residential. This is the case in Champlain College’s development of a mixed use property containing 5,000 SF of retail as well as approximately 200 student housing apartments in downtown Burlington on which construction will begin in 2017. Historically low vacancy rates in the apartment rental market led to a flurry of growth that peaked in 2016 with an increase from 2015 of a low 0.9% vacancy rate to current rate of 4.4%. In 2016 alone, 689 new units were added to the market and 323 more are expected in 2017.
We will continue to see growth in the retail and residential markets as South Burlington formulates a plan for their vision of a new “city center” akin to what exists in Burlington and, soon, Essex. Their preliminary plans include adding 20,000 SF of retail space, a 100 room hotel, 51 extended stay suites and 77 residential units. At the center of this development is the University Mall, what some consider a defunct and no longer profitable enclosed mall that has received attention after it fell into foreclosure in July 2016. This will likely lead to a major redevelopment of the property.
Though getting less attention, the industrial market remains a viable field of investment that is currently undersupplied and maintaining stable rental rates. There was a growth rate in 2016 of 1.2% and growth in 2017 is projected to be 0.9%. Vacancy is at 5.6%, which is 23% lower than the historical average.
The office market in Chittenden County remains vastly oversupplied with weak demand. Growth in 2016 was at 0.9% with 81,000 SF of new office hitting the market and absorbing much of the new interest. Growth in 2017 is expected to be at a rate of 1%. Vacant is currently at 9.7%, which is 24% higher than the historical average. As expected, this is putting negative pressure on rental rates.
Chittenden County, and particularly Burlington and South Burlington, have become hubs for growth and have caught the eye of both small and larger investors. It will be interesting to see how the development described above will influence the landscape of this state known for its rural appeal.
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*Data provided by the December 2016 Allen & Brooks Report.
Originally printed in the January 27th – February 2nd New England Real Estate Journal.