BOSTON— Boston’s industrial real estate market continued to cool in the second quarter of 2025, as leasing activity slowed, vacancies rose, and asking rents declined. According to Savills Research, these trends reflect a market increasingly shifting in favor of tenants amid economic uncertainty and rising supply.
Net absorption remains negative, totaling -200,000 square feet year to date, with activity focused largely on lease renewals rather than new tenant move-ins. Meanwhile, the vacancy rate rose to 8.1%, a 140-basis-point increase year over year, driven by a combination of macroeconomic headwinds and an oversupply of new space.
As competition among landlords intensifies, average asking rents fell 2.9% quarter over quarter, landing at $13.28 per square foot (NNN). This decline underscores a tenant-favorable environment and marks a shift from the aggressive rent growth of previous years.
Inventory and Development Trends
The Boston region’s total industrial inventory reached 334.9 million square feet, up from 323.2 million square feet in Q2 2024. However, new deliveries have slowed, with just 0.8 million square feet completed so far in 2025—significantly less than the 7.0 million square feet delivered by this time last year.
Construction pipelines have also tightened, with 3.0 million square feet under construction, down from 6.9 million square feet in Q2 2024, as developers respond to softening demand and elevated vacancies.
Notable Q2 Lease Transactions
Despite the slowdown, several sizable leases were recorded during the quarter, with a noticeable tilt toward renewals:
| Tenant | Size (SF) | Submarket | Address | Transaction Type | Industry |
|---|---|---|---|---|---|
| Destination XL | 674,000 | Route 128 South | 555 Turnpike Street | Renewal | Retailer (Brick & Mortar) |
| Quality Beverage | 188,000 | Route 495 South | 300 Charles F. Colton Road | New Lease | Food & Beverage |
| New England Sheets | 162,000 | Route 495 North | 36 Saratoga Boulevard | Renewal | Paper & Packaging |
| IPL Global | 101,000 | Worcester | 100 Simplex Drive | New Lease | Paper & Packaging |
| Columbia Tech | 94,000 | Route 495/Mass Pike West | 125 Fisher Street | Renewal | Manufacturing |
The dominance of renewals highlights how many tenants are opting to stay in place rather than take on new space commitments in the current environment.
With vacancies rising, absorption in the red, and rents softening, the remainder of 2025 is expected to continue favoring occupiers. Tenants entering the market are likely to encounter more flexible lease terms and more space options, while landlords may need to adjust expectations and pricing strategies in response to shifting demand.
