While Leasing Goes in Hibernation in Boston Suburbs, Lab Turns Into Gold, Says Garry Holmes


WALTHAM, MA—While Greater Boston’s suburban office leasing market has entered “hibernation” the area’s lab space has turned into “gold”, says Garry Holmes, President of Wayland, MA-based RW Holmes Realty Co. Inc., which specializes in commercial real estate brokerage in suburbs.

In an exclusive video interview with Boston Real Estate Times, Mr. Holmes and Mike Ogasapian, Assistant Vice President at RW Holmes, talk about Greater Boston suburban commercial sales and investment market, strengths and weaknesses of various submarkets, especially the leasings, and provide an overview of lab, R&D and manufacturing and industrial/distribution markets.

To watch the full interview, please click here, or on the image below:

“Specifically for office, deal velocity has slowed and focused almost solely on income based trades. We did see several notable sales close over the summer.  Add-value trades or assets that do not have an attractive existing rent roll are not as prevalent right now with the exception of lab conversion,” says Mr. Ogasapian. “This is largely due to a very slow leasing market for traditional office space under the current conditions.”

For an office asset to be attractive right now, the rent roll needs to have significant term to carry it in the current office market, adds Mr. Ogasapian.

“Similar to what we were seeing before COVID, it appears there is still demand from investors but the criteria for what would be an attractive asset has narrowed because of this making supply of fungible assets very limited,” says Mr. Ogasapian.

Medical device manufacturing and development, pharmaceutical companies, and specialized research users, however, are all continuing to grow in Massachusetts, says Mr. Ogasapian.

“Companies that are of this nature are still receiving funding from various sources and many continue to grow as a result. Finding space that can accommodate that type of facility is a challenge right now for users, however,” said Mr. Ogasapian. “Many new speculative lab developments are already in various stages along Route 128 and we are seeing firsthand a shift away from the traditional technology companies that require office space to life sciences companies that need something more specialized. The demand has shifted and is tangible from the users and we’ve been seeing the market react as such.”

The lab market is a very different story, says RW Holmes President Mr. Holmes, adding that lab space has turned into gold.

“The life science/biotech industry is robust and continues to have a major impact throughout the suburbs.  Demand is outpacing supply and essentially all submarkets are benefiting from the inner suburbs of Boston out to I-495 and Worcester,” said Mr. Holmes.

On the industrial side, deals are getting done and demand by users is strong as the market continues to perform across the board as e-commerce is fueling activity, said Mr. Holmes. Large scale commitments in Revere, Wilmington, Franklin, Bellingham and Marlborough have absorbed large blocks of either existing space or new construction. There is a limited supply of quality space under 20,000 square feet which continues to push rents.

The suburban office market, however, is not so robust.

“Quite simply, office leasing is in hibernation while the bright spots are industrial and life science/biotech. Speaking for office, the leasing market is at a virtual standstill due to COVID,” said Mr. Holmes. “Many large requirements have been shelved until companies get their employees back to work and have the ability to evaluate space needs and the impact of COVID on future office design. We do not expect activity in the office sector to improve noticeably until 2021.”

Mr. Ogasapian said that for industrial, demand and interest from investors is at an all-time high. Institutions and local investors alike are turning their focus towards the industrial asset type – of just about any size too. Across all suburban submarkets, vacancy is low and rents have appreciated by 15-20% in the last 5 years.

“Any add value opportunity would likely be for construction of new product at this point. Large assets over 100,000 SF that have big box warehouse potential down to smaller assets in the 20-60,000 SF range that can provide infill or final mile delivery space are trading at record numbers per SF. This was the case pre-COVID, and is going to continue now that the future of the office market is uncertain,” said Mr. Ogasapian.

How do various submarkets of Greater Boston compare with each other?

For the last 12 years, the Natick/Framingham office market has maintained the lowest office vacancy in all of the suburbs due to the strength and growth of large corporate users such as The MathWorks, TJX, Bose, Cognex, Staples, and Sanofi (Genzyme), Mr. Holmes said.

“Central 128 continues to be the most sought after location in the suburbs and is benefiting immensely from the growth in the lab sector which is pushing companies out of Cambridge. As more buildings along central 128 are converted to lab space, the companies that are being displaced are often looking for better value space in the North or South Shore,” Mr. Holmes said. “Although the I-495 office market has lagged in comparison over the past decade, the industrial market continues to flourish with single digit vacancies and spec development.”