Commercial Real Estate Development in New Hampshire: Opportunities, Trends, and Challenges

By James Kerouac

The commercial real estate market in New Hampshire has seen significant shifts since the start of the century. From the Great Recession to a post-pandemic market, opportunities for development remain, but certain trends and headwinds have shifted development strategy. Recently Shareholder and Real Estate Practice Group Co-Chair Jim Kerouac was featured in the New Hampshire Business Review for an “Ask the Experts” Q&A. Below is his interview where he weighs in on opportunities, trends, and challenges in the industry.

Q: What has changed since you began your commercial real estate practice in New Hampshire two decades ago?

It’s odd to think that I’ve been doing this for more than two decades.  The commercial real estate market has experienced significant changes during this time, going through various challenging and positive cycles. During the Great Recession, I regularly helped clients with loan workouts and foreclosures. Afterward, and before and during the pandemic, there was a period of low interest rates and an active real estate market.  During that time, we begin seeing an influx in institutional capital to New Hampshire. We continue to see more investment from out-of-state capital.

The pandemic and the following steep rise in inflation have further shifted the market. As we all know, the pandemic changed work habits, reducing the demand for commercial office space. There were stretches earlier in my career where I regularly did deals involving commercial office buildings, including leasing, buying, and selling of properties. Now, there’s a trend towards repurposing these properties, such as converting office spaces into multifamily properties or mixed-use developments, particularly in Manchester.

Q: What are current trends and challenges you’re seeing with the commercial real estate development industry?

Inflation continues to affect our clients’ ability to develop property in a cost-effective way. Construction materials are more expensive than before the pandemic and supply chain issues plagued development during and after the pandemic. Those factors, coupled with volatile interest rates, have made it more difficult to get deals done, especially projects that involve development and redevelopment of property. This forces clients to think outside of the box to get projects over the finish line. We help our clients by trying to identify different sources of capital or finding creative ways to structure deals. Historically, developers didn’t face these challenges.

Another challenge is infrastructure, particularly water and sewer availability, which hinders dense housing projects in areas without public services. Additionally, the power availability on the transmission grid is a concern for larger industrial projects.

Q: What is the current state of affordable housing development in New Hampshire, and what’s coming?

It is well documented that New Hampshire has a major deficit in available housing, which is especially acute with respect to workforce and affordable housing. Building more housing has been challenging for many reasons, from NIMBYism to soaring construction costs and interest rates. On the positive side, it appears that housing, especially workforce housing and affordable housing, is getting more attention in Concord and Washington, DC. We are seeing more efforts to find ways to provide funding for additional development, but projects still face barriers. The funding of affordable housing development largely relies on the federal Low-Income Housing Tax Credit and other state and federal subsidy programs.  Participation in such programs is competitive and there are significant barriers to entry in those programs.

Q: How do you help affordable housing developers bring their projects to life?

Our real estate attorneys possess a deep understanding of both the business of real estate development and the associated legal challenges. We assist clients in crafting comprehensive legal and business strategies to take projects from conception to construction and operation. Additionally, our land use lawyers are experts in navigating the sometimes-byzantine process of obtaining the necessary permits and approvals for development property. In addition, our Government and Public Affairs practice offers a strong network of connections to key decision-makers in Concord.

Read the original NHBR feature HERE.