Boston Industrial Market Posts Lowest Vacancy Seen in Decades
The commercial real estate market in the Greater Boston area continued its torrid pace in the first half of 2017. All sections of the commercial real estate market inside Route 128 are white hot, especially after the announcement that General Electric will move its corporate headquarters to the Seaport District. Recent data indicates that Boston has one of the hottest economies in the United States and ranks as one of the top economies in the world. The 2017 Investment Intensity Index ranks Boston as the fourth market in the U.S. and 14th in the world for commercial real estate investment.
In the industrial sector, which includes warehouse/distribution and flex/R&D product, vacancies are at the lowest point seen in decades. At the end of the first quarter the vacancy rate decreased to 5.7 percent. Net absorption totaled 2.24 million square feet for the quarter. The fact that the urban industrial market is continually shrinking as aging industrial properties are redeveloped into “higher and better uses” has caused a tremendous displacement of companies from inside Route 128 to areas outside the coveted Route 95 corridor. A dearth of available institutional-quality industrial product exists in today’s market with just over 13 percent of the industrial inventory built since 2000 and vacancies at only 6 percent on such product. Legalized marijuana in Massachusetts should further drive down vacancies and cause rents to continue to increase.
At the end of the first quarter, flex projects had an overall vacancy rate of 7.2 percent, while warehouse buildings reported a vacancy rate of 5.2 percent. The average quoted asking rental rate for available industrial space at the end of the first quarter was $6.90, triple net, while the average quoted rate in the flex sector was $10.49, triple net. During the first quarter of 2017, seven buildings totaling 438,996 square feet were completed in the Greater Boston area and there is currently 3.07 million square feet of industrial space under construction.
Without question, the music in the Greater Boston commercial real estate arena continues to play with no end in sight.
— By David Stubblebine, president, The Stubblebine Co./CORFAC International. This article first appeared in the October 2017 issue of Northeast Real Estate Business magazine.