Newport County Commercial Real Estate Update
Commercial Real Estate Update in Newport County
June 2025
OFFICE MARKET
Small office market remains very strong
People are continuing to look for space to work outside of their homes. Local entrepreneur activity complemented by remote and hybrid corporate professionals seeking space. Clear preference for private offices over collaborative workspaces among current prospects. Data demonstrated lower vacancy rates and increased gross rental income when larger spaces are subdivided for multiple tenants. The largest vacancies we noticed this year have been government contractor businesses who have abruptly lost their funding.
Large office demand shrinking
Hybrid work models have reduced space requirements, yet market remains robust with just 5.1% vacancy. Companies prioritizing workspace quality as employee retention strategy, driving amenity-focused upgrades. In January 2024 state legislation facilitated office-to-residential conversions through increased density allowance and modified parking requirements. Early-stage regulatory shift with potentially significant long-term implications for commercial development strategy. The market’s currently in observation phase regarding conversion opportunity impacts. Cost of construction has been the biggest roadblock.
RETAIL MARKET
Little to no vacancy
Historically low vacancy rate in both tourist and community center type areas. This has been the trend for two years now. Retail rates are increasing slowly due to low inventory. Overall temperature read from retailers is that staffing is still the largest hurdle, but sales support their decision to renew their lease contracts. Staffing still directly affected by lack of affordable housing. Big Box vacancies have been filled, and quickly: Christmas Tree Shop → Brown Health Primary Care, GameStop → BTone Fitness, Bed Bath & Beyond → Home Goods. New mixed-use development underway: Rosebrook Commons. A mix of 160 apartments with commercial units on the first floor. 20,000 square feet total, up to 12 units. Interest is slow on these retail units, but we anticipate activity to increase as the project moves along/ is more visible.
HOSPITALITY MARKET
Short term regulations
Significant 2024 regulatory changes restricted short-term rental licenses to limited and general business zones only. Previous residential zone licensing opportunities now eliminated, concentrating rental inventory in commercial districts. This has created an influx in property owners, in residential zones, looking to do the summer/winter model and their leases now must be at least 30 days long. Last summer the inventory was flooded with properties who were previously on Airbnb/VRBO looking to make the same income with increased summer monthly rates. Many homes were not leased, and I expect the same to happen this summer. This will ultimately cause the property owner to either adapt a year-round rental model or sell the previously performing asset.
INDUSTRIAL MARKET
Too much inventory?
2020-2023 was the peak for industrial demand. We have seen over and over again that Trades survive economic downturns and even ‘pandemics’. Two years ago I would have said industrial is our strongest market. Inventors took notice and started to build. The new tradesman developments to note are: 2949 East Main Road - 9,000 SqFt tradesman center, 165 Oliphant Lane- 16,560 SqFt, Tupelo Cove (condo conversion)- 16 units total, 24,000 SqFt, Coddington Cove (under construction) 56,000 SqFt.
INVESTMANT MARKET
Owner/User vs. Investment
There have been very few investment sales; a majority of recent sales have a personal use or development component. Most Investment sales volume remains limited with transactions predominantly driven by: end-user acquisition for personal operational needs Properties with development potential, current investor yield expectations centered around 7% capitalization rate in the Newport market, elevated interest rate environment directly constraining investor acquisition capacity, owner-operator acquisitions dominating transaction landscape, frequently leveraging SBA 504 financing programs, significant valuation concerns emerging at intersection of: escalating property values and rising construction costs resulting appraisal gaps affecting transaction completion.
