Within the office sector, 2017 showed stark improvement over the previous year. While momentum was surging with a higher volume of lease deals in 2016, 2017 has shown much larger tenants in the Huntsville market, including some major relocations with more coming soon.
Politics aside, the consensus among the office community has been that the election of President Donald Trump in 2016 has been a boom for the defense industry as expectations are high and contracts are expected to continue to flow to fund many of the business sectors related to defense that thrive in the Huntsville metro area. That encouragement has led to excitement in 2017 and more defense industry related players have been less hesitant than they were in the past to consider expansions and relocations to higher class facilities, and it has shown within the statistics.
In Huntsville, much like the national trend, class A office space has seen a decline in vacancy and also a rise in rental rates. Research Park Class-A product has reached $19.89 per square foot, with Downtown Huntsville Class-A product reaching $24.87, a 4.5% change from 3Q16. New construction is underway on multiple multi-tenant projects in Downtown Huntsville, while some single tenant projects are actively evolving within the Research Park submarket.
Companies have had Huntsville on their radar, giving a boom to the local office market. Additions like Jeff Bezos-owned Blue Origin and expansions by companies like Aerojet Rocketdyne and Parsons have enthused office building owners and have also added new prospects to the market through their suppliers and local excitement that have not been previously seen.
Appetite for office development, while enticing, is still not rampant in Huntsville as in other markets. Downtown land prices are hovering in the $35- $40 per square foot range and the desire for land and redevelopment seems to be increasing. Major projects such as Mid-City, Town Madison, and Constellation are expected to add hundreds of thousands of square feet of modern office space to the Huntsville Metro area, which will likely break rate barriers seen in previous years. Finally, anecdotal evidence indicates that more activity is prevalent, the size of the activity is larger and the momentum of 2017 should carry into