BOSTON–The Greater Boston industrial market continued to lose momentum in 2025 as elevated vacancy, cautious tenant behavior, and constrained capital markets weighed on activity, according to a new report from Colliers.
Industrial vacancy reached 12.6% by the fourth quarter, up 80 basis points from Q1 and marking a 10-year high. The increase occurred at a slower pace than in 2024, but availability remained historically elevated, totaling approximately 11.4 million square feet of direct space across the metro.
Construction activity remained sluggish throughout the year, with fewer high-bay projects underway and a notable shift in development strategy. As of Q4, roughly 2.6 million square feet was under construction—unchanged from a year earlier but down 73% from Q4 2021, when speculative development surged amid pandemic-driven e-commerce demand. High-bay space now accounts for just 46% of projects underway, compared with 84% at the peak of the cycle.
Leasing activity was subdued as cautious decision-making dominated the market and renewals outpaced new commitments. Still, several notable deals signaled pockets of resilience. Amazon expanded its regional footprint with a lease of more than 450,000 square feet at 139 Campanelli Drive in Uxbridge, while quarterly absorption reached 573,000 square feet, supported in part by built-to-suit projects such as Commonwealth Fusion’s 160,000-square-foot manufacturing facility in Devens.
Despite these gains, full-year absorption totaled just 31,000 square feet, excluding 6.6 million square feet of Amazon deliveries—a sharp decline from 2.6 million square feet in 2024.
Submarket performance was mixed. Rising availability in Route 128 South continued to pressure the southern portion of the metro, where fourth-quarter availability climbed to 14.7%. While the area recorded 59,000 square feet of positive absorption in Q4, it ended the year with 470,000 square feet of negative absorption. In contrast, the North submarket posted 638,000 square feet of positive absorption for the year, helping offset losses elsewhere.
Capital market fundamentals further constrained the industrial sector. Quarterly sales volume fell to an eight-year low of $297 million, contributing to a 15% decline in rolling four-quarter volume to $1.95 billion. Since 2022, industrial cap rates in Greater Boston have increased from 4.9% to 6.6%, while pricing per square foot has declined 14%, according to Real Capital Analytics. Although interest rates have stabilized and the Federal Reserve has begun cutting rates, monetary policy remains restrictive amid persistent inflation.
Broader economic headwinds are also influencing market conditions. Boston’s education and health services sector—long considered a stabilizing force during downturns—has posted three consecutive months of year-over-year job losses, contributing to a 0.3% contraction in the metro’s overall job base. Venture capital activity has slowed as well, with the number of Boston-based companies receiving funding in 2025 falling to its lowest level in more than a decade.
Developers, meanwhile, are adapting to shifting tenant demand. While appetite for high-bay space has cooled, interest in flex, R&D, and advanced manufacturing facilities is growing. During the fourth quarter, Cabot, Cabot & Forbes broke ground on a 180,000-square-foot R&D and manufacturing project in Woburn aimed at biotech and advanced manufacturing users. With flex space supply growing less than 2% over the past five years, Colliers notes that demand for these specialized assets could tighten as innovation-driven industries regain momentum.
Overall, the report characterizes 2025 as a year of adjustment for Greater Boston’s industrial market—marked by elevated vacancy, limited new construction, and selective leasing activity—while early signs of stabilization and evolving demand point to potential opportunities ahead.
