PORTSMOUTH — A new study says Portsmouth’s Melville area could help Aquidneck Island retain and attract growing marine technology and defense companies.

There’s an irony in that recommendation: One of the report’s prime examples of a fast-growing company that needed more space is Vatn Systems, an undersea technology firm that started in Portsmouth before moving its headquarters and manufacturing operations to Bristol.

Vatn was founded in Portsmouth in 2023 and quickly attracted millions of dollars in investment as it developed autonomous underwater vehicles for military and other applications. By 2025, however, the company had moved to Unity Park in Bristol, establishing 9,000 square feet of office space and another 9,000 square feet for manufacturing.

It has continued to grow there. The report says Vatn recently acquired another 90,000-square-foot space in Bristol.

The company’s trajectory illustrates one of the central concerns raised in the “Greater Newport and Aquidneck Island Commercial Real Estate Analysis,” prepared for the Greater Newport Chamber of Commerce by Fourth Economy Consulting.

The study found an extremely tight market for office, retail and industrial space throughout Newport and Bristol counties. Growing firms looking for larger offices, manufacturing facilities or flexible combinations of the two can struggle to find suitable and affordable locations.

The problem could become more acute. Key growth sectors — including professional, scientific and technical services, engineering, computer systems design and manufacturing — are projected to add more than 1,700 jobs by 2035. Accommodating that growth would require an estimated 1.47 million square feet of additional office and flexible industrial space, the report said.

Plenty zoned, but little available

On paper, Portsmouth would appear to have considerable room for such growth.

Across Newport, Middletown and Portsmouth, about 3,152 acres are zoned for commercial or industrial uses. Portsmouth alone accounts for 1,395 acres — substantially more than either of the other two communities.

But only about 446 Portsmouth acres are actually being used commercially or industrially.

That does not mean the remaining acreage is vacant or readily available for development. The report says the gap between zoning and actual use can reflect numerous obstacles, including parcel size and affordability and inadequate water, sewer, road access or other infrastructure needed by modern businesses.

There is also a particular shortage of light-industrial space. Only 106 acres across Aquidneck Island — less than 2% of its zoned land — are specifically zoned for light-industrial uses.

As of April, just six industrial properties were available for lease across Newport and Bristol counties, and only two were zoned for flex-space uses. Such properties are particularly important to startups and technology companies that may need a combination of offices, research and development, assembly and small-scale manufacturing space.

Looking again at Melville

The report points to Melville and the former Navy Tank Farms as one place where that shortage could be addressed, identifying waterfront industrial buildings there as candidates for conversion to “marine tech flex” space.

That recommendation takes on added significance in light of Vatn’s departure from Portsmouth.

The company was founded in what the report describes as the center of New England’s underwater technology corridor. Its growth required not simply conventional office space, but manufacturing capacity as well. When Vatn made that transition, it did so in Bristol rather than Portsmouth.

The report does not say that a lack of suitable Portsmouth real estate was the specific reason Vatn moved to Bristol. But it presents the company as an example of rapid growth immediately before discussing the broader shortage of suitable commercial and industrial properties and opportunities for adaptive reuse.

Melville itself presents challenges. A separate Aquidneck Island and Naval Station Newport Compatible Use Study cited in the report found that surplus Navy properties depend on Navy utility systems. Water and sewer infrastructure would need to be transferred to municipal control or privatized to support future development.

Transportation improvements, including upgrades to Burma Road and the Stringham Road Connector, could also improve access to the Melville and Weaver Cove areas.

More broadly, the commercial real estate report recommends that Aquidneck Island communities identify properties suitable for reuse, modernize zoning to accommodate flexible and light-manufacturing facilities and assess water, sewer, power and high-speed data capacity on industrially zoned land.

It also suggests exploring creation of a regional development authority to attract investment and help finance economic development projects.

The stakes, according to the report, extend beyond real estate. Without significantly more office and flexible industrial space over the next decade, it warns, the region may have difficulty keeping the high-paying jobs expected to accompany growth in technology, engineering, manufacturing and related industries.

Vatn Systems offers a particularly local example: A company founded in Portsmouth found the space for its next stage of growth across the bay in Bristol.