Three Sectors Driving Greater Boston's Industrial Real Estate Market
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 opened in 2012.
Bridgemedica, a medical device turnkey concept-to-supply partner which began as a start-up at Walpole Park South, is expanding its facilities from 20,000 to 41,000 square feet at 111 Forbes Boulevard at Cabot Business Park in Mansfield.
Meanwhile, life sciences companies have continued to fuel the industrial market even outside of Cambridge, especially in neighboring communities. Genzyme recently took space in Ames Park in Somerville and Biogen Idec renewed its space on Medford Street in Somerville.
2. Food. Companies in the food sector have seen a tremendous amount of merger and acquisition activity among large competing companies over the last two years, which has had a ripple effect on the real estate market. Michigan-based Gordon Food Service acquired Perkins, a Taunton-based food-service and equipment distribution company in first quarter 2012. With Reinhart purchasing Agar in third quarter 2012 and Sysco’s well-known recent pursuit of US Foods, there is no question that these are happening times in the food industry. But there is other activity, as well. Yell-O-Glow Bananas expanded its space in Chelsea to add an additional 61,000 square feet and there continues to be strong interest from food service companies looking to expand into Everett and Chelsea, due to their proximity to Boston. Kettle Cuisine is expanding into Lynn with 200,000 feet of space.
3. Auto Parts. The auto parts industrial market is also seeing strong growth. Certifit, an auto parts manufacturer, expanded from 20,000 to 30,000 square feet in second quarter 2012 to Walpole Park South’s new spec building. O’Reilly Auto Parts purchased 15 Independence Drive, a 370,000-square-foot distribution center in Fort Devens for $20.7 million.
There are now more than 800,000 square feet of requirements in the market for built-to-suit and existing buildings.
— By Cathy Minnerly, Executive Vice President, and Trey Agnew, Executive Vice President, of NAI Hunneman. This article originally appeared in the January/February 2014 issue of Northeast Real Estate Business magazine.