BOSTON–The fourth quarter marked one of the most active of the year for both leasing and sales in Greater Boston’s industrial market, according to a report Boston real estate brokerage firm Hunneman.
“At 8.5% in the fourth quarter, vacancies are sitting at their lowest levels since mid-2000. The warehouse market continues to dominate, boasting the lowest vacancy rates and accounting for the lion’s share of absorption in 2018,” the report said. “Such positive fundamentals are fueling strong rent growth throughout the metro area.”
Having expanded by 40-50% over the last 10 years, asking rents are sitting at all-time highs. Above average gains have been centered inside of Route 128, but with limited availabilities in these areas, landlords are gaining traction along Route 495, according to the report.
Here are the other highlights from the report:
- Boston’s urban industrial markets remain heated. Tenants seeking space in the city are facing very tight market conditions and surging
- Excluding the former NECCO factory in Revere, vacancies in the Urban Core would be just 6% and asking rents would be closer to the high-teens per square foot NNN.
- Properties, particularly in former industrial clusters in the South End and South Boston, are facing adaptive reuse by residential and commercial developers This supply-demand imbalance isn’t expected to abate anytime soon, and should keep upward pressure on lease rates.
- There is one area of the city that is expanding it’s industrial The BPDA is looking to increase space for advanced manufacturing, biotech, seafood processing, cold storage, etc. at the Raymond L. Flynn Industrial Park; one of the last sections of the city for new industrial development.
“Historically tight market fundamentals and rising rents have brought some speculative developers off the sidelines,” the report said.
The Campanelli Company recently completed two buildings, totaling 427,000 square feet, in Bellingham with 7-Eleven and Snyder’s of Hanover occupying 127,500 square feet. Gutierrez’s 220,000-square-foot warehouse at the Crossroads Industrial Park in Northborough is set to deliver next quarter, and reportedly has a 100,000-square-foot anchor tenant. Condyne’s Bluestar Business Park in Norton encompasses more than 500,000 square feet of high-bay distribution space, and is expected to come on line in the third quarter of 2019 as well, according to the report.
“Even with rising construction costs and land prices, robust demand from large industrial users supports these new projects,” the report said. “Despite the emergence of some economic risks, indicated by a flat yield curve and stock market volatility, consensus expects economic growth to persist in the near term, and the Greater Boston industrial market poised for continued growth. Fundamentals remain strong, outsized tenant demand persists and rents continue to set new records.”