'A Permanent Extension': New Hampshire Sees A Boost In Demand As Jobs And Population Grow

With swaths of developable land and a lower cost of living, New Hampshire may become a new stomping ground for New England investors and developers.

New Hampshire has seen an influx of interest as the radius for Greater Boston development prospects has extended North, creating new economic development opportunities. With access to the highway and proximity to downtown Boston, the area has drawn residents and companies while also bringing in new investment appetite.

But while the state is appealing for its business-friendly attitude, tax-free status and available land, developers that spoke at Bisnow's New Hampshire State of the Market event last month said infrastructure issues, capital market strains and access to oversubscribed funding sources have placed a heavy burden on new and much-needed multifamily development.

"Large developers and any institutional owners of real estate absolutely redlined New Hampshire," Cushman & Wakefield Executive Managing Director Tom Farrelly said at the Manchester Country Club in Bedford, New Hampshire. "New Hampshire is now a permanent extension of the Massachusetts marketplace"

For decades, investors and developers alike were more than hesitant to build in New Hampshire. But as Covid began to shape the way people worked throughout New England, the sentiment around investing in the state began to change.

Farrelly said Cushman & Wakefield expanded into the market realizing there was no comprehensive data or tenant representation, making it hard for investors to come in. Since then, the market has grown and become an attractive place to do business.

"I used to call on companies and begged them to come up and look at real estate and they wouldn't do it," Farrelly said. "Now New Hampshire is on every single tour. Not only on the list, but at the top of the list, because of no sales tax, no income tax, no inventory tax, and even more importantly, no estate tax."

With many workers taking advantage of work-from-home policies, many Massachusetts residents migrated to Southern New Hampshire to be close enough to Boston while having a lower cost of living.

The state's population reached 1.4 million as of July 2023, with an increase of 1.8%, or 24,500 new residents, since April 2020, according to the University of New Hampshire. Only 41.3% of the state's population were, much lower than 54.3% across all other New England states.

The state's population gain exceeded every other state in the Northeast except Maine in 2023, according to UNH.

One city that has benefited from the growth was Manchester. Just under an hour from Boston, the city of 553,000 residents has seen steady population growth since 2020. That growth was seen because of the state's tax structure, low cost of living and its proximity to the White Mountains, major U.S. cities and Canada.

"There's a lot of people that have moved to New Hampshire, whether that be for family, or for their jobs, or for recreation opportunities," said Jodie Nazaka, director of economic development for the City of Manchester. "We take advantage of that in Manchester. we promote our assets and our location. We are trying to offer more incentives, not only for our residents but also for our investors."

With this population boost, there's also been an influx of institutional capital entering the market.

One of the biggest land sales occurred in the state last year, with Target Corp. acquiring the former Green Meadow Golf Club for $122M to build a 1.4M SF logistics center, the Union Leader reported. The retailer plans to partner with a developer to build on the 375-acre parcel.

Developers who have been in the market over the last decades said they are seeing a massive change and interest from bigger players.

"We realized that from a basis perspective, there was a tremendous amount of value that you could create," R.J. Kelly CEO Brandon Kelly said. "We're seeing that inflow of institutional capital here."

Kelly said that the companies that have come into the space have helped to increase the population growth and are moving here to continue to grow their own companies.

"We're seeing companies, especially since the millionaire's tax in Massachusetts was put in, really want to push into New Hampshire, and that's also going to drive this influx of capital," he said.

In December 2023, New Balance broke ground on a New Hampshire manufacturing plant. The $70M, 102K SF building will be located in Londonberry, near the Manchester-Boston Regional Airport, Manufacturing Dive reported. The site will create more than 150 jobs, with intentions of increasing to 240 in the first year.

Nazaka said that the area is also known as "ReGen Valley" because of the abundance of life sciences workers. The Advance Regenerative Manufacturing Institute calls Manchester its home and produces human organs, cells and tissues for medical transplants, WMUR reported.

"There's so much more intellectual property and growth that's happening out of that," she said. "It's going to be huge for the City of Manchester, it's going to be huge for the state of New Hampshire and it's going to be huge for the greater Northeast."

With this job boom, there has been a greater need for housing throughout Southern New Hampshire. Across the region, there's been a below 1% vacancy rate due to major migration, which has left housing developers to play catch up, according to the New Hampshire 2023 Residential Rental Cost Survey.

Time and time again, Manchester has been ranked one of the hottest real estate markets in the country due to its affordability and proximity to major metros like Boston, according to Realtor.com. Manchester metro home prices have risen 51.2% in the last four years as of April 2024, with Bostonians making up a third of the potential buyers.

Nazaka said that the city has been pushing to bring in more affordable housing, selling 15 tax-deeded properties at auction, with the proceeds being put into an affordable housing fund.

"We're trying to build up our coffers," Nazaka said. "When developers come in, we can incentivize them to add more affordable units."

Nazaka said that they have also had to rely on the help of surrounding communities to boost housing production efforts.

However, building this type of housing has been difficult in the last couple of years as construction costs and interest rates have been ultra-high, making it hard to make projects pencil out.

"There's a lot of projects that are getting permitted, there's a lot of interest," Eckman Construction Vice President Preston Hunter said. "The challenges, however, are leading to a lot of those projects that have either been approved or perhaps even in the process aren't necessarily making it to construction. There aren't as many shovels hitting the ground right now."

The state needs to bring on approximately 60,000 housing units by 2030 and 90,000 by 2040 to curb the housing crunch, according to a New Hampshire Housing Study. Matt Menning, principal at Elm Grove Cos., which owns 18 apartment communities in Massachusetts and New Hampshire, said that in the last three years, less than 4,300 units have come onto the market.

"What's gonna give?" Menning said. "Is it going to be interest rates? Is it just that affordability is going to cool demand or maybe construction costs come down."

Sheehan Phinney shareholder Gregory Chakmakas said that developing affordable housing in the state has also been difficult, with varying funding options swamped and more competitive to obtain because there isn't infrastructure in place to handle the new demand.

"I think one of the problems facing New Hampshire is a lot of those resources are oversubscribed," Chakmakas said. "There's not enough buckets to fill out your capital stack to meet all of the demand."

On top of that, the lack of power and infrastructure has stalled certain projects indefinitely, leading to greater frustration among developers. NIMBY sentiment in the more rural parts of the state has worsened the problem.

"It doesn't appear to be any silver bullet," Menning said. "The local control is very strong in New Hampshire. There are major benefits to it, but I'm not against it. But you get a huge diversity of application of law and application of zoning and density because of that, and the state is very hesitant to impose any mandates on the municipalities."