With All-Time High Rents and Low Vacancy, Greater Boston Industrial Market Remain Heated

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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.”