The general availability of office space for lease has remained relatively steady over the past year. In Providence,  the overall vacancy rate has increased slightly to 11% from 10% last year. Vacancies in the Class A and B properties remained constant at about 9%, in a market that totals about 6 million square feet.  As planned, GTech and Fidelity Investments took possession of over 250,000 square feet of space in Capital Center.  There was reasonable leasing activity in other prime properties while there was limited demand in the secondary office buildings.  Besides GTech and Fidelity, the big office news in Providence was the sale of Fleet Center, 101 Friendship Street and Gateway Center, totaling 510,000 square feet.  Prior to 2004, large real estate investors were reluctant to enter the market, but over the past two years, six prime office buildings were sold to national grade investors.  Also of interest is the continued redevelopment of former mill complexes with approximately 500,000 square feet to come on line in 2007 and 2008 for use as office, retail and residential space, all in the nearby western neighborhoods.

The Rhode Island suburban office market totals about 6.5 million square feet and in 2006, vacancies dropped almost 2% to about 8%.  All sub-markets, except for the fringe areas of Providence, experienced positive absorption.  This is especially true of the East and West Bay Areas.  Of special note is the development success of Michael Integlia who has built and leased over 1,000,000 square feet in the Warwick market.  Integlia's properties now command rental rates of $23.00 to $24.50 per square foot, exceeding previous high rents which are rarely higher than $20.00 per square foot.  The southern suburbs will have an influx of over 500,000 square feet of new construction in 2007, less than half of which is pre-leased.  The northern part of the state is experiencing a noticeable slow down in demand as we go into 2007.

The industrial market, with a few exceptions, is still lacking any speculative development or build to suit construction due to the relative high cost of construction, lack of land ready to develop and the weak lease market. With rental rates generally holding between $2.00 - $5.00 per square foot, triple net, spec construction is not viable. The overall vacancy rate remains well below 10% for non-mill type property in this market, which is about 50,000,000 square feet.  Most of the larger transactions that occur in this market remain sales, and there is a limited supply of available properties.  The decline of manufacturing is being offset by the conversion of properties to sales-service and back office uses, along with mill type properites going to residential in many cases. Leasing activity continues to be very soft.

The retail market continues to grow with the ongoing development and redevelopment of the primary retail corridor in Rhode Island, which is Route 2 through Cranston and Warwick, and along Routes 295 and 6 in the Johnston area.  Also, along Route 6 in Seekonk and Route 1 in Attleboro, Massachusetts we continue to have development activities with limited vacancies.  Development and the redevelopment of the big box retailers are dominating activities and new investors have acquired several existing centers.  In Providence and in Cranston we are seeing upscale and contemporary national chain restaurants penetrating the Rhode Island market for the first time.  These restaurants have avoided the small Rhode Island market in the past, but with the addition of upscale hotels, office and residential space, the Ocean State has finally attracted these establishments.