In the Greater Boston area, retail real estate seems to have a hopeful outlook for 2012 and beyond. Market conditions in the general Boston retail real estate realm improved slightly with the overall retail vacancy rate decreasing from 4.8 percent in the second quarter of 2011 to 4.6 percent in the third quarter — down significantly from the 5 percent fourth quarter 2010 (Costar Q3 2011 Boston Retail Market Retail Report). Boston’s retail net absorption increased dramatically to a positive 1.09 million square feet in third quarter 2011 — up from a positive 822,957 square feet in the previous quarter. Average quoted asking rental rates however were still low at $15.27 per square foot in third quarter 2011. In addition to improvements in vacancy rates and net absorption, the Boston retail market had several major retail lease signings in 2011, including a 60,000-square-foot Stop & Shop relocation in North Reading, Massachusetts, and a 45,000-square-foot Whole Foods Market signing in Lynnfield, Massachusetts. Also notable was the development of the 600,000-square-foot Northborough Crossing project anchored by Wegmans. The Boston area retail real estate scene should continue to show signs of recovery and positive motion, as the local economy slowly pushes upward toward …
Market Reports
Despite an economic recovery that is characterized on a national level as listless and lacking vitality, a rising national unemployment rate and apparent challenges in distancing ourselves from the debt crisis, the commercial real estate market in Massachusetts has begun to pick up steam. Market indicators for the Greater Boston market continue to improve, albeit slowly, especially in the high growth sectors such as the pharmaceutical and biotechnology industries. Employment in the Boston Metropolitan Statistical Area (MSA) grew by 2.1 percent in the 12 months from August 2010 to August 2011. New jobs dropped unemployment to 6.4 percent from 7.5 percent a year earlier, compared with Massachusetts’ unemployment of 7 percent and the national unemployment of 9.1 percent as of August 2011. The leading non-farm payroll jobs in the Boston MSA are education and health services, trade transportation and utilities and professional and business services, according to the U.S. Department of Labor’s Bureau of Labor Statistics. The overall Boston industrial market ended mid-year 2011 with a vacancy rate of 11.2 percent. The vacancy rate was down from earlier in the year with net absorption equating to positive 1.72 million square feet in the quarter. From mid-2010 to mid-2011, net absorption …
The Boston apartment market is on fire. As a result there is a vast amount of equity, developer interest, and investor interest focused on the Greater Boston Market. What does this mean for the future of the Greater Boston Apartment market? First a matter of definition, the metro Boston market encompasses all towns within Interstate 495 (Boston’s second beltway) and inwards and, therefore, does not include Central and Western Massachusetts, New Hampshire nor Rhode Island. The overall vacancy was 4.2 percent in second quarter 2011 (REIS: Metro Boston submarket). Class A property has seen the greatest rent growth, 1.5 percent in Q2 2011, alone. However, Class B property has maintained a lower vacancy at 4.5 percent during Q2 2011, dropping from 5.9 percent. The city of Boston has exhibited the most rental growth of any submarket of all the Greater Boston submarkets. In the city, rent is up 6.5 percent over the first half of 2011 with rents exceeding $4 per square foot and an average rent of $4,400 per unit based on a recent ARA Class A Survey. These rents are attracting developers and capital. The most recent development start is the 187-unit Avalon Exeter Apartments at the Prudential …
In 2011, the Boston commercial real estate market has shown some signs of life, with most movement attributed to small and medium-sized companies. 2012 appears to promise much of the same, with the greatest demand coming from the 5,000- to 25,000-square-foot users who are growing. Meanwhile, larger tenants are still active in the market but taking less space, effectively offsetting what smaller companies are growing into. The largest users in the Financial District are law offices and financial services firms, and the downsizing in these industries has resulted in increased vacancies. In addition, major businesses have become more efficient users of office space (fewer administrative employees per attorney, more “hoteling,” equal sized offices for all, etc.) and more conservative in growth projections, resulting in less space demand for companies when they do grow. Over the last 12 to 18 months, Boston’s top commercial real estate markets have shifted. The Back Bay area has started to run away from the Financial District as the preferred submarket in Boston. Its appeal is shared between employers and employees alike, with a “24/7” neighborhood feel, new retail shops and restaurants and easy access from the Pike for commuters. These qualities have helped the Back …
Operations will remain tight in the urban core as retailers expand to premier locations in Boston, while stagnant building activity and an uptick in demand will allow operators to backfill under-utilized space in the suburbs. As businesses expand payrolls in the Financial District, residents will migrate toward major employment hubs and entertainment districts in surrounding areas. As a result, global and national retailers will expand or relocate from older centers in peripheral neighborhoods to newer, redeveloped infill properties in Boston. Prime shopping districts in Back Bay, including Newbury Street, Commonwealth Avenue, and Boylston Street will garner the most consideration this year as tenants lease quality, street-level store fronts with high visibility. As available space shrinks in the submarket, vacancy will drop to a metrowide best of 3.4 percent this year, giving owners enough leverage to raise rents. Meanwhile, muted construction and large lease signings will support positive net absorption in third-ring suburbs such as Bristol County and Merrimac Valley submarkets, reducing vacancy an average of 100 basis points this year. Solid retail sales and job growth encouraged tenants to move forward with expansions, underpinning a 60-basis-point decrease in vacancy over the past year to 6.5 percent. In the prior 12 …
Recent news: Several large transactions have taken place recently: pet supply retailer PetEdge signed a new 215,000-square-foot lease in Billerica, Dealer Tire took approximately 100,000 square feet in Mansfield, and Harvey Industries signed a new lease for 55,000 square feet in Southborough. A number of new prospects are also looking to capitalize on aggressive rental rates. These include Sonepar, in the market for 180,000 square feet; Horizon Beverage, in the market for 400,000 square feet; and New England Sheets and Horn Packaging, each in the market for 150,000 square feet. Major industrial users leaving the market include General Motors which will vacate 400,000 square feet in Norton and Adidas/Reebok which will vacate an additional 500,000 square feet in Lancaster and Stoughton. Submarket update: Overall, the Metro South industrial market has been hit the hardest, recording its worst metrics in 10 years and posting a 22 percent availability rate at the close of 2009. The strong-performing Metro West Market, which saw nominal adjustments in vacancy rates, absorption and average asking rents, managed to capture several large transactions in 2009, including Genzyme, Verizon and FedEx Smart Post. The Metro North Market posted lower vacancy and lower tenant velocity. Predictions for the next …
Boston has the third largest investment management center in the world, eclipsed only by New York and London. It’s the birthplace of the mutual fund and is now arguably the “mutual fund capital of the world,” with literally trillions of dollars invested in funds managed there. The Boston retail market has certainly had its share of woes along with the rest of the country, but high barriers to entry, its infill nature and the city's promising long-term results keep the retail market pretty strong. Boston, perhaps more than any other Northeast market, has been nearly impossible for developers to crack and has become a notoriously challenging market in which to build. Because of this, the demand for retail space has remained light, but the vacancy rate for the area is nominal, hovering around only 5 to 7 percent. Although the amount of retail space in the city has increased by 12 percent since 2003, it has failed to keep pace with demand, which has grown 19 percent during the same time frame. Facing stiff economic headwinds, several developers have announced they will scale back on projects proposed for Boston. Earlier this year, plans for a massive urban shopping center in …
While many cities in the Boston area rely on their proximity to the city to ensure economic development, outlying towns have proven equally resilient. Despite the current economic downturn, Westfield, Massachusetts, continues to secure new business due to a combination of financial incentives and its desirable location. The city has utilized these local and statewide incentives to encourage investment, including the Economic Development Incentive Program, a tax incentive program designed to stimulate business and create jobs in Massachusetts. This month, construction began on an estimated $25 million, 657,000-square-foot rapid deployment distribution center for The Home Depot. A tax incentive helped finalize plans for the new center. Westfield’s City Council and Mayor Michael R. Boulanger devised an incentive for the company that calls for a 50 percent cut in property taxes for the first 10 years of operation. The new distribution center is expected to create as many as 150 jobs. The city has also shown a willingness to go beyond tax incentives to attract business. In March, Target Corporation purchased land for the construction of a 1 million-square-foot distribution center at an estimated cost of $100 million. Before the purchase was complete, the city council passed a $10 million bond …
Job cuts among financial and professional services firms will cause office fundamentals to weaken in Boston this year, but modest amounts of new construction will temper the supply and demand imbalance. With layoffs at State Street Bank, Bank of America, Merrill Lynch and Fidelity Investments projected to total in the thousands, a resulting decline in office space demand will drive up vacancy for the second consecutive year. In the CBD, negative net absorption of approximately 550,000 square feet will raise the average vacancy rate nearly 200 basis points to the high-11 percent range. While tenant demand across the metro will wane in the near term, tighter construction financing and lingering economic concerns have reined in development activity. Completions in 2009 will drop off from last year and will represent only a 0.6 percent expansion of metrowide inventory, helping to offset reduced employment-generated demand. Weakening fundamentals and an uncertain economic outlook will underpin conservative buyer expectations this year. As a result, deals will be underwritten assuming higher vacancy rates and rent declines, elevating cap rates metrowide. Currently, initial yields are averaging in the high-6 percent to mid-7 percent range, up about 25 basis points to 50 basis points over the past …
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