The Boston industrial real estate market is definitely looking up. There has been strong positive absorption of square footage over the last three years, especially in Boston where large industrial facilities are increasingly converted to housing units, and the absorption trend is now spreading further out from the city and expanding across business categories. In Massachusetts, growth is particularly apparent in three key sectors: medical, food and auto parts. Here is a breakdown of how it’s playing out: 1. Medical. The medical field has seen extensive growth over the last couple years, particularly with medical device manufacturing, and that is good news for the industrial market. Owens & Minor, a Fortune 500 company, is the leading distributor of medical and surgical supplies to the acute care market. It added to its presence in the state at 20 Freedom Way in Franklin with a 100,000-square-foot expansion. This is on top of its existing space at 135 Constitution Drive, which totals 227,000 square feet. Another example includes PSS World Medical, an American distributor of medical products, equipment, billing services and pharmaceutical-related products, which is expanding and consolidating two locations into 50,000 square feet at Walpole Park South, in a spec building that …
Market Reports
While much of the suburbs, as well as pockets in Boston and Cambridge, continue to have a high inventory of office space, rents keep rising as vacancy is dropping in the area’s hottest submarkets — Boston’s Back Bay and East and Mid-Cambridge. Class A vacancy in the Back Bay now averages 6 percent while it’s even lower for Class A space in Mid-Cambridge and East Cambridge (1 percent in Kendall Square and 1.5 percent in Central Square). Average rents for Class A office space in the Back Bay are over $57 per square foot and almost $78 per square foot for high-rise space. In Cambridge, average Class A office and lab space rents are in the high $50s. Other Boston Trends • With demand increasing in the Seaport and even the low-rise tower space, many tenants from Cambridge are looking in other submarkets. In fact, Downtown Crossing has become the new Seaport, and North Station is seeing an uptick of activity as well. Average Class A rents in the Seaport are up to $52 per square foot, with much better value available in Downtown Crossing and North Station, where rents are in the mid-$30 range per square foot. • Demand …
It's been quite a turbulent ride; however, recovery is underway. Although retail inventory in Eastern Massachusetts/Greater Boston showed only slight gains, the decline in vacancy more than made up for it. At year-end 2012, total retail inventory totaled 189.5 million square feet. The amount of retail space in the region has increased 13.1 percent during the past 10 years. However, the recession took a toll on new development, and we’ve seen only a slight gain of 0.1 percent in the past 24 months. This slowdown has benefited the retail environment by increasing the demand for existing space. Approximately 2 million square feet of unoccupied space was filled during the year, which brought the vacancy rate to 7.8 percent from 8.9 percent a year ago — the largest drop in more than a decade. As a result, the year ended with net absorption totaling 2.05 million square feet. There wasn’t much movement among the ten largest communities in terms of retail space, although Braintree replaced Leominster at number 10. Boston has the largest amount of retail space, of course, followed by Cambridge. Natick, Brockton, and Danvers complete the list of the top five communities in terms of total retail square footage. …
Boston's waterfront redevelopment is generating thousands of jobs and facilitating growth across several employment sectors. The construction industry, in particular, has benefited as workers build thousands of residential units along the waterfront. Pier 4, a mixed-use project located in the Seaport District, is underway and will consist of three buildings to contain apartments, ground-level retail, condos, and a hotel or office space. Additionally, developers are moving forward with plans to build two 22-story towers in the Seaport Square mixed-use development, adding 800 apartments and 300,000 square feet of retail and entertainment space. This would be the first major project at the 23-acre site, considered the key to connecting the surrounding Fort Point, Fan Pier, Pier 4 and Waterside Place developments into a 24/7 urban environment. The developments are successfully transforming the area from sizable parking lots to a center that will draw employers and young professionals seeking a live-work-play lifestyle. In addition, many builders are acquiring older assets in prime areas of Boston and deploying capital in order to increase rents or convert to condos as empty-nesters and young adults seek more affordable ownership opportunities in affluent neighborhoods. Developers in search of conversion opportunities are targeting larger units with nice …
Anecdotally, by activity and by the numbers, the suburban Boston industrial market has definitely strengthened. If positive net absorption trends continue through the balance of the year, 2013 could end in territory that we have not seen since before the Great Recession. The momentum in the market has changed significantly in two years. For example, two years ago our firm was hired to sell a 53,000-square-foot single-story industrial building in Woburn for a third-generation plastics manufacturing company that was growing and wanted to buy a larger facility in the region. The company concurrently asked us to look for a larger building for them to buy. However, before putting an alternative building under contract, they would need to sell their Woburn property. In 2011, we did not have much activity from prospective buyers interested in our client’s property yet there were a number of viable purchase options available to them. Fast forward to the present, and we have multiple, highly qualified companies interested in buying their Woburn building — but now there is nothing to buy that meets our client’s criteria for size, quality and location. As a result, we have been forced to switch our acquisition strategy to buying land …
Positive demographic trends, low interest rates and Boston’s stable economy inspired a surge of investments in the New England multifamily market. Last year, multifamily transaction volume neared $1.2 billion across the region, roughly 70 percent of the $1.6 billion peak we experienced in 2007. Transaction volume has increased every year since 2008, fueling competition for product and driving down cap rates. Investors pursuing deals in Greater Boston’s inner ring are accustomed to cap rates in the low 4s and sometimes below. While low cap rates have been great for sellers, they are causing some investors to widen their investment parameters. Many groups are finding Boston’s economic momentum resonates beyond the 128 beltway, allowing for rental increases and limited vacancies previously unrealized. ARA has tracked sales from Rhode Island to New Hampshire and has seen an influx of foreign equity, mainly from Asia, the Middle East and Australia. This trend represents a change from the last cycle when Europeans, mostly Germany and Ireland, were the largest foreign capital source in the region. In recent years, the majority of investments targeted by these foreign players have been in the city of Boston and the immediate suburbs; however, ARA has tracked recent sales …
The vacancy rate for the 19.7 million-square-foot Cambridge office and lab market decreased from 11.5 percent to 10.3 percent during the third quarter, with more than 150,000 square feet of positive absorption. Year-to-date absorption totals 386,000 square feet, with all of the positive absorption occurring in the lab market. The lab market continues to be the driving engine of the Cambridge market and with four consecutive quarters of positive absorption, it shows no sign of slowing down. The two largest leases of the quarter were signed by Merrimack Pharmaceuticals (110,000 square feet), a homegrown Cambridge company, and Boston Biomedical Inc. (63,000 square feet), which will open an oncology R&D facility in Cambridge. Conditions in the Cambridge office market generally favor landlords despite three straight quarters of modestly negative net absorption. The office vacancy rate stands at 10.9 percent, but with some sizeable commitments expected to transact in the fourth quarter and a number of active tenants touring the market, conditions are tight, particularly in the East Cambridge submarket. Office Market The 10.3 million-square-foot Cambridge office market has been statistically flat for much of 2012, barely moving from 10 percent at 2011 year end to 10.9 percent at the end of …
The Boston apartment market will remain in favor of landlords in the coming quarters as new developments surface and rents reach peak levels, although residents may seek more affordable living options. The improving employment picture and a severe shortage of supply within Route 128 have tightened vacancy below 3 percent. By year end, asking rents will reach new record highs, which has already ignited a building frenzy throughout Boston. Nearly 1,500 units are under way in Suffolk County. These units will come online by 2014 and may ease rent growth. Meanwhile, demand in outlying areas is gaining steam as young professionals are being priced out of the core. Families and empty nesters alike are also migrating to the suburbs, where newer developments offer a sense of connection to the community similar to urban settings at more affordable rates. Developers are capitalizing on this trend and transforming areas near major transit stations into densely packed, master-planned communities. The redevelopment of the South Weymouth Naval Air Station, known as Southfield, is one example of this trend. The first phase of the mixed-use project in Norfolk County was recently completed and added 225 apartments, townhomes and top-notch amenities to the area. By the …
With all the construction vehicles on retail sites as you circle metro Boston, we can now quantify the retail slowdown attributable to the recession as a three-year window. Never has the local retail market been healthier than it is today. WS Development is under construction with its Whole Foods-anchored Meadowbrook Walk in Lynnfield. The Nordblom Company has begun 3rd Avenue, a Wegmans-anchored lifestyle project in Burlington. Market Basket is well under way at the former Polaroid site in Waltham. New England Development is building its Wegmans project in Chestnut Hill while WS redevelops the former Macy’s further east on Route 9. Also moving forward, though at a slightly earlier stage, is NED’s long-awaited Westwood project. A total of almost 3 million square feet of new high-profile — even iconic — retail space along Boston’s inner ring beltway is now upon us, exactly three years later than originally anticipated. Notably, grocery is driving all of these larger projects. While traditional market leader Stop & Shop makes only narrowly strategic moves and Shaw’s languishes, grocery chains of a wide range of sizes targeting distinct demographics have inspired development at both the local and regional level. Wegmans, Market Basket, Whole Foods, Price Rite …
Like many metro areas across the U.S., Boston’s 494 million-square-foot industrial market slowed as we approached elections and the end of 2012. Despite mixed signals, the situation isn’t entirely dour, and there are signs of optimism in terms of demand and activity, evidenced by a slight decrease in vacancy and 475,000 square feet of net absorption in the first half of 2012, according to CoStar Group. At a more macro level, the Boston area’s thriving technology sector has led to job growth and declining unemployment, which ultimately increases consumer demand and benefits the industrial property market. The Boston industrial market has been flat for more than three years now, but that’s created opportunities for end users to lease higher-quality properties than they previously inhabited while reducing occupancy costs, which is the prevalent trend both in Boston and nationwide. Tenants seek to improve efficiency by consolidating warehouse and distribution into more modern properties with higher clear-height ceilings and other features. While users demand more efficient and flexible industrial space, they also demand more flexible — and generally shorter — lease terms. If tenants can achieve both operational efficiency and lower costs through outsourcing to third-party logistics providers (3PLs), even better. End …