Sean Teague, Cassidy Turley
Boston is known for its top-notch universities that spawn world-class technology, pharmaceutical and bio firms, not to mention its leading money management and financial services base. These factors support one of the most vibrant office, residential and retail markets in the nation. Often overlooked, Boston’s industrial market may not be as glamorous as gleaming new office and multifamily projects rising along the waterfront, but its steady performance and strong recovery are impressive nonetheless.
Vacancy in Boston’s 117 million-square-foot industrial market declined 1 percent between the second quarter of 2013 and mid-2014, from 13.2 percent to 12.1 percent. A paucity of new construction and deliveries suggests further vacancy declines. Only 41,000 square feet of industrial product has been delivered through midyear, and 76,000 square feet was under construction at that point.
Looking ahead slightly, the industrial market is on track to absorb approximately 1.4 million square feet in 2014, with 680,000 square feet of absorption recorded through June. This total would exceed 2011 and 2012 totals but trail 2013’s 1.8 million square feet of net absorption.
Boston’s Bread & Butter and E-commerce
High land values and competition from markets such as Central and Northern New Jersey, which can serve broader populations at lower cost, limit the prospects for bulk industrial development. Still, a series of recent leases in the 100,000- to 250,000-square-foot range have driven the market, along with a steady stream of smaller deals under 100,000 square feet.
Of course, Amazon and e-commerce companies are changing the industrial landscape across the U.S., including Boston. Amazon has already established a 1 million-square-foot fulfillment center in nearby Windsor, Conn., and reportedly has signed a 300,000-square-foot lease in Stoughton, Mass.
Otherwise, third-party logistics providers (3PLs) and local distribution drives the market. Locally based Sullivan Tire recently expanded into 200,000 square feet at Myles Standish Industrial Park in Taunton, Mass., while Max Finkelstein Tire expanded by 115,000 square feet at Boston Business Park. Leading 3PL deals of the past year include Owens & Minor’s 234,664-square-foot lease in the I-95 South submarket and List Logistics’ 105,232-square-foot lease in the Lowell/Chelmsford submarket.
On the investment sales side, Boston’s industrial market generally doesn’t see many institutional trades, but investors’ hunger for quality industrial product piques interest beyond core markets such as Northern New Jersey, Chicago and Los Angeles. For example, Exeter Realty Capital, one of the most active industrial investors in the U.S., acquired a $90 million portfolio from Colony Realty Partners at the end of 2012. The eight-property deal included six buildings at Forge Park in Franklin, Mass., and two in Myles Standish Industrial Park in Taunton, Mass. Similarly, Liberty Property Trust’s 2013 acquisition of Cabot Industrial Value Fund III’s $1.475 billion portfolio included seven Boston properties totaling 410,000 square feet.
The strength of Boston’s overall economy and forecast for continued growth should propel momentum locally for the industrial market and drive improved occupancy and increased rents. With solid investment and absorption stats over the past three years, Boston’s industrial market is as strong as it’s ever been — and poised to only get stronger.
— By Sean Teague, Executive Managing Director, Principal, Cassidy Turley. This article first appeared in the October 2014 issue of Northeast Real Estate Business magazine.